Transcript of Fast Five Episode : Starbucks Returns To Office, Shopify Blocks Bots & Kraft Heinz Seeks Couples Therapy | Fast Five Video

00:00:11 Anne
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00:02:41 Chris 
And I guess now, and I’m the one and only Chris Walton.

00:02:43 Anne
You are, you are. And we are here once again to discuss all the top headlines from the past week, making waves in the world of Omni channel retailing. And Chris joining us today as they do once a month, every month we have managing directors from the A&M consumer and Retail Group, Chad Lusk and David Brown. Welcome, Chad. David, we’re so excited to have you. You’re typically our end of the year guest, so I love that this is like our our mid year preview, the July preview of what might happen on the end of the year podcast. Chad the Lusker, Chad Lusk, how are you doing today? Are you ready for this show?

00:03:23 Chad
I’m doing great guys. It’s good to be back. Yeah, this is a little meta I.

00:03:27 Chris 
Mean last time I.

00:03:28 Chad
Was on was the end of year award show The Omnis Yes, now Doug, thank you very much. But I was actually sitting in for David, not alongside David.

00:03:40 Anne
That’s true.

00:03:41 Chad
Using his mailed in envelopes to unleash the winners. So that’s right. About three years since David and I did this together. So, you know, we lit that show up. We’ll we’ll do it again here today.

00:03:54 Anne
Yeah, absolutely. I think of you every time I pick up an envelope, which is rare, Chad, But every time those white envelopes, I pull one out. I think about it. Chad, before we go to David’s introduction, quick background on you for those of our listeners who might be joining us here for the first time, if you don’t mind.

00:04:11 Chad
Yeah, absolutely. Partner Managing Director out of Chicago background pre consulting here as I was a multi time Chief Marketing Officer, Chief Strategy Officer across both CPG and retail today. Nowadays I spend most of my time on broad scale transformation with a real focus on growth and commercial excellence.

00:04:36 Anne
Wonderful. We have some stories for you today, Chad, that we’re quite excited to discuss. David Brown, another Omni Talk veteran. David, why don’t you give our listeners a quick background on you, your role out there at A&M?

00:04:52 David
Sure. Happy to and great to be here. I lead the consumer retail group along with a couple others lifetime professional services started in banking and now 25 plus years and consulting with the red thread of being retail kind of optimization programmes, whether that be kind of turn around growth etcetera, really working across the whole value chain. So super excited to be here. Very sorry I missed the year end show but this will be great prep for for this year.

00:05:28 Chris 
It was like you were here in spirit, David, for sure. Like we did it. We, we, we did it. Skip a beat with you. I mean, you’re historically on the year end show every year and it felt like you were still there. Chad did a great job representing your your point of view. And I’ve never heard the term red thread before. So I might have to, I might have to borrow that. If you’re OK with it, of course. Well, I will attribute it to you as well. All right. And should we get started with this week? Let’s.

00:05:50 Anne
Do it. Let’s do it all.

00:05:51 Chris 
Right in this week’s Fast 5, we’ve got news on return to office mandates from both Starbucks and Target this week, yesterday’s inflation report, supermarkets reportedly losing ground with younger shoppers, Shopify setting boundaries for AI agents on its merchant sites, and AW SS Danielle Estropa stops by to announce this month’s Retail Tech Startup of the Month for the month of July. But we begin today with what may be the worst ketchup secret. Chad, I’m so glad you’re on the show this week because I know you’re going to get that reference. The worst ketchup secret in history. And.

00:06:27 Anne
Yes, we promised a headline for Chad. Here it is. Headline #1 Kraft Heinz is preparing to break itself up a decade after an infamous merger of the two biggest names in packaged foods that was orchestrated by Warren Buffett and Brazilian private equity firm 3G Capital Partners. According to the Wall Street Journal, Kraft Heinz is planning to spin off a large chunk of its grocery business, including many craft products, into a new entity that could be valued as much as $20 billion on its own, according to people familiar with the matter. That would leave a company housing goods such as sauces and spreads like Heinz namesake ketchup and Dijon mustard brand Grey Poupon. The company has given priority to its faster going offerings like hot sauces, dressings and condiments, which are more in line with consumer preferences than processed lunch meats and cheeses. It hopes the two separate units could be in total more than Kraft Heinz, roughly $31 billion market value currently. Chad, what is your assessment of the Kraft Heinz breakup and what is the potential value creation given as the rationale?

00:07:31 Chad
So first of all, it’s a pretty big week for food M&A overall. I believe this was just a day after Ferrero announced the deal to buy Kellogg cereal division, right? Listen, in this case the, the massive devaluation that’s occurred since the Kraft Heinz merger is, is stuff of legend, right? So am I surprised to see this like especially in this current era of pretty massive portfolio shaping and reshaping across food and Bev CPG? No, not at all. Your question is, will it work right? You know, listen, the theory of M&A is painfully simple. When you break it down, even though it’s kind of painful to make work, you need to make the move that adds value. And so the numbers that are being stayed out in the article or wow, we break it up, it’s worth more than it is together. How does that work? Right? So you know, it’s the inverse of an acquisition deal, right? If you’re acquiring, you’re betting on being able to disproportionately grow something more faster than it otherwise could, or grow the same at a higher profit margin. Otherwise you’re paying for it in the purchase price. That’s what Ferraro is banking on by taking those slower moving cereal brands from Kellogg. That’s what JM Smucker bet on with Hostess. You know, countless examples. If you’re divesting and breaking things apart, you’re getting rid of the boat anchors that others could do better than you, right? In this market, growth is hard. Folks have negative comps. So you’re seeing this a lot. It’s shrink to grow, right? Someone else do better with Oscar Mayer and Lunchables and Mac and cheese. When when these brands aren’t succeeding at Kraft Heinz, you know what probably right, the large conglomerate CPGS, you know, they take off their pants one leg at a time like the rest of us. They have to allocate resources like anyone else. So you know, these brands, they fall out of favour kind of a death spiral internally. So someone who can take them, make them higher priority, take the brand equity, invest in marketing, invest in innovation. It’s been shown numerous times that it works and that, and that’s what they’re banking on here, which does make sense if there’s a willing party, which is always the other side of it. But you know, the, the, the break up, I mean, it’s just a couple years ago in terms of what Kellogg did, you know, into Kellanova and Kellogg. And now that’s selling off to Ferrero, who’s going to try to put it on speed. You know, it’s, it’s, it’s, it’s a 10 year journey here that that reached kind of an inevitable conclusion and we’ll see where it goes from here.

00:10:14 Anne
Yeah. Chad, how much do you think like regulation is going to impact? You know, in the past you had these mergers and acquisitions or divestiture is happening. Do you think that there’s less opportunity now because of the requirements to change ingredients or remove artificial flavourings and that kind of stuff in this kind of category that will impact that?

00:10:36 Chad
I, I don’t know that it has an impact specifically on a, on a deal like this. I mean, listen, the entire food industry is on watch right now when it comes to that. And that, you know, that’s just becoming, you know, at at this point some degree of table stakes of how the industry needs to, to react going forward. I’m not sure that individual, especially brands in in this kind of catalogue that that ultimately is going to be a deterrent or an accelerator on M&A activity.

00:11:07 Anne
And David Brown, where do you see the opportunity here from this, you know, as somebody who’s worked in professional services for a long time, if if Kraft Heinz is coming to you with their their the separate companies now, what are some of the key things that you think could be or actions that could be taken right now to help the success? Yeah.

00:11:26 David
I I agree with a lot of what Chad said and I think there’s a couple other angles. 1, I think what we’re seeing now is the dismantling or the, the proof point that a lot of the 3G work just really didn’t work right. You know, all of these billions of dollars of cost synergies that were supposed to happen really haven’t worked because of either the complexity of the organisations or as Chad said, the resource allocation, etcetera, etcetera. So I think the, the opportunities as you split these apart is really going to be to be laser focused on what matters for the consumer. So you, you pick a strategy and then you ruthlessly execute against it. It’s really hard to pick, you know, 6 different strategies within an organisation and, and executed against it effectively because it just doesn’t work right. So I think that’s what we’re seeing more than anything here. And as you kind of divest and be able to get more focused, I think the other interesting thing that that I haven’t seen in any of the press on any of these deals yet is as they go to either get sold to foreign entities or foreign entities are are looking at them. The regulations do matter, right? Yeah, there’s a lot more ingredients that are limited outside of the US than inside the US That’s a whole different debate that that we could have. But also the, you know, the ongoing tariff situation. And like if you start moving, you know, kind of manufacturing plants or you know, now you’re re importing cereal or Mac and cheese or, or whatever it is you you could be talking about drastically different price points. So how that plays out on the valuations?

00:13:24 Anne
Great. And and Kraft Heinz has had this innovation centre focused on product design and development for 75 years or something now too, but likely focused on the US market and what they’re doing here, not what those regulations are probably going to be when you’re looking at overseas buyers. Chris Walton round us out here. What else would you add to what David and Chad had to say?

00:13:48 Chris 
Yeah, I don’t, I don’t, I don’t think I’d add much. But I do have an analogy that I used to think about these things. You know, I think of it like, you know, whenever it was, what would they say was 15 years ago that this, this merger happened? You know, to me, it’s just like, you know, it’s like a marriage and the marriage didn’t work out and they need to separate and they they’re not as sexy, they’re not as good looking, they’re not as happy as they were when they were apart from each other. And so now they’ve got to separate and potentially get back into the gym and start working out and finding the happiness in life. And potentially there’s another acquirer down the road. And maybe to David’s point, that Acquirer is an international company that is farther ahead on understanding the different puts and takes with, you know, refining product formulations and all that. So that that’s how I look at this. It’s just, you know, the natural progression that that happens for a lot of folks in many aspects of life.

00:14:39 Chad
For you, Chris, who’s gotten sexier overtime?

00:14:42 Chris 
Oh, thank you, Chad. Thank you everywhere on this podcast, Chad, thank you. Thank you. All right, well, let’s move on on that note because I’ve got riding high already for this to start today off. All right, headline #2 Both Starbucks and Target issued return to office orders this week, according to local Minneapolis NBC affiliate Carol Levin. Shout out to Carol Levin. Target’s Chief Commercial Officer Rick Gomez said that starting September 2nd, he’s asking all team members to work in person at least three times a week, adding that there will be flexibility, including allowing employees to decide which three days to work in person. Sounds a little half pregnant to me. Target reportedly doesn’t mandate its employees to work remotely or in person. Rather, individual leaders make the decisions based on what’s best for their teams. Starbucks, in contrast, said employees will have to work in the office a minimum of four days a week, Monday, Tuesday, Wednesday and Thursday, starting in October. The new requirement, which is up from a previous one of three days, applies to workers in Starbucks Seattle and Toronto support centres as well as North American regional offices. For workers who decide to opt out and leave the company instead of meet the new 4 day requirement, Starbucks is offering a quote one time voluntary exit programme with a cash payment. End Quote David. Lots of companies are instituting backed office policies this week, some mandating 4 days like Starbucks, others like Target keeping it loose as far as when people need to be in the office for their three expected days. Is there a best practise across the industry at this point or how should retail executives think about this challenge?

00:16:22 David
Yeah, this is super interesting one, Chris, to me, like I, I don’t know if there’s a best practise. I, I, I will say this that the majority of my clients and I think our clients are moving back towards this, right? And, you know, being in the office more, I don’t think it’s going back to five days a week anytime soon. I, I do think there has been some lessons learned about that. You can have some remote workforce and there’s a, a, a work life balance that just naturally comes with not being in the office five days a week. But on the flip side of that, I will tell you that the clients that I see that are in the office more collaborating more, just being in the same room to make big decisions are more productive, They’re more efficient. And, and I actually think they make better decisions. Cause there’s just something about the human element that is missing on when you’re, you know, 3-4, five days a week on, on zoom calls, you don’t build relationships as well. You really can’t have as active a debate where you’re, you know, getting super demonstrative or whatever in the room, you know, being very Italian and talking with your hands. But I.

00:17:41 Chris 
Never thought about that. Yeah.

00:17:42 David
Yeah. So I’m surprised it’s taken this long, quite frankly, kind of COVID. But I do think, yeah, if I was to think about kind of a best practise and if it was, it was my company, you know, I would probably have 3-4 days a week and with some flexibility because I think there is huge value to to being in person now. Yeah. Do I hate, you know, travelling as much now again as I as I do and, and being away from the family? Probably sure. But but, but I do think for the companies there’s, there’s value.

00:18:19 Chris 
Yeah, there’s puts and takes with every, every job really. At the end of the day, David, let me ask you, because we, we put, we put both of these headlines in on purpose, the Starbucks and the Target dichotomy in terms of how they’re handling it. Do you think, I’m curious, do you, do you, do you approve of one approach over the other? Say Starbucks saying you have to be in these four days, whereas Target saying like it’s up to the individual managers discretion which three days of the week they want to be in. You know, how do you, how do you, how do you think about that? Is is there a? Yeah, I do the wrong way.

00:18:48 David
Yeah. No, I do think there is a right way. I do think if you’re, you know, pick some minimum number of days, you have to define those days. Otherwise the start with three days, right? You know, that leaves 40% of the time. And if you do the the math, and I’m not going to do the math right now, but you, you could end up with one day a week overlap, right? And you know, So what, what have you really accomplished there then, right. You know, set the operating rhythms of the company and, you know, set a series of meetings where people can be together. And I’m not a huge advocate of meeting just for a meeting sake, but like, but if you’re gonna have the benefit of people being in the office, you actually have to have them in the office together. So I, I would mandate, you know, whether it’s Tuesday to Thursday or whatever, But, but I, I, I would go to the mandate route.

00:19:35 Chris 
Yeah, otherwise you’re on, on. You’re in the office on Zoom with many people still, and I saw you shaking your head. Do you agree with that?

00:19:42 Anne
Yeah. I mean, I think it’s just, it seems like it’s actually more work when you don’t specify what the days are like on top of just what David was saying, trying to make sure that you’re getting Zoom calls coordinated when people are not in the office. Like now you have to have that extra layer for each one of those managers to figure out. And and I just think like that it also seems a little. Disruptive to the whole organisation to like, I think the Starbucks approach makes much more sense, like you’re not just working at a Target, you’re not just working with your team, like you’re working with teams throughout the organisation, hopefully. And so I think standardising it makes a lot more sense.

00:20:21 Chris 
Yeah, I 100%, I 100% agree with you and I think I think you said it very well. Chad. Chad, what’s your take? Do you have any other light you share on this given your personal experience and working with retailers across the industry?

00:20:32 Chad
Yeah, I mean, I’d agree with everything David said in terms of the merits and values and what we’ve observed and experience of, of in person work, right. You know, easier to maintain relationships remotely, harder to build new ones, decisions get made faster and quite frankly, psychologically, right, people have feelings of higher collaboration, IE less transactional when they’re in person. You know, we’re generally social creatures. So I would also imagine in person leads to higher engagement, more connection and loyalty to the job and company, higher satisfaction. Don’t have the data, but you know, as you guys are debating Starbucks versus targets model and which is better? And you know, kind of the practicality of logistics aside, you know, I, I think what I’d add is that corporate cultures are different and policies need to align with the values and cultural norms of that company, right? They have to balance the productivity with recruitment and retention. It can’t be viewed in a vacuum, right? So how employees are treated and respected and valued in other ways than just office policy, right? So, you know, maybe an illusion of flexibility when corporate culture is way more restrictive, right? Can just be lip service. Or if you do have a more restricted mandatory policy, but employees do feel valued and respected, it can work and make sense. So I would just continue to advise companies to make sure that the policies that they’re doing aligns with their overall culture and values.

00:22:06 Chris 
Yeah, the point I’d add on top of that, and I’m not, I’ve been thinking about this a lot. I’m not sure exactly how to articulate it. So you guys will need to give me some space here and maybe even help me out to articulate it. I think in a in addition to the culture, there’s also the work that is required from the company itself inside of that culture. And so, you know, I look at Target and the commercial team, that’s basically the merchant and the inventory planning teams, the planning and allocation teams. And, you know, I, as I was stepping back from this story, both for Starbucks and Target, I was like, OK, yeah, if your job is to put products in front of customers in physical spaces, it probably is important for you to work together to get into the stores together, to understand that, to be in charge of that, to make it work the best way. Because my guess, and from what I’m hearing from a lot of people, and I’ve been hearing this for the past two or three years, the remote work has been a big reason why we’re seeing all these pictures of Targets out of stock shelves throughout social media constantly. And that’s because I think these teams are not together working through the issues and not, you know, going down to the store right next door and being like, look, what are we doing about this? You can’t get together to solve that problem in a way that’s easy and efficient. So that’s the sorry for not articulating that as well as I normally would try to do, but I think there’s something to that in terms of the work that has to be done as well.

00:23:24 Anne
Chris, you bring up a really good point too. It’s like, how is this being measured too? Like I, I don’t know, like are we, or is it just simply like productivity that’s being measured once people are coming back to work? But like, are there teams at these, at these eight, these companies who are really investigating? Like what positives are we seeing from this? Like how do we measure the success of our organisations after being able to do that? Is it just full shelves or you know what else are they tracking to make sure that this is the right move to?

00:23:53 Chris 
Well, that’s, that’s a pretty easy measurable metric, you know, like do we see in stock improvement once we force the teams back in the office? I mean, that’s, that’s one. Can you correlate it directly? No. Is it required? Not necessarily, but it probably doesn’t hurt.

00:24:07 Anne
Right, all right, let’s move on to headline #3. Tariff driven inflation may now be starting to emerge. According to The Associated Press, inflation rose last month to its highest level since February as President Donald Trump’s sweeping tariffs push up the cost of a range of goods including furniture, clothing and large appliances. Consumer prices rose 2.7% in June from a year earlier, the Labour Department said on Tuesday, up from an annual increase of 2.4% in May. On a monthly basis, prices climbed to .3% from May to June, after rising just .1% the previous month. Excluding the volatile food and energy categories, core inflation raised 2.9% in June from a year earlier, up from 2.8% in May. On a monthly basis, it picked up .2% from May to June. David, I hope you were keeping track of all those percentages as I was reading them. What impact do you predict tariffs will have on retail for this upcoming holiday season?

00:25:08 David
Yeah, so it’s a great question. And, and I think the short answer is don’t know yet. We’re getting dangerously close. But let’s be honest, without getting into the whole political discussion, President Trump’s playing a giant game of chicken with the rest of the world, right, In terms of who’s going to blink first, Because I think nobody believes that, you know, high tariffs across the world are a, a good thing, right? And if there isn’t resolution, I think it’s going to have an enormous impact on on the holiday season, you know, across all categories, whether it’s luxury goods, toys, apparel, it, it, it really doesn’t matter. Everything is going to be affected. And you know, there’s a, it’s just a share of wallet issue, right? It’s people have so much money to spend on holiday gifts and family excursions and, and everything along those lines. And, and I think you’re going to see a, a rebalancing of, of how those dollars get spent to more experiential things as opposed to less material things, if they still end up being, you know, kind of 20, thirty, 40% more expensive. But, but we just nobody can could tell you right now with any certainty what the tariffs are going to be when we get into the heart of the holiday season. And, and anybody that says they can is, is, you know, either lying or, you know, hopeless, hopelessly optimistic.

00:26:48 Anne
Right. Or you know, and, and who knows what products will be on shelves. Chris, you were just talking about this in the last headline like we’re already seeing out of stocks at Target and other places. What do you think as a former merchant in particular? Like, what do you think we’re going to see once we head into the holiday season as a result of this?

00:27:05 Chris 
Yeah, I agree with David. Like we don’t know what tariffs will be in place during the holiday season, but I do think there are some, you know, things that we can potentially bet on. And everyone knows I’m on this show knows I’m a betting man if you look at my Kentucky Derby track record. But you know, I think if I was betting and looking at what’s going to happen, I think there’s, there’s two things I’m I’m pretty confident about. I think 1. I think this will be the least well stocked shelves are across all of retail that we’ve seen for a long time. And so and so that then therefore means the proclivity we’ve seen for consumer spending to get pushed up into October by way of Prime Day, which kicks it off, is going to happen even more this year because people are going to need to get in there and get what they can when they can get it for those gifts and for the holidays. So those are the two things I would bet on. It’s not going to be great stock position because people are probably waiting to decide where to place their bets, how much they’re going to place. They just don’t know yet. At least that’s what I’m surmising. But you guys, A&M Group can probably answer that better than I can. But yeah, I think you’re going to see people trying to wrap things as quickly as they can on deals early in the season, too.

00:28:08 Anne
Yeah. And I’m curious too, you know, Chad will go to you next. But I also wonder like the mass retailers that we’re talking about, the Walmart’s, the Targets, you know the these guys are prepared more than or have the ability to be more agile when it comes to these types of things. I’m wondering what the small, medium sized businesses are going to do because they cannot tolerate the fluctuate, the constant fluctuation. And I think that also impacts, you know, when it comes to gift giving and holiday times of year. You know, are we in the sea of sameness where it’s like your options are whatever Target and Walmart and Amazon still have left in stock and that’s what you’re going to get. There’s no there’s, you know, we had Kristen Sevilla on the show not too long ago talking about how it’s the sea of sameness. We’re going to see, you know, all, all beige goods. We’re not going to see the, the like highlight pop of colour in apparel or accessories that used to be that intriguing and fun, more personal, an old kind of gift. So I, I’m curious, Chad, like what do you think shoppers are going to see? Are they going to go the way of what David’s saying where, you know, they, they’re just going to have to cross their fingers and hope that they can get the best thing possible? Or are there things that your clients or that other retailers and brands can be doing now to kind of help still give people that thing to shop for that unique gift?

00:29:27 Chad
Yeah, really, really great avenues that that you guys have laid out. So if I first answer from kind of the advisory standpoint and then maybe the prognostication standpoint, listen with, with respect to, to tariffs and, and actually predating that to the last round of, of hyperinflation. What what we’re advising our clients is first minimise the impact as much as possible, right? Leave no stone unturned when it comes to cost reduction, you have to approach it there first before even testing how much is too much for the consumer to bear in pricing like a hard look of a cost across the board, not just in, in COGS is, is mandatory, but that, that as far as pricing and, and those that’ll be more successful in that then have the the ability to, to have more flexibility to your point. And you know, when it comes to pricing like it, especially at this stage, it has to be precise, right? Looking at consumer price elasticity’s by skew being selective on where your hikes versus holds are. You know, blanket moves are going to be tough to do again more broadly or or people are going to find themselves out of the market, right? I mean, as far as far as going into the back part of the year here, I mean, I agree. Listen, we can’t predict exactly where things are going to hit and how I think we are going to continue to see upward movement in kind of the staples and essentials categories. So grocery, personal care, pet, you know, and and private labels not exempt from these. So I think we’ll we’ll likely see them move together and and where you may see more holds, especially for holiday season. Here is in your more for traditional gift giving discretionary spend areas like apparel and it’ll be tough, but but electronics, right, They’re too important for the season. And I love what David said. We’ve already seen shifting last year toward experiences versus goods on holiday gift giving, But I still agree. I mean, I, I think it’s important that where prices do rise, I expect significantly lower inventory positions for those items at holiday, right. I think retailers will be more content to sell out, you know, then be left with tremendously expensive inventory piles. And so it’ll be those that can manage the skew balance with how they’re able to optimise cost and, you know, pointed pricing actions relative to inventory for the season. And man, it’s a tricky, it’s a tricky, tricky balance.

00:32:08 Anne
Yeah, well said I.

00:32:08 Chris 
Don’t I don’t miss being in those rooms making those decisions one bit right now, especially during with this climate. All right. Well, let’s bring Danielle onto the show to announce July as Retail Tech Startup of the Month. Let’s give a big Omni talk. Welcome back to AWSS Danielle Stropa. Daniele is the worldwide technical Lead for AWS Partners in Retail at Amazon Web Services where he drives the technical strategy for AWS Partners in digital commerce, customer engagement and generative AI. Daniele, it is hard to believe that it’s already been one month since we handed out our first Retail Startup of the Month award. But that was June, now it’s July. So who is this month’s Retail Tech Startup of the Month?

00:32:54 Daniele
This month Peak is Bria AI and I’m really excited to share what they’re doing in the industry and how they are revolutionising content creation for plants.

00:33:06 Anne
Is so bria BRIA dot AI Bria AI? Why? What do they do? Why is it so important in your mind? And what kind of sets them apart from other players in the space?

00:33:20 Daniele
So Priya is a visual generative AI platform. However, they are not just another text image generator, right? We’ve seen many of those. They built what they called build their first platform and that really focuses on three key aspects, 3 key things. The first one is bringing commercial value to their customer. So helping businesses creating on brand content that actually drives results. The second one is ease of integration. So their technology is available in different or is accessible through different mechanisms and that can plug right into existing, existing workflows. So ease of adoption as well. And the last one, which I think it’s, it’s huge for enterprises is really the fact that the, the content that Prea creates is fully compliant. It’s safe to use. Their model is trained on properly licenced data and commercial data. So that’s a huge aspect for for enterprises. One thing that I I think really sets for you apart from from the rest is the ability to maintain brand integrity. They have a feature called tailored generation where basically customers, brands can take prayers, model, they can fight, fine tune it, adapt it so that it creates content specific for a brand, for a, for a product. So they’re not just say, messing around with the actual products, they place the actual products in different contexts, in different scenarios with proper lightning and and shadows, maintaining the proportions. So it’s really like having a professional studio at your fingertips, just more scalable and faster.

00:35:31 Anne
And Danielle, this is for an example with this might be product images, might be different ads that you’re creating for retail media. Is there any other example of this that you could provide?

00:35:44 Daniele
Yeah, I mean, orator media is, is definitely one of the one of the use cases social media campaigns and any kind of communication or customer engagements that brands are doing, but also the the product, the product detail pages, right. So that’s something where it’s often the case where you see products in a lifestyle scenario. So it can really relate with users on a more personal level, so.

00:36:19 Chris 
Daniel, like what let’s get you out here on this. So what are the, what are the long term implications of AI image generation? You know, when you think about it broadly across the industry, like for the retail executives that are listening, like what do they need to know in terms of why this is an important topic and how things are going to change in this direction?

00:36:36 Daniele
Content creation. Content generation is is time consuming. It’s expensive when when you need to do it at scale for thousands of products and possibly even multiple times a year when you have different collections, different seasons. So here we are talking about reducing dramatically the cost of creating this type of content, achieving faster time to market and the ability to create personalised content a scale all while maintaining that brand consistency. Imagine being able to create thousands of product image for an e-commerce stores in in minutes instead of weeks. Or being able to run localised social media campaigns across different markets without incurring into huge production cost. So I think what Preya is doing here is really addressing a key challenge in in the industry. It’s not just a cool technology that that they’re built, it’s a practical solution that can easily be integrated into into existing system again, which is crucial for large scale adoption. And the focus on commercial value and integrity is something that is key for for enterprises and for that commercial use. So I think Bria is really one of those start-ups that is worth keeping an eye on in this rate and tech space.

00:38:19 Chris 
Well, you heard it here first, folks. Bria AI, put it on your radar screen. Thanks, Daniela. Thank you OK, headline #4 Supermarkets appear to be losing ground with younger shoppers, according to Grocery Dive. Traditional supermarkets are falling out of favour with younger generations, with people in those cohorts increasingly turning to discount retailers to buy groceries, according to survey data published Tuesday by The Feedback Group. Gen Z ers, millennials and Gen Xers, Yes, shout out to all those Gen Xers out there are most partial to Walmart, with more than 1/5 of people in each of those groups who participate participated in a poll the research firm fielded this spring, saying they most recently shopped for food at the mass retailer. Those generations also showed a preference for ALDI, with Gen Z ers especially likely to have made their latest grocery shopping trip at that chain. 22% of shoppers in that group shop for groceries, most recently at ALDI, the same proportion that did so at Walmart. While supermarkets might be losing ground with the younger shoppers, they remain popular with older consumers, the survey found. I love how they The survey said older consumers, 28% of baby boomers and 31% of people in the Silent generation. We got to come up with a better name for that generation than the Silent generation. Well, they said they shop for groceries most recently at a supermarket ahead of other formats Walmart came in at #2 among members of both baby boomers and the Silent Generation, well ahead of ALDI Chad. What advice would you have for regional groceries as they appeared to be losing share with the younger here generations but still attracting boomers and the silent generation?

00:40:02 Chad
I’m not sure, first of all where I fall into all of this I generation. Wait, what? What are we calling me again? I don’t know, you know, I, I love when predictive data starts to actually play out in the, in the market. And what I, what I mean by that is we, we can go back shameless plug, but we can go back to some of the learnings of within our ANM consumer and retail group. We do a semi annual consumer sentiment survey and we look at these sort of buying trends and look at all kinds of different spreads and segments of the population, household income and and there’s a lot of generational preferences that that have popped when it when it came to grocery over our past couple of surveys. So, you know, on the whole, younger grocery consumers are more price sensitive and they’re more likely to look and try out different products and assortments. They have a particularly high confidence and private label. They’re they’re interested in quality of goods, but they’re the ones who disproportionately see a quality boost in store brands. So that trade off for the better price isn’t as significant to them because they feel like they’re getting quality. And about half say they’re likely or very likely to try new brands that they see, especially when they provide better for you health benefits. That’s the playbook, right? And like these are the areas that Walmart and ALDI are winning at, right Discount prices, high private label penetration with good quality that they invest in healthy assortment options. And this is where we can see that, you know, many regional grocers are falling behind. So look no further to the data and preference and purchase drivers of these generations. And and the playbook is is laid out in front of you.

00:41:53 Chris 
Yeah, Chad, I’ll give you, I’ll give you another plug because in addition to your consumer sentiment survey, you guys also released a report on space planning, which I got thinking about in, in regards to this conversation too. And so, you know, to answer the question from that perspective, in terms of the advice that, you know, I personally would give to the regional grocers would be, and I got it from, you know, talking to your team about that report is you got to map out your current strengths and weaknesses, you know, as a grocer and you got to do it by category. And then you have to ask yourself the hard question of how are those categories going to be trending 5 to 10 years out and placing bets again on which trends you think are going to be most impactful against your overall value proposition? You know, is it going to be e-commerce? Is it going to be fresh food? Is it going to be food as medicine as a trend? And you need to get to work. You need to get to work designing your in store experience and your digital experience, not just for today, because I feel like a lot of people are just designing both those experiences for today. You got to be designing it 5 to 10 years out. That’s what I think. And that’s why Walmart’s killing it on both ends. They’re killing it with the younger shoppers and the high income demo, which is why they’re so strong right now. But I don’t know, David, anything you’d add here?

00:42:59 David
Yeah, the only thing I, I I’d add is I think where you were going, Chris, is that I actually think that they’re they’re just a better experience, right? Like if I if I, I just think about like the.

00:43:10 Chris 
Got to amplify that.

00:43:11 David
The, the three or four options that I have here in, you know, my little hometown of, of Truckee, CA, you know, we have a, a Raley’s 1 Market, which was the 1st Raley’s 1 Market, which is an amazing experience. We have a brand new Grocery Outlet, which is a way better experience than the Safeway that is right across the street and it’s better prices, etcetera. So, you know, why wouldn’t I go shop at some place that has a better experience and lower prices? I mean, it’s it, it, as Chad said, it’s simple data and the data’s playing out.

00:43:45 Chris 
Yeah. And all the data we’re seeing is converging to this, this answer this, you know, eventual thing like we saw a report yesterday on e-commerce and who’s gaining the share in e-commerce that Mercatus put out. And it was saying the same thing, the same people are winning Walmart, all you got highlighted in that too. And close this out here. What are your thoughts?

00:44:02 Anne
I think price is the biggest concern. Like I think you have to be making sure that you’re investing to make sure that your pricing is competitive in those areas. And the second thing I would say is content creation. Like I think that even though you’re a regional grocer, I think it’s important to be thinking about how you’re finding those news, new consumers and connecting with them. And I think of, you know, creating video or creating other like other types of engaging content that will show up in some of the places where Gen Z is too, because they don’t know about you. Like unless, you know, Walmart, Target, Amazon, like these people are investing in creating content, capturing interest, sending out recipes, being saying we have the trending products that you’re talking about on TikTok. Like they’re investing in those areas. And there are partners that I think these regional grocers can find to help do that so that they remain relevant. Because it’s like you said, you know, then the research showed they’re, they’re, they’re having this consistent audience across, you know, boomers and even some older Gen Xers. But that’s going to go by the wayside. So I’d be invested in how am I creating content so that I show up for these audiences that are coming into the market in the places that they’re spending the most time.

00:45:17 Chris 
That’s a great point. It calls to mind. What was it? Was it stop and shop that was doing the kiosks for the mobile couponing in store? You know, and like, who’s your muse as you’re designing this? Is it the silent generation that’s probably likely to use that kiosk or is or are you, you know, putting your resources towards what you’re going to be in the future and what you want to be? That’s a great point, Anne.

00:45:36 Anne
All right, let’s go to headline #5 Shopify is setting boundaries for AI agents on its merchant sites. According to Modern Retail, Shopify is drawing a line in the sand on a gentic AI, the type of bots that autonomous complete tasks on their own without human inputs. With new language across merchant websites that appears aimed at blocking agentic AI systems, Shopify now includes a warning in their code that powers merchant storefronts, telling bots what they can and can’t do. The message appears in each sites robots dot TXT file, a standard tool websites used to give instructions to automated crawlers like search engines. The
States. Quote automated scraping buy for me agents or any end to end flow that completes payment without a final review step is not permitted. End Quote. The move, however, is not likely an outright rejection of a gentic AI, the language direct. The added language directs legitimate integrators to use its official checkout kit. In other words, the change shows Shopify is thinking ahead, drawing early boundaries between controlled integration and unregulated automation. Shopify merchants could theoretically override the robots dot text file as Shopify is a content management system. In other words, the change shows Shopify’s thinking ahead, drawing early boundaries between controlled integration and unregulated automation. But the default setting suggests the platform is trying to protect its ecosystem by discouraging unauthorised AI scraping. And check out information. David, we’re going to ask you a a more top level question here. I won’t ask you about robots dot text files, but are retail board rooms giving enough attention to a gentic AI or is Shopify ahead of the curve and trying to curve AI bot activity on its properties?

00:47:24 David
So a couple things here, Ian. One I think this is the best news I have heard this year from a shop.

00:47:30 Anne
Yeah.

00:47:32 David
I’ll tell you why. Like if you, you know, try to book a reservation in New York City for any restaurant that’s worth going to if you you want the latest collab with, you know, Adidas and Bonner or you know, pick any collabs that are out when they drop. You want to try to buy concert tickets on the the day of release. You can’t do any of that anymore as a person that is sitting in front of a computer and waiting for 10 AM and then clicking, right? It just doesn’t happen, right? Because all of the bots have completely taken over. So I actually think this brings some validity back to the online shopping experience and, and allows humans to participate, which I think is, which is a great thing. To your broader question, I think boardrooms are starting to pay attention to agentic AI in a lot of different ways, right? I think it’s, it’s, it’s very analogous to almost the outsourcing journey, right? Is like we, you know, there’s the commodity stuff you can do with, with agentic AI of data aggregation and, and things like that. And, you know, and like automating certain things or eliminating certain things. I think it’s really tip of spear stuff. And very few people are doing really cool pricing, personalization, merchandising stuff. Yeah, because they a the, the skill set is outrageously expensive to, to hire right now because there’s not enough of it. So you’re only seeing kind of the largest players primarily in the tax place that are kind of really pushing the envelope. I don’t, I think retailers are a step or two behind the curve, but I, I think they’re starting to realise that they are a step or two behind the curve. And the next couple years are going to be interesting to see A, the talent war and then B, how the talent is deployed to to help retailers.

00:49:39 Anne
Right. Well, certainly a reason I think like you said, I thought this was the one of the most intriguing stories that we had this week on the Fast 5. But certainly something that you know is going to push hopefully more retailers to start putting more focus on this as a priority for them. Chad, where do you, where do you sit on this? Are you, are you feeling like this is being talked about enough in boardrooms that you’re sitting in?

00:50:03 Chad
Well, I, I, I think there’s probably lots of talk in boardrooms about agentic AI, but maybe not from the, I don’t know, kind of ethical or, you know, perspective that Shopify’s coming at it, right? So, you know, it’s about commerce maximisation. And I do think Shopify is ahead of the curve in terms of thinking about that activity, right? I mean, this, this raises huge questions around enforceability and, and legal consent and, and e-commerce. And personally to me, I, I’m all in favour for slow playing AI in places where AI decision making imposes risk. I mean, I, I, I love the idea of it, right? I mean, the consequences of allowing AI free reign to, to, you know, make mistakes or, you know, I, whatever the ramifications, like it can cost a lot of money, at the very least piss a lot of people off. So there is a spectrum in terms of in its development, how AI should be used in decision making, right? And as David said, you know, the Super repetitive lower risk, quite frankly, if there’s little for the human to add, yeah, but AI run wild, right? But in these cases where either AI can air or it provides an imbalance in the market. So either around what the AI will do, so it’s a risk based decision or, you know, if there’s something that a human can add to the decision or execution. So more of a value based decision. We need the human intervention at least until, you know, we’re developed to that point. And Shopify is saying that’s the case for the Gentek AI and frankly, I’m not going to push back on that.

00:51:40 Anne
Yeah. I mean, I think it, you make a really good point, Chad. And I think it, it just re emphasises how important this is because I think we we have to all be agile and ready to react and adapt our businesses to, you know, to be, you know, in a position to change if we need to based on how search is going to be happening. I mean, I think we look at how Amazon was doing this, You know, you, you can shop aloe yoga and buy a bra on Amazon, even though they weren’t in the in the Amazon marketplace. I think it’s going to be really important for all brands, all retailers to focus on how this is going to continue to shift and then how search behaviour is going to shift as a result. But Chris Walton close us out. Oh.

00:52:24 Chris 
My God, yeah, I’ve got a lot of a lot of thoughts on this one. I mean, I think, you know, if I looking from an executive perspective, the first question I ask myself is why do we allow any of this? You know, why do we allow bots to come in and scape scrape pricing? Like if I’m Walmart, why do I want my pricing out in, in the, in the, in the Internet sphere? Like why does that, why do we allow that to happen? And so then I start thinking about the lobby efforts across the retail industry and I’m like, you know, we’re spending all this time lobbying for credit card processing fees. Why are we lobbying for regulation to, you know, limit bot activity or to control bot activity in some way, shape or form? So that’s one question. But given that there’s an absence of that, then the bigger question for me is how does what we’re talking about evolve? In my gut tells me that the agentic AI platforms are going to start, it’s going to become marketplace 2 point O and those agentic AI platforms are going to get a cut of the revenue directed from those retailers that ultimately allow them to plug in simply and easily. It won’t be everybody, but it’s going to be some of them. And so the task was for me, if I’m ACEO or, you know, I’m in that boardroom trying to say, how do I do this? Is I have to ask myself, what am I OK with getting scraped And what am I not OK with getting scraped? Like do I want a jet tick agents on my site checking out for someone without my, without that customer ever entering into my property? My, my guess is that a lot of people probably don’t. So then it comes down to what’s it going to cost for me to prevent certain information from getting transmitted that way. I don’t know the answer to that. I don’t even know if it’s even possible. But those are the discussions you’ve got to start outlining. What are we OK with? What are we not? And then go from there, in my opinion.

00:54:00 Anne
Yeah. And not just the the economic cost, but what are the costs of the customer can’t purchase like are you going to see a reduction in shop in customers spend or awareness of your product if you’re not allowing that activity too?

00:54:13 Chris 
You don’t get the first party data, you don’t get anything that you’re used to getting. There’s a lot of costs that come with allowing sites to or bots to scrape you in ways that you’re not ready for.

00:54:23 Anne
Right, all right, you guys, let’s close it up with the lightning round. Chad, you get question #1 Morrison’s recently announced that it will limit which colleagues it allows it’s in its stores back rooms to prevent what they’re calling, quote, idling and promote more service on the shop floor. Did you ever idle in a stockroom back in your early career days, Chad?

00:54:45 Chad
You know, my, my first real job was I, I worked at a grocery store in the grill area when I was in high school. A chef’s had it and everything. Yes, I was the Panini king. You know, there, there were, there were likely sometimes that I idled in the back, maybe took a stroll through the, you know, refrigerated cooler room. And I, you know, didn’t want to maybe be Next up for a customer order, you know, if I got to a lunch crowd or something. So probably prone to happen a few times.

00:55:18 Anne
Oh my gosh, played some games with this pricing sticker gun behind the scenes. Sure, I I see what you’re doing there.

00:55:26 Chris 
All right, next one, call her daddy. Host Alex Cooper got booed mercilessly for her rendition of taking out to the ball game at Wrigley Field last week. David, I’m guessing you you saw the video of this. So if you were to serenade the crowd during the 7th inning stretch, how would you handle it? Would you straight sing it or would you ham it up?

00:55:45 David
Yeah, I, you know, well, hey, I’m the world’s worst singer, so I would never get asked to to sing it, but I think I’d have to go very it’s it’s one of the great traditions and it’s so classical. I so I, I think you got to go straight sing it, engage the crowd and and do it by the book. I’d feel other otherwise you it’s just way too risky, right? And it’s not as much fun.

00:56:10 Chad
Yeah.

00:56:11 Anne
All right, David, you get question #3 as well, Next Door just announced that they’re re platforming with the help of AI to focus on more real time news and safety updates for neighbours and cut back on the cranky neighbour post. Have you ever posted on the app and if so, why? And extra points here if it was to shut down one of those cranky neighbours.

00:56:34 David
Yeah, so a little embarrassed to admit this, but I’ll admit it anyways.

00:56:40 Anne
Are you the cranky neighbour?

00:56:42 David
No, no, no, no.

00:56:43 Chad
You’re lying. You definitely.

00:56:45 David
Lying. You’re not. I am not the cranky neighbour, but I have shut down a cranky neighbour using my wife’s account. Oh, OK, nice. Without her authorization of of course. Which when it was found out did make me contribute to the luxury goods market as a as a dog house to get myself out of the dog house. But yeah, I actually think it’s a really good thing like that they’re re platforming.

00:57:14 Chris 
Wow, great story, David Guy. Yeah, I 100% agree. All right, an influencer, Mia Zilu. I think I’m pronouncing that name right. An AI powered social media star who has amassed over 150 Instagram followers by sharing sexy pics of herself at various tennis events took Wimbledon by storm last week. But there’s a catch. If you caught that Mia is not real, she is 100% AI generated and I looked at the photos and I cannot tell the difference folks. Chad, how long do you think before AI influencer start popping up inside of retail stores like actual shoppers?

00:57:49 Chad
I and well, I guess I’m glad that you’re asking me a more professionally oriented question related to this, otherwise I don’t even know what I would say. Like, you know, do we get sexy AI and Lululemon? What does that mean? I listen, I don’t actually think AI modelling is that far off, honestly. The economics of cutting down and marketing creative and photo shoots and all like the the first ones who do it are going to get some, you know, public backlash for sure. But I think it’ll be short lived and and this actually will happen.

00:58:26 Chris 
Yeah. Wow. Yeah, it’s probably, it’s probably closer than it appears. The objects in the mirror are closer than they appear. Is that what you’re saying, Chad?

00:58:32 Chad
But closer than maybe we’ll realise, given that no one even knew that this, you know, that this person that, that this wasn’t a person so.

00:58:39 Chris 
I I honestly could not tell the difference. All right, well, that closes us up. Thanks for a great show. You too. Happy birthday today to Fat Boy Slim, Corey Feldman and to the man who helped us all. Wonder if there is enough time on Saturday to go to Home Depot and Bed Bath and Beyond in the same day, the incomparable Will Ferrell. And remember, if you can only read or listen to 1 retail blog in the business, make it Omni Talk. The only retail media outlet run by two former executives for current top ten US retailer. Our Fast 5 Podcast is the quickest, fastest rundown of all the week’s top news, and our daily newsletter, The Retail Daily Minute, tells you all you need to know each day to stay on top of your game as a retail executive, and also regularly features special content that is exclusive to us and that Ann and I take a lot of pride in doing just for you. Thanks as always for listening in. Please remember to like and leave us a review wherever you happen to listen to your podcast or on YouTube. You can watch this episode in its entirety by simply going to youtube.com/omni Talk Retail Chat. If people were listening, they want to get in touch with the A&M Consumer and Retail Group. Pick your brains, you and David’s brains, about anything that’s on their minds. What’s the best way for them to do that?

00:59:45 Chad
You can always learn more about us and our practise at Alvarez and Marsal Dash crg.com. Find us on our LinkedIn at Alvarez and Marsal Consumer and retail group. But because we’re so gosh darn approachable, feel free to reach out directly to David and I, and happy to happy to connect.

01:00:06 Chris 
All right. Well, thank you again to David Brown and Chad Lusk of the A&M Consumer and Retail Group for joining us as they do every month. And on behalf of all of us at Omnitalk Retail, as always, be careful out there.