Rundown: The Daily Harvest saga, Bud Light layoffs & an Apple/Amazon's pricing lawsuit

0:05Hello and welcome to the Modern Retail Rundown. I'm your host, senior reporter, Gabby Barco, and I'm here with editor-in-chief, Kale Guthrie-Weisman. Good morning, Kale. How are you? I'm doing great. How are you doing, Gabby? Doing great, yeah. Just enjoying the heat wave like we did all summer long. Yeah. We have a lot to get through today. We'll start out by discussing a behind-the-scenes report from Bloomberg that details how Daily Harvest handled or mishandled its recalled products last year. And then we'll take a look at the latest update on Bud Light and its decline as America's favorite beer via multiple factors.

0:50And lastly, we will get into how Apple and Amazon colluded to essentially price fix. So yeah, let's get into it. Kale, why don't we start with the daily harvest storm that's been brewing the last year, and then we get into the detail of some of these reports by sources behind the scene, customers, influencers, all of that, who spoke to Bloomberg about how the company handled its recall last year, the recall of its French lentil and leek crumbles, for those of you who do not know. Yeah. So this was, I mean, we've talked about this at least once on the show before. But I would say this is the most detailed sort of minute by minute that we've gotten about what actually happened allegedly and how the company responded or potentially dragged its feet when faced with allegations of an unsafe food item.

1:54It was a really, it's a great read. I recommend it. But it sort of goes into both who tried to get Daily Harvest's attention when it was having it, how the company reportedly responded to this. It took a little bit, allegedly, for it to actually, you know, put out a message to customers saying we have an unsafe food item. It took the company, allegedly, a little bit to inform the FDA, like those types of things. And there were some really interesting details that I thought were really fascinating about the social media strategy the company tried to institute to get people's attention. We'll go more into it later.

2:36But like, this was just a really great sort of test case of when you are in a crisis as a company, here's how one company did it. probably at the time to try and make it seem less severe than it was. But ultimately, maybe, you know, nine months later or a year later, you get Bloomberg knocking at your door with some of the details and they don't look too good. Yeah, I think what I found really interesting was the customers that spoke to Bloomberg who alleged that they tried to reach out to the company, I think via social, or customer service, and ask them if they've alerted the FDA about the fact that lentils have been making people sick.

3:26It turned out it was a manufacturing-derived bacteria, all of that. But the company had not at that moment. So there seems to be fuzziness over what Daily Harvest said they did or when they took the steps to alert the FDA versus when customers told them, which was about, it says, mid-June 2022. And I think the news didn't come out until a little bit later than that. Yeah. And I think that there's another really interesting point that the story kind of subtly highlights, which is Daily Harvest grew because of its, you know, in large part, it grew because of its social media presence. Like, it was beloved by influencers.

4:13It had a lot of major names who would tout it. Like, it was a really well-known maker of smoothies and grain bowls. The company, the story goes into detail about how the company really tried to hone its image and its CEO really wanted it to be, like, or tried to craft its image the same way that Glossier crafted its image, you know? So like it was all about being a quote unquote cool brand. But then when a bunch of these well-known influencers or people who supposedly knew, you know, people at the C-suite, they tried to warn Daily Harvest about this issue, then this barrier went up and it looked, it seemed very impersonal.

4:57It was very canned. And for a company that was known for trying to cultivate a community, when this happens and you have this very different result or this very different response, that sort of paints a poor image of the overall brand and what you were trying to create, you know? At that point, you know, Daily Harvest was mainly still an online subscription brand. So it's sort of contained, like you said, to this e-commerce, like D2C following world. I feel like it was such a big story on our feeds. I'm not sure if it really went mainstream, which actually brings us to our next point, which is something that an analyst I spoke to for a story we just did about Daily Harvest launching in retail, starting with Kroger.

5:46And I think his quote was, I don't think I included this in the story, but I thought it was interesting. that he's like, the average Kroger customer that's looking in that freezer may not know about this even, which, you know, they may or may not, I'm not saying one or the other, but it is interesting when it comes to perception of not to be like our New York bubble, but you know, that could be kind of a factor there. But when you go to a big retailer like this and you're coming in with this recall, and I guess like the handling of it is controversial, it's hard to tell, you know, what the image of the company will be, although they are trying very hard to not talk about this ever again.

6:25Yeah. No, and I think that's a really interesting point. Like Daily Harvest is clearly, and we talked about this on earlier episodes, trying to reclaim its image and be the same minus what happened last year, but new and different. And so the fact that it's in Kroger is, I think you're completely right. It's going after a customer, a shopper who probably isn't on the same social media feeds that the people who originally were shopping for and buying it were. And just to tie it back to the Bloomberg article, is Daily Harvest no longer trying to be that cool person food startup as a result? Is it sort of realizing we can be more mass and forget, you know, shed our clothes of this thing because our influencers got mad at us and now we're going to be something different?

7:12You know, I don't know if that's the overall strategy or if it's just about expanding and going bigger. But it's definitely, you know, I like what I just really thought that Glossier thing was very interesting in the story. So like, if you want if you're trying to be the Glossier, would you go to, you know, would you seek out a store like Kroger? You know what I mean? Or would you be seeking out something else? Yeah, I mean, from what I've probed, it seemed like they wanted to get into the most mass market right away as opposed to Whole Foods, which is what, or an Erewhon, which is, I think, what we were speculating on.

7:51But they actually, you know, their CEO told me like, yeah, they want to go mainstream and Kroger is literally the biggest grocery train in the country. And, you know, they have them everywhere. I mean, it's an umbrella of brands. But if you're on the coast, you're most likely not buying the Daily Harvest there. And then D2C will continue to be obviously big for them. And so it will be interesting to see how those two kind of, you know, continue to merge, how those two sort of customer sets overlap. But with that said, I wonder if this is going to be a cautionary tale for how startups handle things.

8:33I feel like this has been a big topic on modern retail. And so, you know, I feel like it's not that there's more pressure to do the right thing, quote unquote, than like a big conglomerate. It's just that because these brands position themselves as these like very personal, very voicey type of companies, I think there's just more expectations maybe from customers, the press, all of the, you know, being like SD to C darling and all of that. Yeah, I think that when you call yourself a company that's predicated on community, I don't know if Daily Harvest ever said that verbatim, but that's very much the essence of what it's trying to do.

9:14People expect a certain level of transparency. And like there have been other companies that have had less extreme examples of this where but they face scandals where when they were asked to be quote unquote transparent or to own up to their past mistakes where people felt they did not do it well enough. And so I think that this is another example of that. This one is particularly acute because it involves, you know, a health hazard that sent people to the hospitals. But also, I don't know, I think that there are a lot of lessons to be learned just in terms of crisis PR. And like, if you are a company that supposedly has a set of values that has a direct connection to your customers, which is one of the major selling points of being a DTC brand, you need to think really critically about how you are messaging these moments of crisis.

10:06Like, you know, one of the other details, and then I'll stop talking about this, was that like, instead of putting a new post that the food was unsafe, Daily Harvest allegedly just edited the posts about the food existing. So people who were following it wouldn't necessarily get an alert of something new, that something bad was happening. And I think that that's an example of trying to hide something under, you know, throw it under the rug, as opposed to just being like, something's bad. We care about our community. We're going to try and deal with this. And so this is definitely a case study.

10:38And if you are trying to be a very open and transparent company who's trying to cultivate a community and people love you and are very vocal about you, you need to be very specific and, you know, think real critically about how you respond to these very difficult negative points in your company. Yeah, and I'll just end by saying there are lawsuits going on. So I don't want to assume why they are or not speaking. But because I mentioned that they are reluctant to ever talk about it again, they're very much in a looking forward frame of mind. And, you know, I'm sure there's legal issues kind of involved with that and what they can and can't talk about.

11:21But, yeah, it'll be interesting to see. I'm really interested to see what the rollout looks like, especially as they add more retailers. And, yeah, we will continue to check in on that. Speaking of PR crisis, another food and beverage brand, of course, on a much bigger scale in this case, is also going through a similar public scrutiny with Bud Light. You know, there's a lot going on since there's been a lot going on since their controversial pride, quote unquote, controversial pride influencer campaign that got backlash from conservative groups. But this week, they also laid off hundreds of employees, which typically in our industry is pretty telling of either sales are not good or, yeah, there's some some kind of issue going on internally.

12:20It's about 2 % of the U.S. workforce, so it doesn't seem like a lot, but that's still about like 400 people, so it's not nothing. But I want to talk a little bit about, I thought it was interesting because regardless of, you know, the issues and the headlines that have been going on, including Governor DeSantis wanting to review, but like, we'll get into that a little bit later. they're also I was like we have to take it one one thing at a time but they're also no longer the top selling beer I mean Bud Light is so synonymous with like America's beer I feel like and that's no longer the case so I think it's interesting that all of these things are converging for the company right now yeah it's uh it's very interesting and I don't know So it's very, this is a really hard piece of news to dissect because there is so much laden in it.

13:18And so like a lot of it, you know, I think it began in May, if I'm not mistaken, but it was a lot of wait and see what is overblown, what isn't, what is a blip. And so I think it was in June, the news came out that Modelo became the number one selling beer over Bud Light. And then the headline was, well, this means Bud Light, you know, lost its market share because of this backlash. And then a lot of other people were like, well, maybe that's just a blip in the system. They're keeping these little tidbits that show that this backlash that did happen, this boycott that happened around the country, you know, I don't think it, you know, there were some very sensational right wing headlines like Bud Light is bankrupt.

14:01That's absolutely not what happened. But also, this clearly did have an effect. And it's a really interesting example of when there's a quote-unquote, you know, culture war story tied to your brand and the impact it could have. which I'll be honest, I was kind of surprised that this has been such a prolonged headline. And like, you know, we don't know if these layoffs are necessarily tied to precisely this issue. But also there has been a decline in sales that the company has faced. You know, as I said earlier, Modelo has become, you know, has taken over its spot as one of the most drunk beers.

14:38There, clearly, the headline that the boycott worked is catching on and, like, did have an impact on its business. And so it's rare that you see such a prolonged reaction to something that you think is just going to be an ephemeral tweet, you know, angry tweet, you know? Right. Especially because this was happening to a lot of brands. We spoke about this, I think. So it's, yeah, it is interesting to me to see that Bud Light is sort of the one where, yeah, I saw like overall sales dropped about 28 % the week of June 24th. So leading up to July 4th holiday. it's so yeah it just seems like such a delayed or a few weeks long boycott I guess if that is what it was but with that said you know I think what I was talking about before which is that Bud Light lost its number one spot this is a story there's a story in the Times that explains why this is actually about a decade in the making the number one beer in the U.S.

15:46if for those of you wondering is Modelo at the moment. And it surpassed Bud Light, yeah, this past couple of months. But that has a lot more to do with just a lot of different factors, right? But they don't necessarily overlap with what we're talking about or with the pride controversy. It's just that there's changing tastes. I feel like millennials are more likely buying imported beers like Modelo as opposed to Bud Light, or at least they have been. It's very 2010s, I know. We're dating ourselves. Yeah. No, and I think that maybe what made this controversy have such a long tail is the fact that there were all of these converging disparate things that all coalesced on the same conclusion, i.e.

16:33that Bud Light is losing sales and going down, even if it's not related to the fact that it did, you know, and for background, I don't know if we explained this earlier, but the entire controversy was predicated on Bud Light did a Pride-affiliated campaign with the influencer Dylan Mulvaney, who is trans, and that angered a lot of people on the right who said they're now going to boycott the company. But then I think that what you're saying is also exactly right, which is that the numbers that we're seeing, the sales that we're seeing, don't all go back to this specific controversy. There are a lot of other things at play.

17:17There's a lot of changing demographics that for years have been moving away from brands like Bud Light. And so it's just a really interesting example where all of these things happened in a close proximity to each other and you could have a really, really clear headline about what caused it, even if that's not necessarily perfectly true. Right. Which, again, I think speaking to the prolonged reaction, this also comes just a few days after Florida Governor DeSantis launched a review of basically based on this controversy that Bud Light's parent company, Anheuser-Busch, breached shareholders' duties over the partnership.

18:02Not really sure how that's connected, but I guess they're claiming that Florida shareholders, Florida has about$53 million worth of stock in Anheuser-Busch. I guess residents do. But they, yeah, they're basically claiming that this could impact their return, you know, on investment and all of that. So I don't know. What are your thoughts on that, Cale? I don't know. I mean, my thoughts are like... I just mean, like, I feel like it's just gonna, it's building on that new cycle constantly. Yeah. And I think that - Even if nothing comes of it. Yeah, exactly. And I think it's building on this new cycle.

18:36And it's a very clean headline that people can point to, especially people who are invested in the ramifications of the quote unquote culture war. I also think that, like, for the most part, you know, this is a time when some companies are doing well, some companies aren't doing well, some companies miss their expectations, some company slightly exceed them. But if there is, you know, any piece of negative news about a company or that happens, and you're in the midst of a whirlwind like this, you can point to that and be like, that's why they're doing bad. And so, you know, I don't think this might be a big PR headache that Harvard Business Review will probably write a case study on in a couple of years from now.

19:20But I also think, you know, a couple months from now, Bud Light will probably be very similar to the Bud Light pre-May 2023. You know what I mean? Like, I think that it's just people connecting dots, some of which may exist. Like, there probably was a slight sales dent because of this boycott. But probably there were other issues at play that had been months, if not years in the making that also led to these conclusions. But there was a really neat narrative that people could tie. And then, you know, people like you and me can talk about it on our podcast. That's exactly what I was getting at.

19:52I was like, yeah, people love a narrative, i.e. media and press. Yeah. Yeah. Of course. Yeah, like you said, when things come together and clean headlines, it just makes it more interesting, I guess, to talk about. You know, we don't love, you know, people. I think the nuances get lost in those cases. With that said, I want to move on to our next topic or next story, which is Amazon and Apple colluding. Never really thought I would say that sentence, but it's over. Price gouging on Amazon. This is a lawsuit filed in the UK that basically states that Apple and Amazon struck a secret deal to make sure that Apple's products are either not discounted or sold at a higher price than certain sellers on Amazon.

20:51on Amazon. So this started in 2018. And TechCrunch says that by January 2019, almost all the independent sellers, the third-party sellers that sell Apple and Beats products disappeared from Amazon. And then basically only Apple, the authorized seller, was selling at a full price. And this basically, not only did it eliminate competition, of course, but this lawsuit alleges that it, of course, duped customers into paying more, whereas maybe they could have gotten something on sale like their AirPods or whatnot. But with that said, I do think it's interesting because it's coming at a time where Amazon listings are just going through all of these different, I guess, litigations.

21:43It's like, okay, what is allowed and not allowed on Amazon? There's counterfeit issues. So you want the official company or brand to list, but then that's also hurting your third-party sellers and the customers maybe in return. So, yeah. Thoughts, Cale? Yeah, this is... Sorry, I went on a little tangent there. No, no, I think you're exactly right. And this is a really gnarly issue for Amazon that it is clearly cracking down on right now. And it's really, I don't know, it's really complicated. complicated. But I think a lot of it does boil down to, as you said, Amazon trying to crack down on counterfeit goods and unauthorized sellers, which have for years run rampant on Amazon because it's such a big platform and it's always tried to make itself seem more like the facilitator than the actual retailer, except for a few other cases when it was helpful for Amazon to say it was the retailer and did that, but we won't get into that.

22:44But ultimately, now Amazon, you know, they're in the US, there's the Inform Act, which is that pretty much forcing every seller to prove they are who they are and that they're selling their own goods. And if not, they are being kicked off of the Amazon platform. I've written a little bit about it. I've been doing a little bit of reporting on it. It's going into effect now. And I've been hearing that some sellers, even those who are can prove who they are, were able to provide the documents have been suspended from the platform. But this UK thing is really interesting because pretty much Amazon works in a variety of ways.

23:17And there have been a lot of people who aren't necessarily the brands themselves, but they're distributors who have either exclusive or non-exclusive deals. They're not selling counterfeited goods, but they're selling the real goods. They got it in a legal and kosher way. but uh because amazon is so big and it's trying to adjudicate who can be on the platform it is giving pretty much these automated computer-led no if if you are not the actual brand you cannot be on the platform and so these businesses are being decimated um and then i think that this this specific apple um amazon thing probably relates to that where there are authorized resellers there are people maybe selling refurbished um goods and they're doing it in the way that they're supposed to be doing it.

24:06But because Amazon is trying to get rid of the perception that it sells, you know, counterfeits or, you know, you know, things that have been stolen or etc, etc. It's getting rid of these sellers who have actually been a great made it into a good competitive landscape. It gave customers an option to buy a discounted Apple product, which could you imagine buying a discounted Apple product? I would love love the ability to do that. But pretty much my point is that like, there there are all of these businesses that for decades have thrived on Amazon, offering, you know, distribution deals, you know, selling goods that legally are theirs that they have the right to sell, but they aren't necessarily the brand representing it.

24:46And they are facing a lot of headwinds and some are just completely losing their Amazon businesses right now because of this major shift that Amazon's making. Yeah. And of course, you know, I feel like there's always Amazon headlines going on, especially in the antitrust area. Politico also reported this week that the FTC is preparing to file a lawsuit that could result in Amazon being broken up. I'm doing like I know the song meme, but I'm not sure what will come of this, but the complaint is focusing on the challenges to Amazon Prime. Do you want to go a little bit into that, Cale? I know it can get very in the weeds.

25:32Yeah, I'll try and be as concise as possible. But essentially, and no one really knows exactly what the lawsuit is going to be. The Politico story cites unnamed sources who did not give Politico access to the lawsuit that they are reportedly drafting. But it goes back to this issue that the UK is talking about with the Amazon-Apple lawsuit, which is competition. And so the FTC probably thinks that Amazon is trying to block competition and block the ability for sellers to post lower prices. You know, there are other things there. I think the company said that they're likely going to be going against Amazon because it forces merchants to use things like its logistics program or its advertising services or even its, you know, AWS, its web powering services.

26:22all of those things. I think the FTC is trying to make a case that Amazon is a monopoly on e-commerce. And if it does successfully levy this lawsuit, it would ultimately probably lead to the, you know, Amazon being broken up into parts. All of these are big ifs. If, you know, the FTC does, you know, hand this lawsuit to Amazon, if it's able to make, you know, the right case. So we'll see how this goes. But simply the fact that it's preparing this and it's being reported, I think, is noteworthy and goes back to all of these big changes that Amazon is making or sort of scrambling to do right now to show that, you know, it's operating in a good and legal way, you know, before it gets faced with even more lawsuits.

27:11Just as an aside, when people say breaking up Amazon, like, what exactly are we spinning out? Because every name I think of, I'm like, well, it's all so interconnected. And they're so adamant about people, you know, yeah, just kind of using the entire suite, if not all of it. Just using as many. Yeah. I mean, it would probably be the... AWS, maybe? I mean, AWS is probably broken up. The logistics would probably be broken up. And probably the marketplace, like the e-commerce, Amazon.com would be its own entity. And so maybe the brick and mortar grocery would be its own thing that isn't connected to the other ones.

27:50That's probably the easiest ones. But I would say even breaking up AWS and, you know, its logistics away from its other e-commerce stuff would be a massive blow, especially AWS, because that's such a moneymaker for Amazon. Yeah. Of course, a blow, especially as Amazon is just constantly trying to figure out their grocery or their brick and mortar business. Yeah, so I guess we'll find out whenever this gets filed. It'll be interesting to see. But that is our show for this week. Please rate and review us on Apple Podcasts, Spotify, or wherever you're listening. Also, don't forget to subscribe to the Modern Retail Podcast to hear interviews with industry leaders every Thursday.

28:36Kale, who do you have on on Thursday? Do you want to give us a free deal? I am talking with Bluestone Lane, which is an up and coming coffee chain. And we talk about all things coffee, which as listeners certainly know, I love coffee. And of course, come back Saturdays for the Modern Retail Rundown. And as always, thank you for listening.

29:09Thank you.