Big marketers like McDonald’s, HP and State Farm are changing the ad agency model as we know it

McDonald's Ronald McDonald After

  • The ad agency model is under increasing pressure.
  • Brands are increasingly demanding single, full-service, dedicated agencies.
  • McDonald’s, HP, State Farm and most recently Mercedes-Benz are some big name brands that have gone down this path recently.
  • “Brands today need to engage along every step of the consumer journey, and the way the current model has been structured doesn’t work,” Rishad Tobaccowala, chief growth officer at Publicis, told Business Insider.

Ad agencies are facing an increasing number of outside threats to their business model. As a result, many are reaching into the past in an attempt to reinforce their relevance — while some are being forced to by their clients.

A growing number of major brands, including McDonald’s, HP, State Farm and most recently Mercedes-Benz, are demanding bespoke, integrated ad agencies.

Specifically, they want creative department (those that make the ads), the strategy teams, and the media departments (the folks that buy ad space) all under one roof. And ideally, they want teams of specialist ad executives focused only on their business.

Given the state of the ad agency business, most are complying.

Having media, creative, and everything else marketers needed from an agency in one place was how things used to be in the industry. But over the past few decades, marketers started working with lots of specialist firms.

However, that’s increasingly problematic in an era when marketers need to coordinate various digital channels and leverage loads of data to make decisions.

“There is an increasing recognition among both brands and agencies that media separatism is not necessarily the best idea,” Brian Wieser, senior analyst at Pivotal Research, told Business Insider. “The hope was that the benefits of specialization outweigh the costs, but there is a realization that a lack of integration can produce significant inefficiencies.”

Thus, rather than coordinating between a bunch of scattered agencies, big brands are asking for dedicated agencies just for them. 

McDonalds wants a new kind of ad agency: one that serves only McDonald’s

McDonald’s arguably set the stage in 2016, when it awarded the bulk of its account to Omnicom, combining creative and media assets from agencies like Sparks & Honey, Critical Mass and other entities to eventually launch a dedicated agency called We Are Unlimited.

Since then, other big name brands including HP, State Farm and most recently Mercedes-Benz have gone down a similar path. 

In fact, the trend has started gaining steam to such an extent that Omnicom CEO John Wren addressed it in his prepared remarks during the company’s fourth quarter earnings call on Thursday.

Wren highlighted the network’s success with clients like HP, McDonald’s, State Farm and Intuit’s QuickBooks, largely due to its coordinated, client-tailored approach. Omnicom has created what it deems the “Global Client Leader Group,” which is comprised of client leaders responsible for overseeing Omnicom’s top global accounts and coming up with connected solutions for them.

“I want to emphasize that most of these wins are a direct result of the organizational changes and strategic investments we have made over the past couple of years at Omnicom,” he said. “Simply put, our clients understand the advantages of an agency model that puts their consumers at the center and is agile across disciplines.”

The old ways of marketing aren’t cutting it, and neither are old ad agency models

To be sure, having dedicated agencies isn’t an entirely new phenomenon — auto brands like Ford, Hyundai and Lexus have all had their own units in the form of Team Detroit (now GTB), Innocean and Team One over the years. And WPP has tried to implement the concept of “horizontality,” or having different units with different competencies work together multiple times with clients such as Colgate-Palmolive and Emirates.

But the combination of fundamental changes in the way people find out about products and make buying decisions, along with the recent slow revenue growth many marketing giants are enduring, is pushing these companies to experiment. 

“Brands today need to engage along every step of the consumer journey, and the way the current model has been structured doesn’t work,” Rishad Tobaccowala, chief growth officer at Publicis, told Business Insider. “What they need is faster speed, more holistic data and the ability to target at different points … more than ever before.”

Brands need to reduce friction. And they also need to rethink how and when they advertise to consumers in a world where products are a click away, said Wendy Clark, global president and CEO of DDB Worldwide, a global agency network within Omnicom.

We Are Unlimited, for instance, employs a proprietary insights tool called “The Cortex,” which monitors trends that resonate with McDonald’s consumers, generates ideas across creative and media based on those findings and delivers work for McDonald’s at every touch point.

“The currency of today’s marketplace is speed – and in service of our clients, agencies too must operate with more speed,” Clark said. “Integrated agency models make a lot of sense for an increasing number of our clients as they remove silos, lead to faster and more efficient operations, lead to a single accountability and a single P&L and stronger, more integrated, more impactful work.”

Plus, in today’s day and age, brands must use data effectively to drive their marketing decisions — and gathering, unpacking and utilizing that data requires seamless coordination. 

“The proliferation of data and touchpoints has created complexity — more data doesn’t mean more insights, and more touchpoints don’t mean messages are heard more loudly or clearly,” said Antonio Lucio, marketing chief at HP. “We need a single go-to integrated team that knows our business and can quickly turn data into insights against which emotional and compelling stories can be told across the entire customer journey.”

Expect more advertisers to follow suit – albeit with risks

Such models are theoretically a win-win for both clients and agencies. They eliminate duplication, thereby cutting costs and improving profitability for clients, while agencies — with larger pieces of a business — eventually add more to their bottom lines, said Tobaccowala.

It is getting increasingly hard to find growth on both the client side and the agency side,” he said. 

However, the more that ad agencies put all their eggs in one advertisers basket, the bigger the risk. If an agency dedicated to a single client suddenly loses that client, it could be turning off the lights.

Yet ultimately, this trend has legs, said experts. Among Omnicom clients, Johnson & Johnson as well as Conagra have followed in the footsteps of McDonald’s and State Farm.

“All of our progressive clients who have the scale of multiple agencies are asking us about more seamless and efficient models,” said Clark. “Traditional ways of operating simply can’t keep up with the mandates of today’s marketplace.”

“The forces driving this change are universal to the industry, so we will certainly see more of it,” agreed Lucio. “This is a period of reinvention, and we want to be at the forefront of it.”

Join the conversation about this story »

NOW WATCH: What ‘Dilly Dilly’ means — and how Bud Light came up with its viral campaign

Related Blogs

    Share this:
    Share this page via Email Share this page via Stumble Upon Share this page via Digg this Share this page via Facebook Share this page via Twitter

    BlackRock is using robots to better predict the future of the economy

    robot artificial intelligence AI

    • BlackRock’s Macro GPS tool is designed as an improvement to traditional economic indicators, and is intended to give investors a more forward-looking outlook.
    • The firm is using the big data quantitative insights provided by its Systematic Active Equity team to further hone the GPS indicator.

    Economic data can be a double-edged sword for investors.

    Sure, it serves an valuable input for traders deciding where to put their money, but it’s also largely backwards-looking. So while it’s undoubtedly useful, it’s often up to investors to calibrate their own economic outlook.

    BlackRock realizes this, and is here to help.

    The $6.3 trillion investment behemoth is offering a proprietary indicator called the BlackRock Macro GPS, which is designed to swing economic forecasts forward and provide more actionable information for investors. Officially, the tool’s purpose is to “show where 12-month forward consensus gross domestic product (GDP) forecasts may stand in three months’ time.”

    In other words, it’s trying to give investors a heads up about any potential economic shift.

    And it’s an improvement on the old model in multiple ways, including the number of data sources from which it pulls. BlackRock specifically looks at indicators like realized activity, employment, sentiment, and survey data, among others. In the end, the GPS is looking to build on models developed by academics, central banks, and other financial institutions.

    However, perhaps the most novel attribute of the GPS is how it factors in so-called “big data” findings. Calling on its Systematic Active Equity team — which uses quantitative techniques to process massive amounts of data — the GPS squad is able to overlay hugely valuable analysis on top of its core economic findings.

    “We often found that we were getting conflicting signals,” Jean Boivin, PhD, head of economic and markets research at the BlackRock Investment Institute, told Business Insider by phone. “It wasn’t clear how much weight we should’ve been assigning to the more traditional sell-side indicators, relative to our own proprietary big data signals. That led us to try a more systematic way of marrying these inputs into one indicator.”

    So what kind of big data capabilities does BlackRock’s Macro GPS have? For one, it mines the transcripts of corporate manager conference calls to assess the tense being used. Boivin notes that they like to look at the ratio of future tense to past in order to predict what kind of investing companies will do in the future.

    The GPS also factors in elements like satellite images and traffic patterns. For example, Boivin says the Systematic Active Equity team is currently working to use shadow measurements for buildings to analyze the speed and progress of construction activity in China. While not officially part of the GPS yet, the initiative shows the ambition and scope of what the team is doing.

    “It’s something that’s getting more and more traction,” Boivin said of the GPS. “We’re not aware of anything that marries all of this data in the way we are.”

    As of right now, BlackRock offers the GPS for the US, UK, Germany, France, Italy, Spain, Japan, and Australia. But it doesn’t plan to stop there. The firm wants to eventually enter emerging markets like China — perhaps using the shadow-measuring technique. It’s all part of the firm’s plan to give traders better and more actionable economic data.

    “We have our sights set on the EM bloc, which is the next step,” said Boivin. “But our primary focus right now is becoming an even more innovative source of data.”

    SEE ALSO: Morgan Stanley’s US equity chief explains why the recent meltdown signaled the ‘final stage’ of the bull market

    Join the conversation about this story »

    NOW WATCH: Microsoft President Brad Smith says the US shouldn’t get ‘too isolationist’

    Related Blogs

      Share this:
      Share this page via Email Share this page via Stumble Upon Share this page via Digg this Share this page via Facebook Share this page via Twitter

      Uber’s CEO says its $245 million settlement with Waymo was ‘well worthwhile’

      The chief executive of Uber Technologies Inc, Dara Khosrowshahi attends a meeting with Brazilian Finance Minister Henrique Meirelles (not pictured) in Brasilia, Brazil October 31, 2017. REUTERS/Adriano Machado

      • Uber CEO Dara Khosrowshahi said the company’s $245 settlement with Waymo was “well worthwhile.”
      • The case put a “pretty significant question mark” over the work of Uber’s employees, he said, and the firm wanted to put the case behind it.
      • Khosrowshahi joined the company five months ago, and is trying to right the ship after a string of scandals.

      SAN FRANCISCO — Uber CEO Dara Khosrowshahi said the embattled transportation firm’s $245 million settlement with Waymo was “well worthwhile” in his first major public appearance since the case ended last week.

      The technology executive, speaking at a Goldman Sachs technology conference in San Francisco, California, addressed the ugly legal battle over self-driving car technology and other subjects during a wide-ranging on-stage interview.

      Since being appointed five months ago after previous CEO Travis Kalanick departed following a string of scandals, Khosrowshahi said one of his key priorities was “removing distractions.”

      “I think the Waymo settlement to some extent was a part of that. Hey, let’s get this stuff away, let’s start executing as a business, because I think as an execution machine we have good people and we have good products.”

      Waymo, a self-driving car company owned by Google’s parent company Alphabet, had accused Uber of stealing purported trade secrets relating to autonomous vehicle technology. The trial and its run-up was an ugly affair, further battering Uber’s self-image as it wrestled with the fallout from numerous scandals, including allegations of workplace sexism and a string of executive departures.

      A week into the trial, Uber agreed to pay Waymo $245 million in equity to settle the case. It did not admit wrongdoing, though the chief executive in a statement expressed “regret” and said the events that led to the trial “should have been handled differently.”

      travis kalanick ex ceo uber trial san francisco waymo

      Speaking at Wednesday’s conference, Khosrowshahi framed the settlement as a necessary step in Uber achieving closure and moving past historic mistakes. 

      “It was a very, very significant distraction for the teams that were working on our autonomous technology, and I’d say it was not only a distraction but it was a personal affront,” he said.

      “These are scientists who have cars and transportation and autonomy in their blood, many of them have dedicated their entire professional career on this quest, and it’s gone from … a crazy dream to something that’s going to get real.”

      He added: “I think that this was a distraction and it also put their really good work under a question mark, and a pretty significant question mark.”

      The $245 million settlement’s role in putting the case behind Uber and “normalizing relationships with Alphabet, Google” made it “well worthwhile,” he said.

      The executive, who was previously CEO of Expedia, also talked more broadly about his efforts to right the ship at Uber: “It looked messy and it was messy.”

      SEE ALSO: The 9 most ridiculous moments from Uber’s $245 million legal battle with Waymo

      Join the conversation about this story »

      NOW WATCH: The coolest gadgets we saw at CES 2018

      Related Blogs

        Share this:
        Share this page via Email Share this page via Stumble Upon Share this page via Digg this Share this page via Facebook Share this page via Twitter

        ‘If I don’t make it I love you': Students, teachers sent harrowing text messages during the Florida school shooting

        GettyImages 918375568

        • Text messages sent during the Florida high school shooting depicted the harrowing reality of the incident.
        • Parents texted their children advice on how to respond during an active-shooter situation.

        Text messages sent amid the Marjory Stoneman Douglas High School shooting in Parkland, Florida depicted the harrowing reality of the crisis that unfolded.

        “If I don’t make It I love you and I appreciated everything you did for me,” one student wrote to a parent.

        “Don’t talk that way,” the parent replied. “The cops are all over.”

        The student reportedly hid inside the bathroom for two hours and was eventually rescued, Miami Herald reporter Chabeli Herrera said on Twitter:

        While hiding in a bathroom for two hours, this is the text Sarah Crescitelli sent her parents. Dad and Mom both crying re-reading it. #stonemanshooting @

        — Chabeli Herrera (@ChabeliH) February 15, 2018

        Another text from a parent to his 14-year-old son provided advice during the incident:

        “All ok? Ben said they heard a couple of gunshots coming from Stoneman douglas,” the parent wrote.

        “Yeah there was a couple I heard too,” the son replied.

        “Ok. Is it all over? Mom wants to come get you now. Is that even possible?,” the parent asked.

        “It’s not over we are on lockdown. Not it’s not possible. You could get hurt,” the son said.

        “Ok. Stay safe buddy. Love you,” the parent continued. “Be safe man. Stay hidden or play dead if there is an active shooter.”

        Parent’s conversation with -14-year-old son who is currently in lockdown.

        — Carli Teproff (@CTeproff) February 14, 2018

        Miami Herald reporter Carli Teproff said the son was eventually safe and reunited with his father:

        Father who sent text to son about playing dead if a shooter comes in is reunited with his son. His other son was also on lockdown in middle school.

        — Carli Teproff (@CTeproff) February 14, 2018

        Another father of a student read a terrifying text message from his child that texted saying, “We’re in a real code red dad, get me ASAP, it’s not a drill, I hear gunshots.”

        This father reads a terrifying text message from his child caught up in today’s shooting at a Florida high school: We have the latest tonight at 11

        — WSB-TV (@wsbtv) February 15, 2018

        Communication between law enforcement officials also depicted the harrowing scene that unfolded during the shooting:

        Officials release scanner communication between first responders at scene of #StonemanShooting

        — WSVN 7 News (@wsvn) February 15, 2018

        “Our hearts are with the students, families, staff and the entire Marjory Stoneman Douglas High School community as we deal with this tragedy,” the Broward Country Public School department said on Twitter. “We’ll provide continuous support for all of the students and families impacted by this heartbreaking situation.”

        The shooting left at least 17 people dead and 14 injured, according to law enforcement officials. Victims included both students and adults, the Broward Sheriff’s Office said in a press briefing.

        Police detained Nikolas Cruz, a 19-year-old former student of the high school, as the suspected gunman.

        Sen. Bill Nelson of Florida said Cruz had done “enormous preparation” for the act and was equipped with a gas mask and smoke grenades. Cruz is also believed to have intentionally set off fire alarms “so the kids would come pouring out of the classrooms into the hall,” Nelson said on CNN.

        “It is clear attack was designed & executed to maximize loss of life,” Sen. Marco Rubio of Florida said on Twitter.

        The school enrolled 3,208 students between grades nine and 12, according to the Sun-Sentinel.

        SEE ALSO: Florida high school gunman was reportedly equipped with smoke grenades, tried blending in with students during escape

        Join the conversation about this story »

        NOW WATCH: Take a look inside Amazon’s grocery store of the future — there are no cashiers, registers or lines

        Related Blogs

          Share this:
          Share this page via Email Share this page via Stumble Upon Share this page via Digg this Share this page via Facebook Share this page via Twitter

          A key Samsung executive who worked on Bixby, Knox, and Samsung Pay is joining Google (SSNLF, GOOG)

          Injong Rhee

          Samsung’s former chief technology officer (CTO) Injong Rhee is joining Google, according to a new report from ZDNet.

          Rhee joined the Korean giant back in 2011, and has worked on a series of important projects such as Samsung Knox, the company’s enterprise security platform; Samsung Pay, its mobile payment system, and Bixby, the firm’s digital assistant.

          ZDNet reports that Rhee was also instrumental in Samsung’s acquisition of Joyent, a US-based cloud-focused firm that would help in the development of software services at the company, whose “reliance and need” on the cloud was “ever-growing.”

          Following almost seven years at Samsung, Rhee is now moving on to Google to become an entrepreneur-in-residence. ZDNet reports that he will work on IoT (Internet of Things) “projects,” which might have to do with devices like the Google Home family (and Google Assistant), or the recently re-absorbed Nest.

          Join the conversation about this story »

          NOW WATCH: This personal airbag could help protect the elderly from hip injuries

          Related Blogs

            Share this:
            Share this page via Email Share this page via Stumble Upon Share this page via Digg this Share this page via Facebook Share this page via Twitter

            The UK government has developed AI so powerful it can block 99.99% of ISIS propaganda videos before they reach the internet

            Jihadi John Mohammed Emwazi

            • The British government has developed AI technology which can scan videos and work out whether they contain extremist content.
            • It gave £600,000 ($834,000) of public money to tech firm ASI Data Science to build it.
            • The firm claims its tech can distinguish news from propaganda with near-perfect accuracy.
            • It is designed to stop ISIS taking advantage of second-tier social media platforms to spread their message.

            The British government has announced the launch of AI software which it claims can detect ISIS propaganda videos with 99.995% accuracy and block them from being published.

            The Home Office publicised the release of the technology on Tuesday morning. They claim it will help small platforms protect themselves from inadvertently spreading extremist material.

            It was developed by ASI Data Science, a tech firm in London which was given £600,000 ($834,000) of public money for the project.

            The government is targeting the software at smaller publishers on the grounds that large ones have already invested significant amounts of money in policing their own content.

            It will be handed over for free as the fight against extremist material online steps up a gear. The Home Office named three companies who could benefit from the technology: Vimeo,, and pCloud.

            ASI Data Science ISIS propaganda filter

            A statement from the Home Office said smaller platforms “are increasingly targeted by Daesh [its preferred name for ISIS] and its supporters and they often do not have the same level of resources to develop the technology.

            “The model, which has been trained using over 1,000 Daesh videos, is not specific to one platform so can be used to support the detection of terrorist propaganda across a range of video-streaming and download sites in real-time.”

            According to the BBC, ASI says the tech can “pick out subtle signals” within videos to mark them as propaganda, and can distinguish them from news reports showing similar scenes.

            Media outlets, which did not include Business Insider, were briefed on its precise workings but asked not to publish the details in case it compromises the technology.

            SEE ALSO: The British ‘Beatles’ jihadis have provided intelligence being used to hunt down other ISIS militants

            Join the conversation about this story »

            NOW WATCH: The NFL is using this football helmet that morphs on impact to reduce head injuries

            Related Blogs

              Share this:
              Share this page via Email Share this page via Stumble Upon Share this page via Digg this Share this page via Facebook Share this page via Twitter

              Bill and Melinda Gates have spent billions on US education — but they are not yet satisfied with the results

              Bill and Melinda Gates

              • The Bill and Melinda Gates Foundation has funneled billions in funding toward improving US education and raising public high school graduation rates.
              • In Bill and Melinda’s annual letter, Bill writes that schools around the country are still “falling short on important metrics.”
              • The foundation’s new strategy focuses on listening to teacher feedback, and funding programs that are specific to each community.

              On Tuesday, Bill and Melinda Gates published their annual letter. In it, the pair answers 10 questions that people often ask them.

              One question wonders what they “have to show” for the billions the Bill and Melinda Gates Foundation has spent on US education in the past decade.

              “A lot, but not as much as either of us would like,” Bill Gates writes. “Unfortunately, although there’s been some progress over the past decade, America’s public schools are still falling short on important metrics, especially college completion. And the statistics are even worse for disadvantaged students.”

              To help raise graduation rates, the foundation has given money toward programs that aim to transform low-performing schools. 

              In 2008, the foundation poured hundreds of millions into designing systems that evaluate teachers — and often determine their pay and job status — based on student standardized test scores. These systems are now controversial, since some experts say the approach does little to help teachers improve. Today, 30 states require schools to consider test scores in teacher evaluations.

              In 2009, the Gates Foundation also started giving hundreds of millions toward creating and marketing what became the Common Core, standards that outline what K-12 students should know at the end of each grade.

              2016 report from The National Assessment of Educational Progress (NAEP) discussed the results of testing a representative sample of high school students who had gone through seven years of Common Core curriculum and tests. On average, from 2013 to 2015, the students’ scores dropped in math and flatlined in reading.

              In the letter, the Gates’ said they have learned that “strong leadership, proven instructional practices, a healthy school culture, and high expectations are all key” to improving US education.

              Melinda Gates further explained the foundation’s new strategy for improving middle and high schools across the country. It focuses on helping educators create and implement their own strategies, which will be specific to each community or school. The foundation will help teachers and administrators gather and analyze data, and devote funding toward strategies that appear to work.

              “Some networks of schools will focus on approaches that we have a lot of experience with, like stronger curricula and teacher feedback systems. Others will look at areas that are new to us, like mentoring programs to ease the difficult transitions from middle to high school and high school to college,” she wrote.

              Watch the Gates’ briefly answer a few other questions below:


              Join the conversation about this story »

              NOW WATCH: The NFL is using this football helmet that morphs on impact to reduce head injuries

              Related Blogs

                Share this:
                Share this page via Email Share this page via Stumble Upon Share this page via Digg this Share this page via Facebook Share this page via Twitter

                ‘We can only take so much abuse': Whole Foods suppliers slam ‘hellacious’ new policies and say rising costs are hurting business

                Whole Foods

                • Whole Foods is charging brands more money for prime shelf space and introducing new fees. It has also stopped paying shipping fees for some products and dropped minimum-order requirements.
                • Some small and local vendors say the fees are damaging their business and they’re considering cutting ties with Whole Foods as a result.
                • “I once drove to every Whole Foods store in the Portland area and dropped off jars of our nut butters” for stores to sell, said the founder of a brand of natural nut butter. “That’s over, that’s done. That’s not ever happening again.”
                • “For a small vendor to go through this is a hellacious, horrible time and financial burden,” the CEO and founder of a snack-bar company said.

                Whole Foods is changing the way it does business with suppliers, and some local and regional brands say it’s having a crippling impact on their business.

                The grocery chain is charging brands more money for prime shelf space and in-store product demonstrations and taste tests while also requiring them to pay ongoing fees to third-party companies for food-safety audits and photographs of their products. 

                Whole Foods has also dropped minimum-shipment guidelines that prevented stores from making tiny orders of just one or two cases of goods and stopped paying shipping fees for some goods, according to a company email on the changes. Several suppliers told Business Insider that they were losing money on shipments as a result. Two suppliers said they had refused to fill orders when shipping costs exceeded the cost of their goods. 

                The changes are part of an effort by Whole Foods to cut costs and streamline product merchandising across its stores. But they are leading to confusion and unrest among some of Whole Foods’ suppliers, according to interviews with eight vendors and two brokers who collectively represent more than a dozen other brands. Some are considering cutting ties with Whole Foods as a result.

                “They have pissed off their employees, they have pissed off customers, and they have pissed off their vendors,” said a Whole Foods vendor of eight years who asked to remain anonymous for fear of retribution. “From a financial perspective, we can only take so much abuse before we say this just isn’t working for us anymore.”

                Whole Foods spokeswoman Brooke Buchanan did not respond to requests for comment.

                Small brands are being squeezed by new requirements

                Whole Foods

                Among the new rules at Whole Foods is a requirement that suppliers selling the grocer more than $300,000 of goods annually must discount their products by 3% to 5%, a change first reported by The Washington Post. Brands must also now pay fees to Daymon Worldwide, a Connecticut retail consulting firm, to schedule in-store product demonstrations — a key way for small and new brands to market themselves to customers. They could previously do their own demonstrations without paying a fee or hire outside companies to do it for them.

                Whole Foods is raising its rates for prime, eye-level shelf space as well, The Wall Street Journal reports

                Every one of the suppliers that spoke with Business Insider said Whole Foods’ new fees and other changes benefited larger brands that could more easily absorb extra costs. 

                “It’s not going to be a launch playground anymore,” said Lindsey Rosenberg, the CEO and founder of Cherryvale Farms, a supplier of baking mixes to Whole Foods. “Young, hip new brands won’t be able to afford to go to Whole Foods first.”

                Larger brands like Annie’s Homegrown, which is owned by the snack-food behemoth General Mills, can more easily pay to get prime shelf space, she said.

                “Annie’s is launching products at an explosive rate, and they can knock you off the shelf because they have more money to spend,” Rosenberg said. “It’s a whole new level of challenges for small brands. It’s either go big or go home now.”

                Whole Foods has long been seen by customers as a destination for discovering new and local brands, vendors said. That’s largely because Whole Foods gave its store-level buyers ample freedom to decide what to stock on their shelves. As a result, small vendors could work their way into Whole Foods by striking up a relationship with local buyers.

                That system is changing as Whole Foods’ global headquarters in Austin, Texas, takes on more power to decide what to sell in Whole Foods stores, according to vendors and Whole Foods employees. It’s getting harder for smaller brands to get into Whole Foods now, they said. 

                “I once drove to every Whole Foods store in the Portland area and dropped off jars of our nut butters” for stores to sell, said Michael Kanter, the founder of Eliot’s Adult Nut Butters, a brand of natural nut butter based in Oregon. “That’s over, that’s done. That’s not ever happening again.”

                Kanter said conventional grocers like Kroger and Safeway, which are growing their selections of organic, natural, and local food brands, were welcoming brands like his that had begun to find a “massive barrier to entry” at Whole Foods.

                Jim Holbrook, the CEO of Daymon, the consulting firm working for Whole Foods, said local products were still vital to Whole Foods’ business model. The grocer, he said, is just charging them for the labor it costs to move products around during demonstrations.

                “There’s no move to keep those vendors out of the stores,” he said. 

                Some vendors are losing money on shipping costs

                GettyImages 681666976

                Whole Foods stopped covering shipping fees and dropped minimum-shipment requirements in March 2016 for its Whole Body department, which includes vitamins, supplements, and beauty products, according to an email the company sent to vendors. 

                About a year later, Whole Foods started rolling out an order-to-shelf inventory-management system that cut back drastically on storage. As a result, stores started making smaller, more frequent orders.

                Small vendors with limited distribution centers often end up paying more in shipping expenses on small orders than their products cost, so some have stopped fulfilling Whole Foods’ orders.

                “When you are a small company only distributing from one facility in [the Pacific Northwest] and there is a store in Boca Raton that wants one unit and it costs $12 to ship and Whole Foods paying $8 on that invoice, you are losing money,” one longtime supplier explained.

                This vendor described scaling back investments in Whole Foods as a result.

                “We’re taking the resources we used to spend on trying to support sales in Whole Foods and shifting them to our online business,” the person said.

                Another Whole Body vendor described reassessing a relationship with Whole Foods. 

                “After our sales analysis profile for Whole Foods is finished, we will then see if it’s even worth it for us,” this vendor said.

                Rosenberg of Cherryvale Farms said she was shifting resources from Whole Foods as well.

                Her company is launching a new snack, and while she would usually give the new product exclusively to Whole Foods for at least six months, she’s now going direct to consumers and launching it online instead.

                Brands are considering cutting ties with Whole Foods

                Whole Foods

                Some suppliers are considering pulling out of Whole Foods altogether as a result of the changes, vendors said. Others are terrified of being cut from store shelves and replaced by larger brands.

                “A lot of the vendors are refiguring their game plans with Whole Foods,” a broker who represents more than a dozen suppliers said. “At one time it was considered a reciprocal relationship. Those days are over. There is no feeling that Whole Foods cares anymore.”

                Another broker said, “My brands all want to pull out of Whole Foods because they are uncertain of what’s going on.”

                Betsy Langton, the CEO and founder of the snack-bar company Betsy’s Bar None, decided in December to pull out of Whole Foods.

                She said she began to grow disillusioned with Whole Foods last year after it invited suppliers to a meeting at Oregon State University and announced that to continue supplying goods to Whole Foods, all vendors would have to start using — and pay fees to — two outside companies: UL Everclean and IX-One. UL Everclean is a food-safety auditor, and IX-One takes photographs of suppliers’ products. Both charge ongoing fees. 

                IX-One, for example, charges $500 annually and $169 for initial photographs of a product, plus an additional $15 annually per product for suppliers of fewer than 300 different items. Any time a product is updated, suppliers have to pay the $169 fee again. 

                “Both cost a ton of money and time,” Langton said, referring to the processes associated with UL Everclean and IX-One. “Whole Foods said, ‘You have a year to get this done.’ It’s like communism. For a small vendor to go through this is a hellacious, horrible time and financial burden.”

                If you have information to share, email

                SEE ALSO: ‘Seeing someone cry at work is becoming normal': Employees say Whole Foods is using ‘scorecards’ to punish them

                Join the conversation about this story »

                NOW WATCH: What ‘Dilly Dilly’ means — and how Bud Light came up with its viral campaign

                Related Blogs

                  Share this:
                  Share this page via Email Share this page via Stumble Upon Share this page via Digg this Share this page via Facebook Share this page via Twitter

                  I tried Prime Now, Amazon’s 2-hour delivery service — and I discovered a glaring flaw

                  Amazon Prime Now

                  • I tried Amazon Prime Now, the company’s two-hour delivery service.
                  • I found it was full of surprising costs, and it took longer than two hours.
                  • Still, it’s massively convenient for some specific needs.

                  Amazon Prime Now is getting all the attention these days.

                  The service, which promises two-hour delivery for a wide variety of items from grocery to electronics, has been expanding rapidly across the country.

                  Most recently, Amazon added Whole Foods to its list of Prime Now stores in four select cities, with plans to roll out to more cities throughout the year.

                  Prime Now is also one of the most important pillars in Amazon’s quest to take a bigger bite of the grocery market by combining convenience with selection.

                  So, with Amazon funneling efforts into growing the service, I decided to check out how it really works: 

                  SEE ALSO: A couple keeps getting mysterious Amazon packages they didn’t order — and they can’t make it stop

                  Here’s where it all starts: This website is a separate portal from, and it’s where all the Prime Now purchasing happens. You could also order items for delivery on the Amazon Prime Now app.

                  To shop on Prime Now, you have to first select which store you’re ordering from. I decided on Amazon, as I thought it would be the most fair test, but I could have also ordered from two different Manhattan grocery stores or a liquor store.

                  I found some on-sale goodies that looked perfect to test.

                  See the rest of the story at Business Insider

                  Related Blogs

                    Share this:
                    Share this page via Email Share this page via Stumble Upon Share this page via Digg this Share this page via Facebook Share this page via Twitter

                    7 tips to make learning a new language on Duolingo much easier

                    Woman in bed looking at her phoneDuolingo is a simple and fun way to get started learning the basics of a new language.

                    I’ve been using the app for a little over a year now to teach myself French. I’m no master just yet, but I’ve learned a lot about the language, and the app itself

                    There are several ways to tweak the Duolingo app to make it more efficient for you — several of these tips really do make it easier to learn the language you’re trying to understand.

                    Here are 7 simple ways to better learn a new language on Duolingo:

                    SEE ALSO: I’ve been learning French on the Duolingo app for over a year now — here’s what it’s like to use the app

                    1. Set your daily goal to “casual” so you’re responsible for only one lesson per day.

                    Setting your daily goal to casual makes it so you only need to do one lesson per day to keep maintain a streak, making it easier to keep a streak.

                    A streak in Duolingo is exactly what it sounds like: If you complete one lesson per day for consecutive days, you start a streak. If you maintain your streak for 10 days, 20 days, 30 days, or beyond, you’ll get a prize.

                    Prizes usually in the form of “lingots,” Duolingo’s in-app currency used to purchase in-app power-ups, bonus skill levels, and fun little features related to the app’s owl mascot, Duo. So it’s beneficial to maintain your streak for as long as possible.

                    That’s why it’s smart to set your goals to just one lesson per day. It’s a simple mental trick: The fewer lessons you’re on the hook for, the less likely you are to shirk off your studies due to laziness. You can always do more than one lesson, but after one lesson, the app counts your daily goal as complete.

                    2. Beware of easy grammatical missteps such as plural versus singular, masculine versus feminine.

                    This is both a Duolingo tip and a language-learning tip in general. In learning a language, it’s pretty easy to confuse singular and plural, and masculine and feminine terms, but Duolingo also tries to confuse you sometimes: It’ll present you with multiple similar options.

                    This has tripped me up plenty of times, where I’ll choose one option too quickly. In general, just be careful about reading all of the available options before making a decision.

                    Failing a lesson isn’t the worst thing in the world — you’ll just redo it until you get it right — but if you want to get better at learning a language, and do it efficiently, be careful about reading every question fully before responding.

                    3. Switching to other apps may reload your lesson on Duolingo, which can make you lose your progress.

                    There is a workaround, however, though it’s not very convenient: If you’re in the middle of a session but you switch to another app, simply access Duolingo from the “recents” section on your smartphone (or multi-tasking on an iPhone). If you attempt to return to the Duolingo app by pressing the app’s icon, it may reload the lesson and you may lose your progress on that lesson. 


                    See the rest of the story at Business Insider

                    Related Blogs

                      Share this:
                      Share this page via Email Share this page via Stumble Upon Share this page via Digg this Share this page via Facebook Share this page via Twitter