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    Published on: December 5, 2002

    In response to yesterday story about dealing with obesity issues immediately and forthrightly, MNB user Timothy C. McCook of the Snack Food Association had a suggestion -- follow William Shakespeare’s directive, delivered in Henry VI, Part II, Act Four, Scene Two:

    “The first thing we do, let's kill all the lawyers.”

    But MNB user Tom Stenzl, of the United Fresh Fruit and Vegetable Association, had a different take:

    “Kevin, the NYT article and your comments are a well-timed word of warning. Food companies, retailers, restaurants and commodity groups are going to have to figure out whether their actions are part of the solution to the obesity crisis, or part of the problem. The real battle isn't in the court with frivolous lawsuits; it's in the court of public opinion where consumers want to know where their kids' health ranks in your corporate priorities. Retailers are well positioned to promote healthy eating programs like the government's 5 A Day program to increase fruit and vegetable consumption. Quick serve restaurants that offer a fruit cup or baby carrots as an option with their kids meals can win that battle. But commodity groups and companies that take a public-be-damned approach and tell us to exercise more while still mindlessly promoting overeating the wrong foods haven't begun to feel the backlash that's coming when 12-year-old Susie comes home from the doctor with diabetes.”

    We got an email the other day from an MNB user who commented on a story we didn’t even run, that 7-Eleven Japan has entered into an alliance with Toyota to build stores near the car manufacturer’s Nagoya factory, as well as in housing developments that it is building for its employees.

    The MNB user wrote:

    “Is this the current version of the company store? In the company town?”

    Sounds like it. Maybe these are the kinds of relationships that American retailers should be building with the giants of other industries…

    Sort of reminds us of the culture portrayed in the movie “Rollerball” (the original James Caan version, not the laughable remake from last year). That movie portrayed a world in which there were no countries or states, only corporations…which sounds to us like a pretty good premonition about where things are headed.

    On the subject of nutritious meals and Americans’ declining desire to spend time in the kitchen preparing them, MNB user Trish Bellrose sent us the following email:

    “As the marketing director of a small private food manufacturer (The Spice Hunter and the mother of 2 small children, but most notably a cheap skate, I cannot believe people are so pressed for time that they can't bother to peel a potato or a carrot anymore and would rather pay the premiums for pre-peeled and pre-cut vegetables. What's next? Pre cooked pasta? And these "conveniences" are so packed with fat and sodium it's no wonder kids are more obese than ever! Maybe people should work less and stay home more so they can prepare a nutritious meal for their family that, by the way, will still only take about 20 - 30 minutes!

    “I'm probably living in the stone age, but I am baffled by these statistics. And believe me, I came from a home where Kraft blue box mac & cheese and instant mashed potatoes were the norm (maybe that's where I get my angst from)!

    “So onward I press, trying to find that food product golden egg, delivering flavor, convenience yet still being healthy and natural at a price you won't need to take a second mortgage on your home to afford!”

    We’re so sympathetic to Trish’s point of view that we even allowed her to not-so-subtly sneak in a commercial for her company.

    We would point out, however, that prepared salad mixes have revolutionized the produce department, and we swear by them. And as for pre-cooked pasta, it’s a lot easier to make lasagna if you use the no-boil pasta…

    So we fall into the “heathen” category. Sorry…

    On the subject of Starbuck’s continued growth, one MNB user wrote in to tell us:

    “Did you read about the community loyalty Starbucks has recently been doing? They've set up a community involvement program where their employees can participate in a local fund-raising or community service effort, even ask for their patrons' participation, and Starbucks will pay the Charity for the hours worked of both employee and patron? Talk about away to build community loyalty within a community.”

    Responding to recent stories about self-checkouts at Home Depot and Wal-Mart dealing with class action lawsuits on labor issues, one MNB user wrote:

    “Do you think it's a coincidence that you have all this talk about self checkout at the same time Wal-Mart employees are suing because the company is "making" them work? And don't forget about the note you received a couple of months ago about the union employee who gets three months of the year paid vacation. Has it become so "all about me" that everyone has forgotten about getting a day's pay for a day's work? Are people getting that self-absorbed that they don't know how or don't want to interact with each other?”

    Maybe we’re naïve, but we fervently hope that the lawsuits don’t exist just because certain union employees don’t feel like doing a day’s work. We’d like to think it is about more than that…even if “more” means union organizers looking for an angle…

    But maybe we’re naïve.

    We wrote yesterday about how farmers in the UK are testing their own supermarket to compete with chains that they feel are treating them unfairly. One member of the MNB community wrote:

    “The Seattle area has been making a concerted effort to created numerous outlets for the local farmers to offer their produce throughout the growing season not just at the Pike Place Market but also in various in-city and outlying communities. The thrust is being emphasized on organics. Although some of the local grocery stores haven't necessarily seen this as competition cutting into their margins, there area stores who have noticed and have begun to incorporate more organic produce, and even one local chain (Larry's Markets) that actually has a local farmers emphasis in their produce section where all the produce from a local farmer is even identified by farmer. They've been taking this approach for two seasons now and it obviously is working as both farmers and Larry's are continuing in the program.”

    Makes sense to us.

    On the subject of Home Depot’s sales help (or lack of), one MNB user wrote:

    “Making a new home in the Greater Atlanta area city of Roswell I am making numerous visits to a near-by HD to make and fix numerous items we find necessary in making a new home. The sales people at the HD I visited, and I have no idea which one it was, were friendly, helpful and we never had to walk too far to find one to help us in numerous departments. Now, I realize not every store nor every visit may be as nice as what I experienced but I can't help but believe that, in total, more people are satisfied with the treatment and service they receive than the few who are complaining about it on MNB. Otherwise, HD wouldn't have the competitive edge in their business that they have succeeded in getting.”

    Maybe. Or maybe it is surviving on its reputation and the pure size and reach of its operations, and the fact that it has put almost everybody else in the category out of business.

    We’re just speculating here…

    Responding to yesterday’s story about Wal-Mart building a multi-level unit in Central LA, one MNB user wrote:

    “It sounds like "Ikea", Wal-Mart style!”

    Does, doesn’t it?

    Finally, we wrote yesterday about how people ordering on Amazon can now pick up their books, CDs and DVDs from their local Borders Books and Music, generating this incredulous email from MNB user Tom Russell:

    “Help me understand this. If I order on Amazon so it comes to my house and saves me the time and gas and grief of shopping, why would I want to go to a Border's to pick it up?”

    Maybe because it is a last minute present. Maybe because you can’t wait two or three days to get your hands on the new Tom Clancy novel, but want to pay Amazon prices?

    This isn’t a requirement. Just an option.

    We believe in options. We want lots of them. And so, we think, do most consumers.
    KC's View:

    Published on: December 5, 2002

    • Costco Wholesale Corp. reported that November same-store sales rose 2 percent, while total sales were up seven percent for the period, up to $3.24 billion from $3.04 billion last year.

    • PriceSmart Inc. reported that same-store sales in the five weeks ended Dec. 1 fell 0.8%, while net sales increased 20 percent to $ 60.4 million for the month of November from $50.1 million a year earlier.

      First quarter net sales increased 15 percent to $164.5 million from $143.2 million in the same period last year.

      The company operated 27 stores at the end of the quarter, four more than in November 2001.

    KC's View:

    Published on: December 5, 2002

    • PepsiCo’s Quaker subsidiary has sold its bagged cereal business to cereal manufacturer Malt-O-Meal. Quaker intends to focus on its larger, more profitable boxed cereal brands.

    • The Wall Street Journal reports that, which traditionally has offered recommendations to shoppers based on what other consumers have bought, has been making up suggestions to get people to check out its new apparel sections. While Amazon says the “faux” recommendations are meant to be obviously fabricated and humorous, the WSJ says it creates questions about Amazon’s methods.

    KC's View:

    Published on: December 5, 2002

    The Grocery Manufacturers of America today supported the U.S. Food and Drug Administration's position that consumers should not make any changes to their diets based on current preliminary research that shows varying levels of the naturally occurring compound acrylamide in foods.

    The FDA today released test results for acrylamide levels in a wide variety of foods during a meeting of the Contaminants and Natural Toxicants Subcommittee.

    Acrylamide is a naturally occurring chemical compound formed in foods during the cooking process, at home, in restaurants or in a food-making plant. Leading health organizations including the FDA and the World Health Organization continue to say that there is no scientific evidence that acrylamide in food presents any known risks to human health. In a statement released along with the preliminary test results, the FDA said the information was being presented to the public in order to advance public and private research regarding acrylamide's formation and potential impact on human health.

    "While acrylamide research currently underway poses new questions about its role in foods, it is important for consumers to know that there is no evidence that acrylamide in food presents any known risks to human health," said GMA Senior Scientific Advisor Sue Ferenc, DVM, Ph.D.

    "Comprehensive research is underway to determine how acrylamide is formed in foods and if it poses any human health risk," added Ferenc. "In the absence of conclusive research, consumers should know there is absolutely no need to change their diets or to produce foods any differently."

    Ferenc and FDA officials also noted that foods not tested for acrylamide are no more or less safe than other foods now on the market that may contain the compound. GMA continues to support ongoing WHO and FDA research efforts in order to determine the best course of action for consumers as well as for the food industry.
    KC's View:
    Wonder if this will change Mrs. Content Guy’s view on potato chips? She hasn’t allowed a chip in the house since the initial studies about acrylamides came out…though she hasn’t denied us French fries. (“Don’t want to be a fanatic,” she says.)

    In general, we agree that the preliminary studies don’t suggest that people should change their diets. But we suspect that this story isn’t going to go away. How will the obesity lawsuits be affected if some day it is revealed that acrylamides are harmful, and both industry and government didn’t do anything about it? What will be the impact on “Big Food” then?

    Published on: December 5, 2002 reports that contrary to industry trends that have retailers spending 1.5 percent less on information technology projects than last year, three major retailers -- Home Depot, Wal-Mart and Benetton -- have signed deals for major new IT projects.

    • Wal-Mart is using a system licensed from JD Edwards to automate real estate management functions.

    • Benetton signed a deal to purchase what is termed “a line of manufacturing, accounting and logistics applications from SAP” that is designed to improve inventory management,

    • And, as previously reported here on MNB, Home Depot is making a major investment in self-checkout technology from NCR and Microsoft>

    Retailers are expected to spend $23.7 billion on IT projects this year.
    KC's View:
    Such expenditures make sense as long as they are designed to deliver value to both the retailer and the customer. And despite our reservations about self-checkout, all three companies seem determined to do that with these technology investments.

    Published on: December 5, 2002

    In the Chicago market, a group called the Cancer Prevention Coalition has attacked the decision by Albertsons’ Jewel-Osco division to sell fresh irradiated beef, on the grounds that such meat could contain carcinogens as a result of the irradiation.
    KC's View:
    Actually, we’re sort of surprised that this is the first real negative reaction we’ve heard now that irradiation has been gaining a lot of fans.

    It is up to retailers to dispose of this issue simply, factually, and effectively.

    Published on: December 5, 2002

    7-Eleven announced that it will attempt to improve sales by focusing on meal solutions.

    "One of the biggest things will be getting over the [image] in the consumers' minds of what convenience store food is," Des Hague, 7-Eleven’s vice president of fresh foods, told the LAT. But "we expect fresh food to represent a pretty meaningful percentage of our growth."

    "The lunch hour has shrunk from 60 minutes to 20-odd minutes," Hague added. "That's put consumers under tremendous stress. We are trying to differentiate ourselves with high-quality portable foods."

    Offerings will range from fresh-made seafood salads to enchiladas and California rolls, as well as microwaveable meals such as lasagna, fettuccine, and Szechwan beef bowls. Prices will range from $2.49 to $5.99 for some higher-end salads.

    In a related development, Sheetz Inc., the 280-unit c-store chain that has built a loyal following for its sub and sandwich program over the years, is testing new at-the-pump touchscreen technology that will encourage shoppers to order a sandwich at the pump, and then go inside to retrieve it.

    For the c-store industry, prepared foods make up 13 percent of sales, excluding gasoline revenue, but generate 25 percent of profits.
    KC's View:
    As we’ve written before, the c-store business is focusing much of its efforts on two areas, meal solutions and loyalty marketing, that are well-worn territory for the supermarket industry. They’re doing so in part because of declining and disappearing gasoline margins, which are occurring because supermarket retailers (and warehouse clubs and discounters) are getting into the gasoline business in order to generate traffic.

    On top of this, Jack In The Box is starting to open c-stores adjacent to its fast food restaurants. And c-stores are installing branded fast food operations inside their four walls.

    So, the confluence of formats continues unabated.

    Everybody wants the same business, the same customers, and is using many of the same methods to obtain them.

    So when will the real innovation start? And what will it be?

    Published on: December 5, 2002

    The following is a special report filed with MorningNewsBeat from

    On November 18th, Auchan and Casino issued a press release on the creation of a 50:50 service joint venture, called International Retail and Trade Services (IRTS), to be located in Geneva (Switzerland). What are the implications?

    Two “small” global retailers join forces

    In terms of Retail Banner Sales e.g. including group sales as well as 100% sales of subsidiaries and franchised operations, Auchan and Casino respectively rank 16th and 17th in our top 100 of global grocers. They slide down the ranking by net sales because of their alliance strategies (partial consolidation of sales) with Auchan in 20th and Casino in 22nd positions. Woeful investors have often dreamt of a possible marriage between the two groups, which would push them up to the 6th place in our ranking, right behind Metro.

    IRTS will allow these two second-tier global grocers to be seen to offer manufacturers similar opportunities to those offered by larger retailers by combining their geographical coverage. With IRTS they hope to become more attractive for the 100 or so key manufacturers they are targeting – these are primarily the “household” names in consumer goods (Nestlé, Danone, Unilever, Colgate, etc.) who can negotiate global contracts and represent a total trade volume of Euros 15 billion for the two retailers; although small and medium size manufacturers are also included in the agreement.

    To negotiate more attractive prices

    The cooperation will allow Auchan and Casino to compare price differentials across the various countries in which they operate, which will in turn increase their buying/negotiating power. This echoes the fracas caused by Tesco at the end of October when, following its acquisition of the Hit hypermarket network in Poland, the retailer discovered that the Polish supermarket group had secured better prices than Tesco from more than a dozen international suppliers said to include Mars, Unilever, McCain and Heineken.

    An added advantage to manufacturers is the fact that the two retailers have very complementary geographical spread and only overlap in a couple of countries (see below). However the partners stress that both companies will continue to do their shopping separately. Price negotiations will be carried out at IRTS headquarters in Geneva but implementation will be left to each individual countries.

    Buying implications of the Laurus acquisition for Casino

    Casino announced in October 2002 that because of its acquisition of a stake in Laurus it would probably pull out of the AMS (Associated Marketing Services) buying group. Following the conflict with Cora and the dissolution of Opera, Casino’s newly created buying group EMC Distribution has appointed Philippe Gautreau to be the head of international buying operations. The group later commented that international sourcing would be effected closely with the Laurus team with a view to develop own labels and “premier prix”.

    Should we read more into it?

    Casino has been very much in the news this year, following the collapse of its purchasing agreement with Cora and the dismantlement of their joint buying group Opera, and later when it announced the take over of a 38% stake in debt ridden Laurus. Auchan, for whom press exposure this year has mainly revolved around its bold approach of the eastern European market (Russia, Poland and Hungary), has on the other hand kept a fairly low profile this year.

    Whilst rumours of a merger between the two retailers come up time and again, Casino and especially Auchan are both fiercely independent, and any such speculation would prove sterile, at least for the time being. Furthermore, if Auchan and Casino were to eventually establish a joint buying group, Casino's option on the 42.4% stake in Cora currently held by Deutsche Bank might be questioned by the anti-trust authorities in France and Brussels.

    This latest venture must be seen for what it is: an opportunistic agreement that will allow two competitive players, who are aware that they lack critical size, to better stand up to large manufacturers, and to compete more effectively with larger groups like Wal-Mart, or Carrefour.
    KC's View:
    Competing with Wal-Mart and Carrefour is the name of the game, and alliances between companies like Auchan and Casino simply will be inevitable in order to do so.

    It’s why, as Albertsons CEO Larry Johnson pointed out the other day, consolidation will continue to affect the food industry on both a domestic and global scale.

    And why even companies like Carrefour will be looking for new alliances…to hold off the Bentonville Behemoth.

    Published on: December 5, 2002

    A class action suit was filed in the United States District Court for the District of Minnesota on behalf of Nash Finch Company stockholders, charging that the company violated the Securities exchange Act of 1934.

    The suit charges that the company “issued false statements, including false financial results in which the Company included income from vendor promotions to which Nash Finch was not entitled, so as to maintain favorable credit ratings on its debt. As a result of defendants' false statements, the Company's stock traded at artificially inflated levels, permitting Nash Finch to maintain credit ratings on its $400 million in debt.”

    Nash Finch has not yet released its last quarter’s results, which has led to the possibility that it will be delisted from the Nasdaq exchange. In addition, it is being investigated by the US Securities and Exchange Commission (SEC) for possible accounting misdeeds.
    KC's View:
    This is becoming a familiar story…and we hope for Nash Finch’s sake, that it comes through it all intact. After the boom years of the 90s, stockholders just don’t take losses very well…

    Published on: December 5, 2002

    • Wal-Mart Stores Inc. reported this morning that November same-store sales rose just 2.6 percent, at the low end of predictions. The company blamed a late Thanksgiving that delayed holiday sales.

      Total sales for the month were up 10.3 percent to $20.997 billion in the four-week period ended Nov. 29.

      The Wal-Mart division's sales for the four-week period were $13.7 billion, up 10.5 percent over sales of $12.400 billion in the similar prior-year period.

      Sam’s Club sales for the four-week period were $2.646 billion, up 7.0 percent over sales of $2.474 billion in the similar prior-year period.

      The International division's sales for the four-week period were $3.499 billion, up 13.7 percent over sales of $3.078 billion in the similar prior-year period.

    • Ahold subsidiary US Foodservice has acquired Allen Foods, a foodservice distributor that generates about $245 million a year in annual sales.

      The move may have come as a surprise to some in the industry, given Ahold’s recent profit downturn and decision to focus only on core businesses; pundits were predicting that it would be a while before Ahold acquired anything new. However, US Foodservice CEO Jim Miller said that the acquisition fit with the company’s strategy because it reinforced a core business.

    • USAToday reports this morning that a new survey by the Society for Human Resource Management reveals that more than 75 percent of workers say they are satisfied with their jobs.

      Thirty percent of employees polled considered themselves ‘very satisfied,' and 35 percent say they're satisfied on the job, the survey showed. A mere 11 percent said they were dissatisfied with their jobs. Older workers were happier than younger workers, while men and women were equally satisfied – but for different reasons. Women were more concerned with flexibility to balance life and work issues and communication, while men put a premium on job security and benefits.

      Interestingly, workers themselves were more happy that their human resources professionals thought they were; in the same survey, HR managers predicted only eight percent of workers would say they were “very satisfied.”

    • Here’s one we hadn’t seen before -- selling fresh cut Christmas trees over the Internet.

      Walmart.ccom announced that it is selling fresh cut frasier fir Christmas trees over the Internet between now and December 9. They cost $57.64 plus shipping, stand between six and six-and-a-half feet tall, and are delivered within a few days of ordering.

    KC's View:
    Is there anything Wal-Mart won’t try? Maybe other companies have done this before, but it’s the first time we’ve seen it…and we’re tempted to try it.