business news in context, analysis with attitude

Perhaps a reflection of many members of the MNB community catching up on columns that were written while they took well-deserved holiday vacations, we got a ton of email on Friday and over the weekend on a broad range of subjects. Let’s see if we can get through it all…

We wrote last week of what appears to be a new trend: airlines charging for meals served during flights. This possibility generated a lot of opinion.

One MNB user wrote:

“I would have thought that the price of the airline ticket would cover the school-house or prison or hospital food they were already serving. for it....above and beyond the ticket prices? Nah. Keep your lousy food. With all the restaurants and snack places in airports these days, coupled with the extra time you have to spend there prior to getting on the plane, you can fill up before why bother providing that crap anyway.”

MNB user MacKenzie Malcolm had an idea about this:

“Why there aren't more Prêt a Manger locations in airports, I have no idea. There may be some, but I haven't seen them. I'm sure airlines would love to dispense with the refreshments on all but the most long-haul flights. I think I might start writing some letters...”

This is a great idea…and considering McDonald’s has an ownership position in Pret A Manger, and is suffering through tough times, this seems like a made-to-order solution to some of its financial woes.

Of course, as another MNB user pointed out, there is a possible flaw in this reasoning:

“The idea to bring food on the plane is a good one, but it might only be a matter of time before they don't allow food to be carried on. Stadiums are infamous for this, planes would be even easier to enforce.”

That’s certainly a possibility. Though we have to say, we read this email on a cramped Delta flight from New York to Atlanta, on which we were lucky to get coffee and pretzels. Between being practically strip searched, having identification checked several times, and enduring all matter of new security procedures (all of them justified in view of the current geopolitical climate), telling people they can’t bring a sandwich on an airplane could well be the last straw.

We noted last week in a commentary that one sign that McDonald’s is retrenching came when the Boston Market in the building next door to MNB World Headquarters closed down; it wasn’t hugely surprising, considering it never seemed very busy, and we’d ventured inside maybe twice during the decade it was there. We mentioned that we’re hoping that Mickey D’s will replace the Boston Market with one of its new and expanding Chipotle units…which prompted a lot of email.

One MNB user scoffed at our logic:

“How can you even compare these? Chipotle has a very ‘eclectic’ and limited menu, is over-priced and is a trend that could easily fade. Whereas Boston Market is a ‘staple,’ a middle of the road FAMILY meal that is hot, ready to eat and appeases many more appetites than a Chipotle ever could.”

First of all, we’re a very eclectic kind of guy…so our taste for Chipotle seems right in line. We also think the food at Chipotle is a lot better than at Boston Market…but taste is, after all, a matter of opinion.

We think “eclectic” may suggest limitations. But it also suggests differentiation. And differentiation, we believe, is the only way to survive in the retailing jungle of 2003 and beyond.

MNB user Ken Robb agrees with us:

“Chipotle is indeed special and unique, and McDonald's has good reason to be excited.

“Chipotle is a refreshing concept, appealing to those who want their Mexican food fast but reject the likes of Taco Bell. The menu is fresh and authentic, and prepared to order. It seems to appeal to young adults who tend to spend more on food away from home. Pricing is reasonable but not cheap, which is another reason for McDonald's to be excited. The average tab at around $7.50 per person (more if beer is purchased) is twice that of the typical hamburger outlet.”

We’re getting hungry just writing this stuff…

MNB user Dan Low joins in the banter:

“It is quite evident that you have been wanting that Chipotle to pop up in your neighborhood for some time. Good luck! We have them all over the place in Columbus and before I committed to losing a few pounds, I was becoming a regular. A matter of fact, not to rub salt in your wound, but we have 2 within a mile and a half of our house! Don't get too excited about the prospects of a Chipotle landing in the Boston Market space. We had a similar situation in a small to medium size shopping center where the Boston Market was shutting its doors. The Chipotle store ended up in a former Big Sky Bread space, catty-corner to the Boston Market. What you have is very independent retail store planning groups within the McDonalds "Family Of Companies". Would seem that this would be an area of opportunity as McDonalds looks for ways to trim that loss.”

Wait a minute. We thought that the stuff they serve at Chipotle was diet food. It’s not…?

And on the broader subject of McDonald’s travails, MNB user Tina Engberg wrote:

“My husband asked me two days ago what I thought about McDonald's as a possible stock pick. I went to a McDonalds for the first time in two or three years last week and have to say that based on the experience, the chain has some major issues. Disorganized and incredibly slow to bring up a Big Mac and small fries, the counter staff did nothing to manage the clutch of people in front of them, whether they were ordering food or waiting for their order to come up (in my case was eight minutes). Perhaps because I haven't had a Big Mac in such a long time, I frankly wasn't the least bit impressed with the flavor or presentation of the sandwich. The fries weren't piping hot; in fact, they were kind of chewy. The Egg Nog shake was the only highlight of the meal.

“In the context of whether or not to buy the stock, my suggestion to my husband was to watch and see what McDonalds does with its other brands. In my mind, the Golden Arches are more than just a little dim.

“Bringing Chipotle to the Atlanta area will be interesting, first, because McDonalds has folded the Donatos in the area, and second, because we already have a significant number of burrito chains here (Willy's, Moe's, Baja Fresh, Qdoba, Maui Tacos, etc.) I think that McDonalds would likely have better success in smaller markets that don't already offer a profusion of burrito options.”

Yeah. Like Connecticut.

On a serious note, it is interesting how much email we get when it comes to the fast food wars, and specifically McDonald’s financial travails.

We suspect that this is because Mickey D’s represents the classic case of a corporation grown so large that it lost its way…and the questions of whether it can regain its bearings is a compelling business drama. It is riveting for two reasons – it can be cautionary for people who work for big companies, and to those who work for smaller entities, it can suggest vulnerabilities to be exploited.

Beyond that, it is sort of like watching this enormous train wreck.

We reported last week that Wal-Mart is persisting with a plan to build a store in Dallas despite neighborhood objections…and is doing so by replacing a supercenter with a Neighborhood Market and then renting space to other retailing entities.

MNB user Gail Ginther offered some thoughts about this:

“From the time that you started the stories on the Neighborhood Market concept, I have felt that one reason Wal-Mart explored this path was to give themselves a means to circumvent local zoning restrictions. And I think that this story reinforces that. Now they can replace a plan for one big box with a string of smaller boxes, which might at least have the virtue of fitting in better with the surrounding environment.”

Last week, stories we reported about declining consumer confidence that set off something of a backlash, with some members of the MNB community questioning whether the reportage of negative numbers in this area actually fueled further erosion of confidence. (We disagree, though we do see their point.)

One MNB user added to the discussion:

“I've wondered for a long time about the value of putting out such doomsday reports. Where I work and live, nothing much has changed since the ‘downturn’ in the economy - Finagle a Bagel and McDonald's still have the ever-present help wanted signs on display, and the people who have been laid off can probably point the finger at other things. Yet, there is still the hand-wringing over the economy, and I can't help but wonder if the media that reports the unemployment figures isn't partially to blame. The economy is bad because the news says it's bad...right?”

Actually, we think the economy is bad for a lot of reasons – but media reporting isn’t one of them. Let’s not shoot the messengers here…

MNB Beth Bennion joined in:

“I’m gainfully employed and have no worries – thankfully - but as I continue to be bombarded almost daily with news of consumer confidence and spending going down, it still has the effect of making me wonder if I should be scaling back on my spending “just in case.” So, although you are correct that layoffs and business failings can certainly initiate the downward spiral, I agree with your readers who say that the media certainly contributes to that uh-oh feeling of wondering if we need to be hoarding our money…”

We had a related story recently about how consumers spent more than planned during the holiday season, and noted that this was interesting since retailers were singing the blues. MNB user Don Sutton offered this perspective:

“Consumers spent more than they planned on while many retailers are crying about sales. No big surprise.

“It ain't rocket science, guys. (Trust me, I spent a number of years working in rocket science and this ain't it.)

“If two people sit down to eat a pizza, they both leave the table fat and happy. If a dozen people decide to fight over the same pizza, every gets beat up and nobody gets much to eat. The explosion of mega stores over the last few years simply tells us that the retailing square footage is growing faster than the total amount of available consumer dollars can keep up with.

“Even if the dozen guys bring baseball bats to the table, there's still only so much pizza to go around. As long as the only response to the need to grow is sheer size the average retail sale per store will suffer, as does the customer.

“I miss the days when I knew the guys at the lumber yard, the hardware store and the small computer store. They had tons of information, help, and insight. Now we're lucky if the guys with the aprons know what aisle the hammers are in.

“I'm looking for my old copy of the science fiction book, Space Merchants, predicting a time when the mega corporations went wild, bought out the government and ended up with a scenario we seem to be headed for.

“Kmart is only the first casualty in the ‘somebody's got to go’ marketplace. It's going to get interesting before somebody starts using their heads.”

On a related subject, we also had a story last week about how the US Bureau of Labor Statistics will stop publishing its monthly Mass Layoffs Statistics report, which detailed information about factory closings across the country and layoffs in places where more than 50 employees were let go. The decision was a financial one, according to the Department of Labor; the report cost $6.6 million a year to produce, and there are just “finite resources.” A spokesman said that it was more important to use funds to get people back to work as opposed to reporting when people are out of work.

MNB user Tom Kroupa responded:

“Do you really believe that "finite resources" are the real reason that the U.S. Bureau of Labor Statistics decided to stop publishing the Mass Layoffs Statistics report? How about this possible reason: The economy is weak and the republicans will be blamed for it so the bush administration wants to minimize the damage to themselves. It’s a classic case of controlling the message. If the public doesn't have the facts, they cannot respond. Can't they eliminate $6.6M of wasteful government elsewhere?”

We’d agree with this, but then we might be accused of focusing on the negative…

While we were dressed down by a few MNB users on this negativity issue last week, including one person who said we should stick to “supermarket stuff” and not focus on economic stories, we did get an email of support from an MNB user:

“Stick your guns Kevin! I just finished reading the views concerning your reporting negative stories and am amazing and annoyed by the backlash, especially the ‘stick to supermarket stuff’ comment. First of all, I think you do a great job of being neutral and presenting a wide range of stories, topics and comments (even with K-Mart believe it or not.) You don't sugarcoat and you don't avoid tough topics which is part of the appeal to me and which earned my respect early on. I appreciate the news you provide but just as valuable to me is your commentary, and the fact that say what you think and stick by your views.

“That said, let's face it, things are not rosy in the American economy right now. There are negative stories in the news for obvious reasons; however, I also read my share of positive stories as well. Having MORE positive stories out there is not going to change the situation - the economy is not sluggish and consumer confidence low because we have too many gosh darn unhappy stories. Putting out more positive news would just make me more suspicious because I see the reality all around me every day and it ain't positive. So don't change a thing! There is certainly nothing wrong with your story content and I hope your editorial eye isn't tainted by the backlash - it is bad enough you even have to defend yourself against these claims.

“As for "sticking to supermarket stuff," I think that this is exactly what you are doing. Part of what makes your column (for lack of a better term) more interesting and unique than most is your ability to think outside the box - a claim many retailers clearly cannot identify with. There is a lot of information out there outside of the retail industry that can be applied and you do an excellent job of integrating that into typical retail news. It is refreshing and right on the mark. Economic indicators - positive or negative - directly affect the retail industry and any retail exec worth his weight looks at all this information as well.

“Kevin, I certainly don't agree with everything you have to say (most but not all) but on these points I am behind you 100 percent and look forward to more of the same tomorrow.

“By the way, only 42 days before pitchers and catchers report to spring training!”

Forty-two days…and life begins again.

Normally, we would avoid posting such a letter, if only because it seems self-congratulatory.

But what the hell.
KC's View: