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    Published on: February 12, 2003

    We got a lot of reaction yesterday to our piece reporting that Starbucks Corp. will test market Godiva chocolates and biscuits over the next three or four months in 50 of its coffee shops in New York, Seattle and Chicago, as well as our commentary that Starbucks would probably soon come up with a Godiva-branded coffee before you know it.

    Rather than post all the emails that said the same thing, let us just say that we knew that there is a Godiva coffee on the market, though the phrasing of our commentary didn’t imply that. It’s just that we seem to remember not being impressed with it, and we were thinking that Starbucks could do a better job of creating a Godiva coffee.



    We got much reaction to our story yesterday about recommendations made by the Bush administration for “disaster supply kits” that American households ought to have on hand, including a three-day supply of water, one gallon per person per day; food; a battery-powered radio; a change of clothes; an extra set of car keys; and cash, as well as a supply of duct tape and plastic sheeting to seal off windows if a chemical or biological attack occurs.

    One member of the MNB community wrote:

    “It is so hard for the public to prepare for terrorism. Three days worth of food and water is not going to cut it if it is a radiological attack, a dirty bomb. Nor will plastic sheeting cut it for bubonic plague or ebola. Gas Masks may help with certain types of gas attacks, but some nerve gases will kill you if they get on your hands. How can we reasonably prepare? It reminds me of hiding under a desk in elementary school all those years ago to drill in event of a nuclear attack? It all seems pretty far fetched, especially since most of the day our families are spread out away from home.

    “All that being said, it is reasonable to stockpile some amount of food and water - probably more like a weeks worth. Pick out a safe room in the house and have available certain items like plastic to seal off windows and doors, duct tape (every one should have it anyway), radio, batteries, flashlights, etc. plenty of reading materials, etc. My family did this already...after 9/11...And, since you have no idea what is going to happen, you can at least do something that might help in case of an attack. I fully expect my local Wal-Mart to have all the essentials on an end cap by this weekend.”



    MNB user Westall Parr wrote:

    “I've no doubt that the threat is real.

    “But didn't we hear all these ideas and suggestions when it looked like Y2K was going to stop the world from turning on its axis (no pun intended).

    “Duct tape and sheets of plastic ?

    “The battery operated radio makes sense.

    “Gas masks ?

    “Does the government have the courage to make that suggestion?

    “These are perilous times and what you need most is common sense and a steady hand. Sounds hokey but it will get you through.

    “Bathroom is probably the safest room in the house.”


    If the bombs start going off, the bathroom also is likely to be the most crowded place in the house…and not just because it may be safe.


    MNB user Jo Anne Sharlach chimed in:

    “During the 50 years of the Cold War, each neighborhood designated a school, a public building, or whatever as a "safe place" for the entire neighborhood. Most stocked survival equipment and food, and all were clearly marked so that in the event of an incident all neighbors could congregate in these centers. (Rather like the bomb shelters in Britain during WW II or the Red Cross Centers now operated during natural disasters.) These centers usually were augmented by a civil defense siren, which covered a huge area. These alarms were tested in Washington, DC up until about 15 years ago on a weekly basis. The alarms were also used in DC and other centers to alert the populace to a natural disaster, like an approaching tornado. (If the DC area had had its old alert system, perhaps we would not have suffered so greatly during the last two huge tornados that have battered the area in the past five years. The alarms would have alerted the citizens to take shelter and turn on the radio to find out what is happening.) Perhaps it is time for us to go back to the past for answers to aid us during this present time of rampant worldwide terrorism.


    And MNB user Kathleen Whelan added:

    “This should be an incredible week for Home Depot in particular and grocery stores in general. I hope that the duct tape and plastic film manufacturers have a flexible enterprise forecasting tool. Wouldn't want any out of stocks! Get those flags and yellow ribbons going, too. This will be a big test for supply chain technology as well as military intelligence!”




    We got an email from MNB user Ronald Cook about McDonald’s marketing efforts:

    “My daughters, now 16 and 8, place McDonalds so far down the list of available fast foods that they are never even on the list. Kaiti, an eight (8) year old prefers the local Chick-Fil-A which does not have a play area to any of the burger places that do have play areas. Taco Bell rounds out the preferred fast food favorites with Wendy's winning the burger option. The Chick-Fil-A option is a favorite due to the fact that the food is of better quality, always fresh and hot and the clerks treat you like they are glad you chose Chick-Fil-A.

    “All the play grounds in the world do not make up for poor food and poor
    service, even to 8 year olds.”





    On the subject of two new dairy-based fruit drinks, from Minute Maid and Snapple, we noted yesterday that it almost doesn’t matter how these products are positioned. Store shelves and coolers are about to get even more crowded than they are already…

    One MNB user replied:

    “This is only because these two companies "own" and dictate what product must be contained within... It's no wonder some of the smaller retailers have a tough time when they are getting pushed and pulled from all sides.”




    We wrote yesterday about the imperious and arrogant American attitude toward Europeans who are anti-GMOs. One MNB user replied:

    “I feel that it is the "ugly American" attitude like this and the projection of SuperPower", better than thou and holier that thou, that has brought us to the brink of a world war. Although I don't support Bin Laden, Hussein, or our North Korean adversary, do you suppose it's comments covering all life topics, like these that add fuel to the fire?”
    KC's View:

    Published on: February 12, 2003

    From the Food Marketing Institute…

      Seeking to enhance the delivery of benefits to consumers from the Women, Infants and Children (WIC) program, the American National Standards Institute (ANSI) Accredited Standards Committee (ASC) X9 has developed a new national technical standard — ANSI ASC X9.93-2002.

      Established by the X9A11 Working Group — which includes retailers, payment processors and government EBT administrators — the new standard enables messages to be exchanged among the parties involved in traditional magnetic stripe and smart card transaction platforms associated with the USDA WIC system. These new platforms also provide a migration path for traditional food stamp and other EBT transactions. Approximately 10 states are experimenting with the standard in some form, with more expected to follow in the coming year.

      Creation of the standard, which enables WIC program participants to obtain their benefits via a smart card platform or magnetic stripe card, was led by the Food Marketing Institute (FMI) and its food retail and wholesale company members. FMI also led the recent drive to establish the ANSI ASC X9.58 standard for traditional food stamp EBT transactions, approved in 2002.

      “FMI, ANSI and food retail companies nationwide have been working closely with government administrators of WIC programs to move forward with the establishment of a national technical standard for the distribution of WIC benefits,” stated Ted Mason, chair of the X9A11-EBT committee. “We are excited to announce the development of a new standard that will thoroughly enhance benefits delivery through convenient and efficient smart card or magnetic stripe card platforms.”

      FMI is encouraging all food retail operators to become familiar with the details of ANSI ASC X9.93-2002 and its applications. For companies that manage their own internal payment switching operations, FMI recommends that a copy of the new standards document be reviewed by their respective operations centers personnel. A copy of the document may be obtained through the ANSI Web site at www.ansi.org.
    KC's View:

    Published on: February 12, 2003


    • George Weston Ltd., owner of Loblaws Cos. in Canada, reported fourth quarter earnings the equivalent of $152 million (US), down from $157 million during he same period a year ago. Annual profits rose to $452 million (US) from $381 million a year ago.

      Quarterly sales were up seven percent to $4.3 billion (US), while annual sales were up 11.3 percent to $17.9 billion (US).

    KC's View:

    Published on: February 12, 2003

    NACS Daily reports that a new Tik Tok Easy Shop, an "automated convenience store," has opened in Bethesda, Md., using the name Redbox. There care now 10 such machines in the DC area.

    The 20-foot-wide, 10-foot-deep and 10-foot-high Redbox is stocked with DVDs, dairy products, soy milk, diapers, eggs, minestrone soup and disposable cameras. Customers can pay via cash or credit card.
    KC's View:

    Published on: February 12, 2003

    According to a new study from the DVD Entertainment Group (which admittedly has a rooting interest), DVD players are now in half the households in the US, gaining consumer adoption faster than either the transistor radio, personal computer, CD player and VCR. Remarkably, DVD players are now commonly sold at price points lower than $100.
    KC's View:
    The answer to the question posed in the headline is, “Waiting for DVD recorders to become affordable so we can start transferring our old taped stuff to disc.”

    Published on: February 12, 2003

    The New York Times reports this morning on an interesting phenomenon taking place at Home Depot stores out west, where thousands of Hispanic day workers stand around their parking lots hoping to pick up some work.

    Home Depot management is not amused, especially as it has begun offering its own installation services to shoppers, and has hired security forces to keep the day workers at bay.

    "Home Depot is a do-it-yourself center," Home Depot’s Chuck Sifuentes told the NYT. "We want people to do the work themselves. But baby boomers are getting older and want the work done for them. This attracts labor that we don't endorse."

    The problem is getting worse as the economy continues to stall, according to the NYT.
    KC's View:
    This actually gives us an idea…if this website thing ever goes south, maybe we’ll hang out at the local supermarket parking lot asking women if they want to take me home so we can make them a risotto…

    Seriously, though, while the NYT reports that the hordes of day workers tend to be scruffy but fairly orderly, it seems to us that Home Depot actually is missing the larger picture. Sure, they offer some installation services, but our experience is that you wait forever and get lousy attention. Maybe what Home Depot ought to have is a pool of employees who have been vetted and who can help someone on a project at a moment’s notice. It could be a powerful marketing tool.

    In the same way, food retailers could offer much the same sort of service, with a pool of talent instantly available for a variety of food-related need.

    Published on: February 12, 2003

    With all the concerns in the marketplace about obesity and healthy eating issues, the March 2003 edition of Prevention has a piece on page 81 highlighting “seven quick foods that fight fat.”

    The premise is simple: convenience doesn’t have to mean “fattening.”
    KC's View:
    Strikes us as a great source of information as retailers try and find new ways to market themselves to consumers.

    Retailers ought to be ravaging the pages of these sorts of magazines, using the editorial as a way to suggest marketing efforts. It can build sales (of both the products and the magazines) as well as credibility for the store and a differential advantage.

    Published on: February 12, 2003

    The Financial Times reports that Freshfields, an international law firm, has warned that food producers and retailers still run the risk of being sued if they don’t deal with the possible dangers of acrylamides in baked and fried foods.

    While there has been a plethora of conflicting information about acrylamides -- studies that say they are carcinogenic to humans, and others saying that they are not -- the law firm told FT that litigation always is possible, even likely, and that companies should clearly document their efforts to understand all the science and deal with the i

    Paul Bowden, a Freshfields partner, told FT: "The science has already reached a point where the clock is ticking for the industry." The risks of being sued are unclear but need to be monitored as new information emerges, the firm said.
    KC's View:

    Published on: February 12, 2003

    The Financial Times reports that Tesco Plc, the UK’s biggest supermarket retailer, has said that two of its subsidiaries -- Tesco Stores and Tesco Property -- made small administrative accounting errors that have now been corrected.

    The mistakes were “nothing sinister,” according to the company. One was discovered by the company’s finance department, and the other by a shareholder doing research.

    The mistakes are expected to have no impact on any financial reporting or projecting done by the company.
    KC's View:

    Published on: February 12, 2003

    MNB continues our newest feature: “The BIG IDEA Beat” Contest, in which the thought-leaders who make up the MNB community have the opportunity to share their perspectives on critical issues facing the industry and win a signed copy of Agentry Agenda: Selling Food in a Frictionless Marketplace, by Glen Terbeek.

    Each week, we offer both a Premise and a Challenge to MNB users. The Premise will seek to state either a fact of life for the food industry as it currently exists, or a trend that seems to be developing as retailers and manufacturers seek a better way of conducting business.

    Your Challenge will be to respond by identifying the best ideas and examples that typify where the industry ought to be heading.

    Entries should be emailed to kc@morningnewsbeat.com.

    “The BIG IDEA Beat” contest will be featured each Monday, and repeated Tuesday and Wednesday…answers must be submitted by 11:59 p.m. on Wednesday. Winners will be picked and featured on MNB by Friday. Some weeks there may be single winner…other weeks, there could be multiple winners. Selection of the winners will be solely at the discretion of Glen Terbeek and MNB Content Guy Kevin Coupe.

    Premise:

    Wal-Mart’s supply chain has been envied by the supermarket industry as being both efficient and effective; many in the industry say it's the key to their success. It was the motive for the ten-year ECR movement, in which the industry tried to emulate it. It includes a significant technology investment including Retail Link that shares complete sales and inventory visibility at store level with their suppliers. It operates on the policy of “net, net” costing to the store.

    And now, as reported on MNB, it is rumored that Wal-Mart may offer wholesaling services to independent supermarket operators, leveraging this supply chain.

    Challenge:

    Tell us if you think independent supermarket retailers should use Wal-Mart’s wholesaling services? What are the pros and cons of doing so? What would be the impact on the shopper, the manufacturer, and the retailer of such a decision? Consider this question from the shoppers’ and manufacturers’ view as well as the retailers'. And finally, if Wal-Mart decides to go into the business of supplying independent grocers, what should the current wholesaler class do in response?
    KC's View:

    Published on: February 12, 2003

    Bloomberg News reports that both J Sainsbury and Safeway Plc lost business to Tesco and Wal-Mart’s Asda Group in the UK last year as consumers responded to low-price messages.

    Sainsbury lost the equivalent of $90 million (US) in sales, while Safeway -- currently being pursued by as many as six companies in an acquisition frenzy -- lost a whopping $364 million (US) in sales to the other chains.

    The Grocer, a UK trade magazine, recently did a market basket study that concluded that Asda was the lowest priced UK grocer, followed by William Morrison, Tesco, Sainsbury and Safeway.
    KC's View:
    The question becomes how this price competition develops further depending on what entity ends up with Safeway.

    One of the wisest people we know in this business suggested to us yesterday that it is likely that the company will end up being acquired by a financial entity, not another retailer, and then will be sold off in pieces. Seems like a sensible conclusion in that it maximizes shareholder value and probably minimizes the headaches suffered by the competition regulators in the UK.

    Published on: February 12, 2003

    The Dallas Morning News reports that Wal-Mart could become the market leader in food sales in that city within a year, using both supercenters and Neighborhood Markets to shove aside the likes of Kroger, Albertsons and Safeway’s Tom Thumb.

    It would be the first time that Wal-Mart would become the biggest seller of groceries in a top 10 U.S. market.

    The paper suggests that because Dallas is a) a major metropolitan area, and b) a place where Wal-Mart seems to be competing successfully in the food arena with the nation’s top three mainstream grocery companies, it could provide a blueprint for how Wal-Mart will exploit other markets throughout the US.

    Kroger is fourth-ranked in Dallas, but actually increasing share, up to 14.2 percent from 13.5 percent, in part because of an acquisition of seven Winn-Dixie locations when that company left the market.
    KC's View:
    While clearly all these chains have to try to be competitive with Wal-Mart on price, it seems to us that equally important are their efforts to differentiate themselves in other areas, especially by catering to local interests and tastes.

    Understanding local consumers and finding new and different ways to appeal to them -- and their imaginations -- seems like an absolute mandate these days. It can’t be lip service, and it can’t be desultory; it has to be strategic, focused, relentless and, above all, inventive and imaginative.

    Published on: February 12, 2003

    Kmart Corp., frustrated that the company’s former executive vice president and chief supply chain officer has not responded to several subpoenas, has asked the court overseeing its bankruptcy to hold Anthony D'Onofrio in contempt.

    The company said in papers filed with the court that D'Onofrio was a "critical player in the crisis at Kmart during 2001" and that "questions remain as to whether D'Onofrio, and those working with him, engaged in serious breaches of their fiduciary duties." Kmart has referred to former management of the company as possibly being “grossly derelict” in its duties.

    The court was asked not just to issue the contempt citation, but also to fine D’Onofrio and require him to pay Kmart’s expenses accumulated in trying to issue the subpoenas.

    According to a report by the Associated Press, D’Onofrio received a $2.5 million retention loan from Kmart as incentive to stay with the company, one of the largest such loans given out by the company to top management.

    D’Onofrio reportedly was handed subpoenas at his home in Texas, his office in New Jersey, and at Newark International Airport.
    KC's View:
    A dead giveaway to the fact that D’Onofrio may be guilty of wasting Kmart’s money is the fact that he lives in Texas and works in New Jersey. By any standard, that’s a helluva commute…no wonder they had to try and serve him papers at the airport.

    Seriously, though, one of the reasons that we begin to doubt that Kmart can survive is that so much of its time and effort is being put into court appearances and filings. It is squabbling with Fleming over the terms of their divorce, it is investigating its own misdeeds, cooperating with a number of federal investigations into its behavior -- none of which has any material relationship to the shopping experience that a consumer has walking into a Kmart today.

    That’s a problem.

    Published on: February 12, 2003

    Fleming Cos. is expected to be in court today, challenging Kmart’s assertion that it did not live up to the terms of their 10-year, $4.5 billion supply agreement and that it considered declaring bankruptcy to get out of the deal.

    That supply agreement, of course, only lasted two years, and was ended last week as both sides agreed that it was no longer in the best interests of either company. At one point, Kmart accounted for one-fifth of Fleming’s revenues.

    In its bankruptcy court filing looking to end the agreement, Kmart said that:

    • Kmart didn’t tell Fleming that it planned to go to the bankruptcy court to end the deal because it was concerned that Fleming would declare bankruptcy itself to end the relationship.

    • Kmart charged that Fleming provided it with inadequate service and rising prices.

    • The relationship between the two companies got so bad that Fleming CEO Mark Hansen didn’t even return phone calls from Kmart CEO Julian Day, even though at that point Kmart was Fleming’s largest customer.

    Fleming said it was going to court to rebut Kmart’s charges: it said that it never planned a bankruptcy filing and that Kmart’s prices only went up as its volume went down.
    KC's View:
    Ugly talk. We’ve said all along that we’re not sure that Kmart will be able to survive all the battering its reputation has taken (a battering much deserved, in our opinion). But you begin to wonder that as Fleming goes out and makes sales pitches to other retailers about why they should utilize it instead of another wholesaler, how exactly does it convince people that it can survive all this?

    And you’d think that Fleming has to convince a lot of retailers to sign on, if only to make up for the 20 percent of volume that vanished when Kmart did.

    We know there are a lot of good people working for Fleming around the country. This can’t make their jobs any easier.