business news in context, analysis with attitude

We got the following email yesterday in response to our report yesterday on how an olive oil disagreement seemed to illustrate how Ahold’s US Foodservice may have gotten itself in trouble, and how similar problems likely exist at virtually every food retailer in the country:

“You are absolutely right that there are similar stories at almost every single retailer. In my experience, the abuse and lack of ethics at some companies is downright shameful. How we evolved to a point where a retailer is 'allowed' to deduct whatever they want from a payment to a manufacturer and then book those funds and wait to see if and how hard the manufacturer comes back after the money is beyond me.

It is literally a license to steal - or, at least a license to an interest-free loan. If a disputed deduction is paid back, it is often months or even years later, and then it is often an exchange of 'free performance' instead of an actual repayment of funds. And now, many retailers have learned that all they have to do to avoid repayment is adopt a "policy" that states they can do a certain thing - like deduct for promotional allowances on products ordered up to four weeks prior to the beginning of a published deal or four weeks after the end of the deal. On a typical four-week promotion, that means a manufacturer suddenly is being charged for 12 weeks of deal product when they had only planned for 4.

“Most manufacturers are unwilling or unable to sacrifice any short-term business with a given customer in order to halt these types of practices. As the industry continues to consolidate on the retail side and the number of retailers shrinks and the ones leftover only get bigger and bigger, manufacturers are powerless to put a stop to these practices. No one has the courage to 'draw a line in the sand' and stop shipping product to an abusive customer. The impact to this month's or this quarter's sales would be too great and the resulting impact to a company's stock price would cause an outcry from shareholders. If shareholders understood what was really going on and what was really best for the business, they would be screaming about what companies are allowing customers to get away with.

“As a conservative, I would normally be against increased regulation by the government, but in this case, the playing field has simply become too slanted in the retailers' favor and it may be time for the government to look into some of their business and accounting practices. In the end, it is the American consumer who gets hurt as all of these costs are simply passed on in one way or another in cost of goods. Without slotting, merchandising fees, etc., the average product could probably be sold to the consumer for 20-30% less than what it is today. Look at the Wal-Mart model - which doesn't charge these kind of fees - and how much lower the average retails are in their stores versus the traditional retailers left today. Far too many traditional retailers have become 'collectors of fees' or 'sellers of space' and have completely ignored or forgotten the consumer.”

We also got the following email from a member of the MNB community:

“Several years ago I did some business with Ahold through their Bi-Lo Supermarket chain out of Mauldin, S.C. At that time, I was doing most of the business with several American citizens that were executives of the firm, but I did accidentally run into the Dutch fellow who was running American operations at that time. The American executives I dealt with (all of whom have long left the firm) were all very professional, honest and fair in our dealings; however, the Dutchman at the time almost "queered" the entire deal with his high handedness and a feeling that he was "a legend in his own mind". We finally did make the deal work, but not thanks to the Dutch, for whom I have held little regard since.”

Several responses to yesterday’s broadside by Katherine Albrecht, founder and director of Consumers Against Supermarket Privacy Invasion and Numbering (CASPIAN), who wrote that “any alert consumer can tell you that the supermarket industry is drowning in a sea of broken ethical compasses,” and suggested in her email that all evil in the supermarket industry can be traced back to the use of loyalty cards. (Okay, maybe that’s a slight oversimplification on our part…)

MNB user Tom Carroll wrote:

“O.K. now I am forced to respond. The Caspian letter is a crock!! I have been calling on the top ranks of supermarket retailers for the past 20 years. I have personally called on every major public and private chain in America and for the most part every one of them are honest and highly ethical. Ahold in my opinion is among the absolute top chains in the country. They have done an outstanding job of acquiring chains and assimilating them into the Ahold fabric and not changing the local characteristics. The method of integrating the frequent shopper card has been a plus and there is no chain more ethical about holding the information in a confidential manner. For the most part, they are the poster child of how to do it right.

“As for ethics, the entire Ahold team, regardless of whether or not it is at Corporate or at one of the division levels are professionals, and a group I am proud to work with on any project. The Ahold problem is not with the team of people that are working tirelessly to make the right decisions but with the top few that change the perception of the company. Ahold will get through this and be better for it.”

One member of the MNB community wrote:

“Katherine Albrecht and her CASPIAN sounds like so many other ‘I told you so" experts in voicing their opinion after the fact. That they're always 100% correct (in their view) has very little to say for their not voicing their opinions before the publicity is at its highest peak.

“I wonder if anyone seriously pays any attention to what they say?”

We wrote yesterday about McDonald’s selling sliced fruit in the UK. One Australian MNB user wrote to say:

“In Australia, McDonald's has added "Toasted Cheese & Tomato Sandwich with Orange Juice & Sultana box" to its Happy Meal menu.....”

Yesterday’s MNB featured a piece about how 90 percent of affluent adults rely heavily on the Internet when making automobile, travel and computer purchases. MNB user Wendell Ponder responded:

“That’s me! I’m currently using the web to buy a truck, gifts, an ATV, a sport coat,… You are right that these companies need a web presence, but you need to be more specific. I search for information on which to make purchases, so an informative easy-to-use site gets my attention and time. However, pop-up ads are counter-productive as far as I am concerned. I have no problem with junk postal mail, I set it aside and deal with it when I have time. Pop-up ads, on the other hand, interfere with my search for information by forcing me to deal with them immediately. I rarely look at the content of these ads and would never purchase from them. I linger much longer at sites with no pop-ups.”

Agreed. Nobody likes pop-up ads.

And, responding to our piece yesterday about the difference between management and leadership, we got the following email from MNB user Bob Schuller:

“I can't remember where I read the article but I do recall reading that you measure a great leader not by how a business does while he is in charge but by what is accomplished after he leaves. Great leaders develop people and give them an opportunity to test ideas without the fear of failure. I think one of the problems with business today is the penalty for trying and failing.”

Based on the number of CEOs who seem to be biting the dust lately, and the turmoil in which they leave their companies, there seems to be a real deficit in leadership these days.
KC's View: