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    Published on: May 8, 2003

    Lots of comments this week on the subject of Wal-Mart's not carrying three men's magazines that it deems inappropriate, and the sanitizing of DVDs and CDs so they are more "acceptable" to consumers. While we support any retailer's decision to sell or not to sell a product, we equated sanitizing art with censoring art…though not everyone agreed.

    MNB user Neil Reay wrote:

    "I have to disagree with you on the issues of "art" being censored when Wal-Mart or Albertsons gets "sanitized" versions of music and movies. The fact is that the producers don't have to make the changes or sell in those outlets. If they want to protect their "art", they will stand fast. If they cave in, it is just commerce, and it never was art. Movies rated "G" outsell "R" consistently, but producers want to have some nudity, gore or language to give them a preview clip to draw 20-somethings. It most often doesn't advance the story or meaning, it is just commerce from the get-go. Movies produce sanitized versions for the airlines for money, then claim they can't offer the same version in stores without compromising the "art." We are always saying that the stores should reflect their consumer's wishes, and they wouldn't offer the changed materials if they didn't sell. Maybe consumers need the clout of major chains to get producers to offer what the consumer wants in the first place."

    Actually, we think that PG and PG-13 movies tend to do better than either G or R movies…but that's beside the point.

    We actually are as harsh in our judgment of producers and studios that cave in to such demands as we are of the companies that make the demands. We also think that art and commerce aren't mutually exclusive; by the way, one of the reasons that movies are so lousy today is that they are viewed as merchandising vehicles, not ways of telling interesting and compelling stories.

    A sanitized culture that focuses on commerce appeals only to the lowest common denominator. It's like the difference between Disney's view of the world and the real world -- we'll take the real thing, warts and all, any day.

    Another MNB user wrote:

    "I think Wal-Mart is only reflecting what their stockholders want
    on what they sell and don't sell. Let the market decide...if a kid can't
    get an Eminem CD at Wal-Mart will he stop shopping at Wal-Mart? I don't think so...I think you are giving Wal-Mart too much credit on how they might shape society...at the end of the day...it is still up to the individual or
    consumer to decide the marketplace results."


    On the contrary, we don’t think that the potential impact of a sanitized society can be underestimated. And we think Wal-Mart, as it grows and expands its field of vision and power, is inevitably going to impact what kinds of cultural or artistic experiences are created because of what it is willing to buy or sell. It won’t necessarily engage in the cultural argument, but the residual effects could be powerful. (It isn’t just Wal-Mart, by the way. Consolidation and conglomeration in any industry can have a dulling effect on creativity and innovation…and, yes, artistic expression.)

    There was some agreement with our position, as one MNB user wrote:

    "I wouldn't want to live in a…world where Wal-mart determines the cultural environment.

    Sounds like a definition for a new circle of hell."




    Regarding a story this week about Ron Burkle's Yucaipa Co. possibly bidding to re-acquire Dominick's in Chicago, one MNB user wrote:

    "It won't be easy. It will take a lot of hard work from management and the employees to repair the damage. Concessions, concessions, concessions.
    Burkle does have the knowledge and grocery background to help with the rebuilding. All the employees that were terminated or FLED during Safeway's reign might come?"





    We received the following email about our Kmart coverage:

    "I've been in the retail business for over 40 years most of that in operations management, part of the time as a Kmart manager in the 60's and early 70's. It was a good place to work, if you had a good store manager and district manager. If not it was terrible, but that's a different story.

    "My wife started working for a local Kmart part time late last year. She's not trying to save the world or become president. She enjoys bringing order to her department, the camaraderie with other employees, the manager, and most of all her customers. From her evening conversations and from the physical change in her store it was obvious the store is headed up. The manager holds daily meetings, praises the staff and store achievements, and generally behaves like an extraordinary retail manager. The store is often 1st or 2nd in the monthly and weekly sales numbers for its division, etc. An incredible change from where it has been for years.

    "So, I was getting tired of all your trash talk about Kmart, because I'm hearing nothing but good things from my wife. Reality sets in! A few weeks ago they transfer in people from a closed Kmart, including a store manager. She says the new people are standoffish and nasty to customer and employee alike.

    "The store manager (I'll call him "ah" for distinction purposes) is only there temporarily and already many of the regulars are getting hours cut, chewing outs in view of all, etc, you get the picture. "ah" is the prototypical Kmart manager of the good old days, lips moving but nothing coming out, wads of gum in the ears, rude, crude, and arrogant. New money, new executives, new merchandise ... none of it makes a hill of beans, if you can't run a clean, well organized, FRIENDLY store. This situation makes me very sad and tells me Kmart, without major changes, has not long to live."


    Trash talk? Us?

    We're just doing hard-nosed (some would say "hard-headed") commentary here…




    Regarding yesterday's report from FMI, one MNB user wrote:

    "Your quote from Edie Weiner, president of Weiner, Edrich, Brown, Inc.,: "Information is not power. Implementation is power," reminds me of a quote an old boss/mentor has mounted in our conference room in 12" high letters for all of us young bucks that thought we knew everything at the time:

    "Knowledge not acted upon is useless."

    "I have know idea where he got that from, but it's stuck with me since my early 20's (and a couple of decades have since passed...obviously the memory chip is strong here!)"




    We received some email regarding our consistent criticism of the argument that only middle management at Ahold's US Foodservice knew about the accounting procedures now under investigation. One MNB user wrote:

    "You hit the nail on the head! As someone who spent six years as a middle management accountant at a large regional grocery chain, the boss knows and orchestrates the practice. Where is the accountability here!! You are also correct that it likely stems from a warped corporate culture, so don’t even try to question those accounting entries because Mr. Merchandiser will not hit his profit goals. Then the accounting boss and Mr. Merchandiser will internally “blacklist” you from any future promotion opportunities. This lack of upper management backbone and protectionism is pervasive in corporations and effective change will never take place if there is no accountability."

    And MNB user Andy Casey chimed in:

    "You don't grow a problem of this size strictly within the ranks of middle management. Just isn't possible without someone at the top asking at least a few questions. More likely, middle management was caught in the "middle" between lagging sales to customers and rising pressure on quotas from on high.

    "Just can't help thinking of Harry Truman and his famous "The Buck Stops Here" sign. Sounds like the powers that be at Ahold are trying to make sure the buck never gets quite that far up the ladder."





    We got some interesting email about the decision by Supervalu's top executives not to take a bonus for last year's performance. One member of the MNB community wrote:

    "No bonus's at Supervalu.....Kmart to pay out Millions. (just a comparison thought) Supervalu shows year to year progress, so does Kmart......in reverse. (Jeff) Noddle seems to be steering the business appropriately. He not only kept his company away from investigations. He kept them out of being a supply source for Kmart. He probably didn't look to smart when Fleming won the bid....He sure looks brilliant today."

    Agreed.

    Another MNB user wrote:

    "What a refreshing "Corporate America" story for a change. Reads a lot better than if they would have let 200 people go to make up for the difference in the profit target rather than not give bonus to top people. Good for you, Supervalu! Makes me want to go visit Cub again next week."




    We had a piece last week about women feeling they are being given short-shrift by many retailers, which prompted the following email:

    "Honestly, I am growing weary of how poorly certain agenda driven women perceive that they are being treated. One only has to go to ANY department store, ANY shoe store or ANY mall in America to see that retailers bend over backwards in catering to women. Women are 50% of the population yet they have fully 2/3 or more of all retail space dedicated to "women's" products. Again, shoes, clothes etc... Also most, not all, but most, small boutique shops in any mall in America are dedicated to women.

    "The statement made by Ms Quinlan is nothing more than reverse sexism, and is a complete affront to those of us who are , you know, the "evil white men of America". Needless to say, the reason that any company is in business, is for profit. To suggest that most companies are foregoing those profits so they can maintain their status quo of sexism is preposterous. Any company worth its salt will do anything it can to sell more and generate additional profits. Look at the most successful company in the world (and still growing
    at record rates) Wal-Mart. Currently being sued by a group of women, yet their sales are greater than any company in the history of business. Ms. Quinlan's diatribe has zero merit.

    "To further suggest that because a marketer is not a woman, that they are incapable of marketing to women just highlights Ms Quinlan's apparent lack
    of intelligence. I suppose that because a doctor has never had cancer, he or she is incapable of working with cancer patients. The argument is a slippery slope at best, and purely agenda driven in reality.

    "As for why sales trends are what they are, the economy, the weather, and many other factors DO drive those trends. It doesn't take a rocket scientist to figure that when people get laid off, they spend less money, or when there is little or no snow, ski equipment and apparel sales will decline.

    "Please don't tell me that you think there is a network of angry women out there communicating amongst each other regarding their frustration about the lack of marketing to their gender. Please don't bring yourself down to the level of the angry feminists."


    We're not going to use this MNB user's name because we don’t want to be responsible for his lynching…

    All we know is that we have a wife, daughter and four sisters…and would never pretend that we understand any of them.
    KC's View:

    Published on: May 8, 2003


    • The Associated Press reports that Donald S. Shaffer, president and chief operating officer of Dollar General Corp. for the past two years, has resigned in order to give the company's new CEO, David A. Perdue, clear leadership of the company.

      Shaffer had been the interim CEO from last November until Perdue was hired last month.

      Perdue was hired to succeed Cal Turner Jr., who stepped down last September. The company now will seek a new president/COO.

    KC's View:

    Published on: May 8, 2003


    • Wal-Mart Stores Inc. reported a 4.6 percent gain in April same-store sales, up from 3.3 percent a year ago. Net sales for the four-week period ended May 2 reached $18.6 billion, up 12.2 percent from the same period last year.

      Whole Foods Market Inc. reported that net income in the quarter ended April 13 rose to $25.6 million, from $20.2 million a year ago. Quarterly sales increased 16 percent to $725 million.



    • Costco Wholesale Corp. posted an April same store sales increase of six percent, on total sales for the four weeks ended May 4 that were up 10 percent to $3.14 billion from $2.84 billion a year ago.

      For the first 35 weeks of its 2003 fiscal year, the company reported net sales of $27.47 billion, an increase of 9 percent from $25.20 billion during the comparable period of the prior fiscal year.



    • Nash Finch Co. announced that it will not meet the deadline to file its first-quarter report, but will be able to file quarterly reports for the third quarter of 2002, the first quarter of 2003 and its 2002 annual report by May 15.



    • PriceSmart, Inc. announced that net sales increased 10 percent to $54.9 million for the month of April, up from $50.1 million a year ago. Same store sales were up 3.6 percent.

      For the eight months ended April 30, 2003, net sales increased 11 percent to $461.1 million from $417.2 million in the same period last year.

    KC's View:

    Published on: May 8, 2003

    In other bad news for Ahold, the Chilean retailer Distribution y Servicio (DYS) claims that it is owed $45 million by the Dutch retailer, and has taken legal steps to recover the money.

    The conflict stems from Ahold's Chilean Disco unit reported missing of a Wednesday deadline to pay $90 million Disco owed DYS for the acquisition of 10 Argentine supermarkets in 2000. The original deadline was last Friday, at which point Ahold said it only owed $45 million because of the devaluing of the Chilean currency.
    KC's View:
    Sounds like Ahold has some real accountant issues, doesn't it?

    Published on: May 8, 2003

    Advertising Age is reporting this week that Wal-Mart Stores is refusing in certain cases to accept price increases levied by consumer packaged goods companies.

    For example, retail consultant Burt Flickinger III tells the paper that Wal-Mart hasn't marked up prices on ready-to-eat cereal, despite the fact that the manufacturers in that category raised prices 2-3 percent last February. Kraft has labeled this conclusion "erroneous," while General Mills and Kellogg Co. aren’t commenting.

    Wal-Mart just says that "everyday low prices continue to be our goal" when working with vendors, and won’t address the specifics of the report.

    The Ad Age story notes that manufacturers are being squeezed by the Wal-Mart moves, as well as by increasing consumer support for private label alternatives in a stagnant economy.
    KC's View:
    Guess when you get to be the size of Wal-Mart, you really can "name your own price."

    If there is any truth to this story, you have to believe it is the kind of information that Wal-Mart wouldn't want out there, especially where government regulators can see it.

    After all, if you’re willing to use your size to name your own price for the products you buy, you're also perfectly capable of using your size to charge whatever price you want…and while that often will mean low prices, that isn't always the inevitable result.

    Published on: May 8, 2003

    The Wall Street Journal reports this morning that Visa and MasterCard are appealing a 2001 court ruling that allowed their member banks to issue credit cards through American Express. That ruling left the credit card playing field open to competition from Amex and other companies.

    The appeal comes just a week after the two companies agreed to a total $3 billion settlement with Wal-Mart and millions of other retailers, in a case that accused the credit card of charging excessive fees and restrict competition on debit-card transactions.

    Visa and MasterCard, in a separate case, also have been ordered to refund $800 million to consumers for improperly disclosing fees charged in connection with credit-card transactions in foreign currencies.
    KC's View:

    Published on: May 8, 2003

    PlanetRetail.net reports this morning that Wal-Mart may be negotiating with Ahold to acquire the latter company's Bompreco stores in Brazil.

    In addition, there are reports that Wal-Mart may want to buy out the Modelo Continente chain in Brazil.
    KC's View:

    Published on: May 8, 2003

    Remember that report earlier this week about Coca-Cola testing out a new brand of coffee in a single location in Atlanta?

    Well, The Atlanta Journal-Constitution reports this morning that there was more than one test.

    In addition to testing out Viaa Cafe at the Celebrity Cafe & Bakery, Coke also was testing it at Huey's, on Peachtree Road, and ended that test about a month ago.

    No word yet on how the tests went.
    KC's View:

    Published on: May 8, 2003

    Global news & commentary from PlanetRetail.net…
    In late April, Ahold announced the sale of its Indonesian operations to Dairy Farm subsidiary PT Hero for EUR12 million (USD13 million). This marks the expected exit of Ahold from the country. The deal involves 22 existing supermarkets under the Tops banner, one under construction and two distribution centres. The sale is subject to approval by Hero shareholders and is expected to be finalised in the third quarter.

    Following the departure from Indonesia, Ahold also announced its departure from the Malaysian market in the first week of May. The Tops supermarket network in Malaysia will also be sold to Hong Kong-based Dairy Farm, so marking its exit from the Malaysian market. The divestment to Dairy Farm had been rumoured for some time. The Malaysian transaction is also expected to be completed in the third quarter of the year. The deal involves 34 outlets under the Tops banner and a distribution centre with the network generating turnover of EUR85 million (USD91 million) last year. The sale price has not been disclosed.

    Ahold‚s flight from the Southeast Asian region was more than expected following the financial scandal that spoiled the company's reputation in late February this year, and made divestment of non-core assets a matter of life and death. Given the small sizes of the store networks in Indonesia and Malaysia, the sale of the operations was not so hurtful to turnover, but further diminished the reputation of Ahold as an international retailer.

    Speculation as to who would scoop up the well run Tops supermarket operations in both countries centred around other internationals in the region, especially Tesco and Carrefour. In this contest however, Dairy Farm seems to have made the deal without too much prior speculation. In fact, Dairy Farm has been focusing on developing its businesses in Asia since selling its retail operations in New Zealand in 2002 and Australia in 2001.

    These disposals made significant funds available to the group, and over the past year Dairy Farm has made no secret of the fact that it was looking for sizeable acquisitions in Asia in order to enhance its existing operations. However, the group also stated that it is cautious and was patient enough to wait until the right deal came along. Clearly the group felt that the right time has now arrived.

    The proposed deals will cement Dairy Farm's market leadership in Malaysia while boosting its position in Indonesia. In Malaysia, the acquired 34 Tops supermarkets will be rebranded to the Giant and Cold Storage formats, taking the total number of Dairy Farm supermarkets in the country to 47. Six of the stores to be acquired are in East Malaysia and the deal will allow Dairy Farm to extend its presence outside the Klang Valley, an important part of the group‚s long-term strategy. In Indonesia, the deal involves 22 existing supermarkets under the Tops banner, one under construction and two distribution centres. The deal will allow Dairy Farm to close the gap on its major competitors in the market, such as Matahari and Ramayana.

    Now only Ahold's sizeable Thai operations remain up for sale in the region. In the Thai market, competition is becoming fiercer and consolidation is increasing. Tesco is currently market leader and with the acquisition of Ahold‚s stores in the country, could make a further leap ahead of the rest.
    However, with Dairy Farm already having wrapped up two deals and with a clear intention to increase its presence in the region, they must not be ruled out. In fact, even though the group does not yet have a presence in Thailand this could be seen as an opportunity to gain a foothold in Thailand that is simply too good to miss.
    KC's View:

    Published on: May 8, 2003

    Internal Probe Results Say Only Two People Responsible, And Both Are Fired
    Numerous press reports this morning reveal that the internal forensic investigation by Royal Ahold into accounting irregularities at its US Foodservice division has revealed that just two people were responsible for the misstatements of profit, and that the company will raise its estimate of overstated profit from $500 million to $880 million.

    The two executives, Mark P. Kaiser, chief marketing officer, and Timothy Lee, executive vice president for purchasing, both had been suspended pending the results of the investigation. Both now have been fired, according to the company.

    US Foodservice CEO James Miller has been cleared of any wrongdoing or knowledge of other people's wrongdoing.

    However, external investigations into the company's accounting practices continue, with separate probes being conducted by the U.S. attorney's office in Manhattan and the Securities and Exchange Commission (SEC). According to The Washington Post, those investigations are specifically looking at executives who supervised Kaiser and Lee.
    KC's View:
    Forensic investigation? We don’t think so.

    Where are the folks from CSI? Hell, bring back Quincy! (We'd settle for Elliot Ness…)

    Maybe we're just jaded and cynical beyond redemption, but none of this makes any sense. And even if you accept that somehow Kaiser and Lee are criminal masterminds on the scale of Lex Luthor, capable of a near-billion-dollar accounting fraud, Miller's lack of culpability remains very difficult to accept.

    Tell you one thing, though. Ahold's internal probe results better stick. Because if the government uncovers additional problems, and the internal investigation turns out to be a cover up, the news will only get worse for Ahold, and will hurt even those parts of the company that have been doing business properly.

    Remember, it's always the cover up that gets you.

    Published on: May 8, 2003

    Okay, yesterday we used this space to point out that some manufacturers at this year's Food Marketing Institute (FMI) show in Chicago weren't as innovative and inspired as we'd like them to be. But not everybody fell into that trap…and we've compiled the following list of the Best-Tasting Items we consumed at FMI, as well as across the hall at the Fancy Food Show.

      1. By far, the best thing we tasted and the single best product idea we saw at the show was "Margarita In A Bag," which has margarita mix in a large bag that looks like a clear hot water bottle. There are lines drawn on the side to tell you how much tequila, triple sec, and water to add - and then you shake it up and stick it in the freezer for about six hours. The margaritas that result are cold and refreshing, and the packaging can't be beat. (You can find out more about this product at www.margaritainabag.net.)

      2. One of our favorite restaurants in the country is Etta's Seafood in Seattle, created by the estimable Tom Douglas. Now, Douglas has come out with a line of chicken, pork, and salmon rubs and beer-based barbecue sauces that are stupendous. (You can learn more at www.tomdouglas.com.)

      3. We didn’t expect to like Kim & Scott's Gourmet Pretzels when we spied them from across the aisle -- and then we tasted the stuffed apple cinnamon pretzel and the stuffed mozzarella pizza pretzel…and just plain salt and mustard may never do again. (Check them out at www.kimandscotts.com.)

      4. We've tried them before, and they've remained one of our favorite cookies: Brent & Sam's Key Lime White Chocolate cookies, part of a line of gourmet cookies that are as good as they get. This one happens to be the best key lime cookie we've ever tasted…and we love key lime cookies. (For more info, try www.brentandsams.com.)

      5. The folks at Surebeam, the company that has revolutionized the irradiation business, were out there sampling hamburgers made from irradiated ground beef -- and they were just fine. What made them even better was the ketchup being served -- Ketchipotle, Ketchapeño, and Ketchonfire, three wonderfully spicy ketchups that complemented the burger beautifully. (You can find out more about these ketchups at www.newtaste.com.)

      6. The Content Kids (as they hate to be called) love Smorz cereal from Kellogg's. We have to buy two or three boxes a week just to keep it in stock, and now the cereal manufacturer has come with one we think the kids will like just as much - Cinnamon Krunchers, which happens to feature icon Tony the Tiger on the box (perhaps his first appearance on a box other than Frosted Flakes). Good stuff.

      7. There's a company called New Tree Chocolates that was peddling some pretty good tasting chocolate candy that is said to include certain properties that encourage certain feelings: "Bliss," "Vigor," "Pure Pleasure." We liked them a lot, and only question whether the chocolate called "Slender" really makes you thin. In fact, according to the company, it just improves digestion. We guess "Regular" wouldn't have been a good name for a chocolate bar. (Check it out at www.NewTreeeUSA.com.)

      8. We were fairly critical yesterday of how Ben & Jerry's ice cream was being sold at the show, and how the presentation seemed to devalue the brand. That said, the company does have a terrific new flavor this year - an Oatmeal Cookie Chunk Ice Cream that is just out of this world…and too good to relegate to the same status as the company's Good Humor line.

      9. The Anchor Bar in Buffalo, NY, is where Buffalo Chicken Wings were invented…and now the bar is bringing to national distribution its own line of bottled wing and barbecue sauces. Yummy! (Find out more at www.buffalowings.com.)

      10. Uh-Oh Oreos (vanilla on the outside and chocolate in the middle), and Cherry Cheese Cake Fig Newtons were new approaches to age-old products -- and they actually were pretty good. The latter was a little sweet for us, but our kids will love it.


    That's the list -- highly subjective, but each one worth a taste.

    Mangia!
    KC's View: