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    Published on: May 15, 2003

    Well, gosh…we've had some pretty active debates here on MNB over the past year and a half, but rarely have they occurred with the passion and intensity as two different discussions that have developed here over the past 48 hours or so.

    The subjects at hand: trans fat litigation, and selling genetically modified food to Europe.

    Let's begin with trans fats…

    It all started a couple of days ago with a story we ran about a lawsuit that has been filed against Kraft, arguing that children should not be allowed to buy Oreos because the filling contains trans fat, which is dangerous for them. This evolved into a discussion of what should be labeled, and to what extent…and now we let you take over.

    MNB user Jem Welsh, of Nutritional Sciences Inc., wrote:

    "Trans fatty acids are proven to be dangerous. We let the government decide how dangerous because there is just so much "the people" are willing to vote on; so we elect someone that juggles our needs with those of special interests. (GMA). Okay, so be it.

    "When it was determined that meat processing was producing dangerous foods, the government got involved and rather than save us from filthy practices, they determined what was acceptable filth. (How many rat droppings were allowed in sausage, etc.) Smart people did not accept this and either made their own sausage, found acceptable sausage or chose not to eat it. With these "informed" people out of the picture, the remaining population continued to accept the governmental standards and accept rat droppings as a (minute?) part of their diet.

    "Now, it is Oreos and by extension all foods that combined can bring us the unacceptable danger of too many trans fatty acids. We want labels, but are willing to elect people that would consider "acceptable" levels once again. And those that choose not to accept the government's take on their health will not wait for standards, rather choose not to eat foods that contain TFA, will find alternatives (safe Oreos, if you will) and the rest of the public will accept regulations in blissful ignorance and tolerance of (and dependence on) lousy
    regulatory process.

    "What is really happening here? We accept foods that are dangerous to us and our children. We choose to eat foods that have the potential to cause us harm, when safe alternatives are available throughout the stores. Then we get upset when we are not properly warned? The transfatty issue has been around a long time, yet because we choose not to heed the warnings, we are then open to blame others for the high cancer rates, high heart rates, the highest obesity on the planet... After all, it has to be someone else's fault, we assume reactively. Or we could choose not to wait for the government and associations like the GMA to provide us with our properly worded warnings and acceptable levels of unacceptable ingredients.

    "I feel sorry for the GMA spokesperson forced to defend their position against warnings. Kinda makes her look like the Communications Minister in Baghdad right before the fall. Her statement, "However, we did oppose the FDA's proposal to include the footnote, "Intake of trans fat should be as low as possible," each time that trans fat is listed in the Nutrition Facts box." You got to pity staff members from groups like the GMA and other associations that have to sit in meetings and determine how to "spin" an obvious danger into a statement that is acceptable for product awareness AND profits. If they are focusing on spin, how can you expect them to provide us with, as you put it, "a comprehensive education program so that consumers understand just what the hell the industry is talking about?"

    "I also feel sorry for the companies that will lose market share over time by not "cleaning" up their products. Informed consumers (not the government, food companies and special interests groups) want nutrition facts and ingredients posted on products. They want to know what is in their processed foods. They are making that clear. The trend toward healthy eating is not going away. Trans-fatty acids and hydrogenated oils (and rat droppings) are not healthy. They are dangerous. "Healthy" companies in the NEAR future will take all this into consideration, not focus on how much they can get away with to keep "fattening" us up with as little warning as possible.

    "The best thing "informed" people can do is not eat the foods they find unacceptable. Certainly, they should not wait until someone comes up with the proper education, the acceptable levels or the proper industry/government statement. Choosing not to eat these foods makes a much bigger statement to companies than Nutrition Facts, label warnings, associations' acceptable levels and governmental involvement in saving us from our taste buds.

    "And your reader suggesting that some mysterious party pooper is forcing this issue down his throat is Double Stuff...I just wonder why he would feel warnings on dangerous ingredients is not worth informing others. Thank goodness someone chose to force the dangers of tobacco down our throats... In spite of that lobby and the regulatory handling of it since, less people are dying as a result of the warning. And tobacco is more addictive than Oreos and Trans Fats (...or is it?)"

    Our position in the debate is that we need labels, not litigation…and that we need extensive educational programs to teach people about the dangers of trans fats and how to put them in the context of an overall healthy diet. Without education and context, all the labels in the world will be meaningless. MNB user James Curley agreed:

    "Kevin, I agree with all your comments on this. Ultimately, the consumer will decide. The current issue of the Utne reader has a great article from Paul Hawken (former owner of Smith & Hawken Gardening Stores) about what he calls a form of non-violent fascism practiced by corporations. Essentially he says this type of fascism is the "we're smarter than you and know what's best for you" type that Monsanto and other GMO marketers (as well as some other corporations) are trying to use instead of solid consumer education, encouraged lively debate and good marketing communications. It doesn't make these guys look any less arrogant when it's understood they own the patents on these foodstuffs and other 'legacy' foodstuffs can't be patented. If GMO products are really better, why not spend the money to educate us all about it instead of forcing it down our throats?"

    MNB user Westall Parr chimed in:

    "The producers are the people that are wrong on this one, at least in my
    humble opinion. I see myself as an informed person and I don't really understand what the issues are and I'm not going to trust Archer Daniels to inform me.

    "I don't trust the people with the new products. I don't feel comfortable with the "monkeying around" they want to do. I don't for a second believe they are doing this for my benefit or my health.

    "So fellows; if you want anyone to believe you start telling us the truth.

    "Inform me - don't bully me.

    "Educate me.

    "I put on my seat belt because I was educated. I take aspirin each day because I was effectively taught that it was good for me.

    "People don't resist change - the do resist being changed.

    "There isn't enough in the PR budget to slide this one by everyone.

    "Ronald Regan told the Russians he would trust them but that he would also verify what he was told.

    "I don't trust the people pushing GM and I most certainly want everything they say to be verified.

    "They've got their work cut out for them."

    The other story that provoked much comment was our report that the United States has filed a complaint with the World Trade Organization (WTO), complaining that Europe is unfairly and illegally banning genetically modified foods.

    The US is arguing that Europe is ignoring scientific evidence that shows genetically modified foods are no more harmful than foods created through traditional means.

    Our comment: "While we understand why this is an important issue to US farmers, who would like to use some biotechnology without fear that their crops will be banned from the European continent, we do have a question.

    Even if the EU ban is based on lousy science -- or, to be more accurate, science that we don’t agree with -- exactly why does the United States have a right to force them to buy and sell biotech foods?"

    Once again, passions were inflamed.

    MNB user Don Sutton wrote:

    "I don't see our complaint forcing anyone to buy anything. I do see it as an attempt to remove unfair obstacles from free trade and give the buyers the option to buy or not to buy. What could be more fair? The real arrogance is seated in the folks that think they should make those decisions for everyone in the UK, not matter what the science or common sense tells them.

    "Does that make sense?

    Put that way, of course it does. But wouldn't EU officials say that they are responding to consumer concerns, as opposed to creating them?

    We used the phrase "American arrogance" in posing the question about the US strategy in this area. (We actually got a phone call from someone yesterday accusing us of being European…actually, they looked at our last name and assumed we were French. For the record, we were born in Greenwich Village and have predominantly Irish ancestry.)

    One MNB user wrote:

    "American arrogance? What about European arrogance! I read in yesterday's NY Times a story about children dying in African nations from starvation, and the world turning a blind eye - again. It makes me sick to see this happen, and to see those people pay the price for their corrupt governments.

    "I think back to African leaders turning back shipments of grain from the U.S. and Canada, because some were GM crops. They did this because of "trade relations" with European nations. For European nations to tacitly condone those actions reflects their arrogance. When we assume Europe is always right in the world and we're wrong, we run a great risk, that not only impacts us, but the rest of the world beyond European borders. GM crops should be monitored, and European countries should have the right to decide their own regulations, but the rest of the world's needs should not be forgotten in the process."

    Actually, we think that all governments are arrogant…not just American, and not just European.

    We don’t assume that any government is right about anything. Ever. (That's a dangerous assumption to make.)

    And, your point about the problems that exist over providing GM crops to starving African nations is dead-on. We could fairly suggest that while the EU can ban GM foods from Europe, it should not have the right to ban them from Africa…which is, after all, another continent. By forcing its view of the issue on Africa, can it not be suggested that the EU is doing exactly what we want to do to Europe?

    Another MNB user wrote:

    "While I'm not sure that filing a complaint is equal to forcing Europe to do anything, it does seem to be a step in the wrong direction. Educating consumers is the only way to remove fear of the unknown or misrepresented. Further damaging our relationship with EU will leave us no access for that education."

    Yet another MNB user chimed in:

    "If I am not mistaken, the food we eat now, whether officially marked as bioengineered or not, has been 'messed with' genetically since humans discovered it could be done to produce better strains of rice, wheat that is more tolerate of bugs and disease, etc. We wouldn't be able to produce nearly half as much produce, fruit, and grains if someone somewhere along the way didn't figure out that this apple tree produces more and better fruit so we are going to crossbreed this one to produce sturdier stock. Humans throughout the decades have ALWAYS tried to improve on Mother Nature..."

    MNB user Brona Cosgrave wrote:

    "Exactly why does the United States have a right to force them to buy and sell biotech foods?"

    "Hummm, you could also ask "exactly why does the United States have a right to force a regime change in a independent sovereign land?"

    "It's all just American bully-boy tactics! While research does exist to that suggest GMO foods may not be harmful to eat, they do not confirm that there are no long-term effects of continuous consumption. Secondly and more importantly, there is no research to show that GMO crops do not have a negative impact on the delicate balance of nature and the environment. It's a shame the American consumer remains uneducated and subsequently disinterested on this issue."

    And another member of the MNB community wrote:

    "Bravo on your view!

    "In the last few years, we seem to have found many new wondrous and amazing ways to alienate the rest of the world. Your words nailed this one on the head."

    Hey, we don’t pretend to have any answers. Just questions.
    KC's View:

    Published on: May 15, 2003

    • Fresh Brands posted first quarter sales that were up 1.9 percent to $187.7 million compared to the same period a year ago, and same-store sales that were up 0.15 percent. Net income was up 0.7 percent to $1.93 million.

      At the company's annual meeting earlier this week, Fresh Brands CEO Elwood Winn said that the company hopes to grow its revenues by 10 percent this year through the acquisition of a compatible retailer that measures up to the company's "strict criteria" and comes at a reasonable price.

    • Safeway Plc said that annual sales and same-store sales for last year were up just one percent, owing largely to the continuing and highly public takeover battle being fought to see which UK retailer will get to acquire the company.

    • Fast-food chain Jack in the Box Inc. reported that quarterly net income fell to $16.3 million, down from $18.2 million in the year-ago period. Total revenue in the quarter was $463 million, up 3.3% from $448 million a year ago.

    KC's View:

    Published on: May 15, 2003

    Published reports suggest that the US Federal Trade Commission (FTC) may give the go-ahead for Nestlé's $2.8 billion takeover of Dreyer's Grand Ice Cream as soon as Friday.

    Once antitrust objections are dropped, the deal would make Nestle tied with Unilever for the top spot in the US ice cream market.

    Unloading some brands probably will be a prerequisite for the deal to continue.

    Neither company was prepared to comment on the speculation.
    KC's View:

    Published on: May 15, 2003

    News & Commentary from…
    The outbreak of SARS has hit China and Hong Kong particularly hard. Forced quarantine, combined with the fear of catching the virus, has led to a large proportion of the population deciding to limit the time they spend outside the relative comfort of their own home, especially in crowded places such as markets.

    This has undoubtedly affected consumers’ behaviour. In Hong Kong, Convenience Retail Asia (operator of the Circle K c-store chain) announced that since the outbreak of SARS, most Hong Kong retailers have seen a drop in sales of between 20% and 60%. Convenience Retail Asia added that its own c-stores were less affected, witnessing a relatively low sales decline of 5% during the month of April. Ironically, Circle K is witnessing a rapid increase in sales of cigarettes, while sales of citrus fruits are also booming as shoppers stock up in the belief that vitamin C will help ward off SARS.

    Many retailers are also suffering in certain parts of China. This month the city government of Shenzhen, Guangdong Province, has lowered levies on hotels, restaurants, retailers, and tourism facilities that have been badly hit by SARS. During the May Day holidays, the Beijing municipal administration for industry and commerce announced that 20 local department stores and supermarkets were unable to keep up with the demand for liquid disinfectant, face masks and clinical thermometers.

    These are exceptional circumstances in China and Hong Kong and one of those instances where retailers can do little more than sit back, cross their fingers and wait for the worst to blow over. The outbreak comes at a particularly bad time for those retailers in Hong Kong, which were already suffering from deflation and falling retail sales before SARS hit.

    However, could there be a silver lining to this cloud? CP Group, operator of the Lotus hypermarkets in China, has announced that sales volumes have risen by between 7% and 12% at every branch since the SARS outbreak. It seems as if some Chinese consumers are shifting their shopping habits away from the crowded wet markets and to the more spacious and what are perceived as hygienic modern retail stores. Lotus, for example, has launched several preventative measures including disinfecting the air and trolleys in its stores, sending home any staff found to have a high temperature, and requiring all cashiers and staff in the fresh produce section to wear face masks.

    Such measures are ensuring that it is probably the traditional small retail stores and the wet markets that are suffering the hardest. In addition, the outbreak could help to actually accelerate the change in shopping habits towards larger, modern retail outlets. For many Chinese consumers, they may be visiting a modern grocery store regularly for the first time, and perhaps realising it is not as expensive or as daunting as they previously thought. The question is, once the outbreak has died down will these consumers return to their traditional shopping behaviour?
    KC's View:

    Published on: May 15, 2003 reports that a dozen Dallas-area restaurants will begin using kiosks and smart cards to build customer loyalty programs.

    The eateries are installing kiosks at which patrons will swipe their previously issued cards, which contain radio-frequency identification (RFID) tags informing the restaurant how many people are in their party. The maitre d' then gets a printout with details about the customer's menu favorites, food and wine likes and dislikes, and even seating preferences. When the customer leaves, the maitre d' will have the ability to add to the database.
    KC's View:
    Since everybody seems to be competing for the same consumer dollar, it only makes sense that you are going to start seeing similar technologies employed in the pursuit of those dollars.

    Published on: May 15, 2003

    Two more executives are out at Ahold's US Foodservice division, as a major shakeup at the accounting-challenged distributor continues.

    CFO Michael Resnick and executive vice president/general counsel David Abramson submitted their resignations, effective immediately. Already this week, US Foodservice has seen the forced resignation of CEO James Miller who left the company under pressure from a supervisory board that is grappling with a corporate accounting scandal. US Foodservice has admitted accounting "irregularities" that resulted in an $880 million overstatement of profits over a two-year period.

    Two other US Foodservice executives -- Mark P. Kaiser, chief marketing officer, and Timothy Lee, executive vice president for purchasing -- have been fired as a result of the scandal, though Kaiser's attorney has made statements accusing the company of making his client a scapegoat.

    Former Stop & Shop CEO and Ahold USA CEO Robert Tobin has emerged from retirement to serve as interim CEO of US Foodservice.

    The scandal also forced the resignations of Ahold Chief Executive Cees van der Hoeven and Chief Financial Officer Michael Meurs.

    In addition, Ahold said that the internal investigation into US Foodservice's activities continues, as do the regulatory probes on both sides of the Atlantic.

    In a related story, Kraft Foods co-CEO Roger Deromedi told Reuters that despite Ahold's continuing travails, the two companies are doing "business as usual."

    "We continue to partner with them (U.S. Foodservice) and with the Ahold organization more broadly. They have many things they need to sort out for themselves but we continue to be good partners with them," Deromedi said.

    "We do provide financial incentives to our retail and food service partners, but we feel very good about how we've managed those and accounted for those, and it's not something we're doing massive reviews on."
    KC's View:
    All these changes can put a new face on Ahold's US Foodservice operation, but the company still has to deal with myriad investigations and what they potentially can reveal about its accounting practices.

    Published on: May 15, 2003

    Reuters reports that attorney/law professor John Banzhaf, who was active in the anti-tobacco lawsuits that changed the face of that industry, plans to push ahead with efforts to use litigation as a way of bringing pressure on manufacturers and fast food retailers that he believes are contributing to the rising obesity rate in the United States.

    Banzhaf is scheduled to deliver a letter stating his claims to the National Restaurant Association (NRA) and even debate with representatives of the group at the National Press Club in Washington, DC, later today. He says that these actions could be a precursor to new lawsuits.

    The NRA says the claims are "frivolous," and "twisted and tortuous."

    There seems to be growing sentiment among some experts that while it may take some time, there is every reason to believe that the anti-obesity legal efforts could eventually have the same kind of impact on food manufacturers and fast food retailers as similar efforts had on the tobacco industry, especially if any kind of addiction evidence is introduced.
    KC's View:
    Analysts also seem to believe -- and we would agree -- that where these efforts can gain traction is in cases that address childhood obesity.

    Skeptics - and there will be many - still better have their legal ducks in a row, because this is going to be a long and nasty legal fight.

    This includes supermarkets. Because we believe that while they have not yet been singled out by the litigious opposition, eventually someone is going to figure out that there is money to be had from the retailing segment, and they will become a target.