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    Published on: June 16, 2003

    Last week, an MNB user wrote that "Wal-Mart's influence needs to be checked" because its expansion into banking and other industries "does not bode well for our future. The government needs to step in where necessary."

    Another member of the MNB community differs with that assessment:

    Should we look to the government to stop every expansion of a business that we disagree with based on its need, or work towards and hope enough of our fellow citizens agree with our views and not shop there, stating the message that it is not wanted, or needed?

    If the gains Wal-Mart has brought to the public in the retail market can be transferred to any other business they enter, then I say "Right on!"

    And another view on Wal-Mart:

    Wal-Mart is driving the idea that everything can be cheaper and thus driving the profits out of the economy that paid good wages and benefits. It is the driving retail force that has produced Home Depot, Lowe's, Office Depot, and a host of other retailing concepts that are selling price, not the value of the product. If Wal-Mart does not think the price is low enough they will not buy from you even though the value is there. Thus they bring down profits that drive other areas of the economy in the entire world. One may consider it productivity? On the other hand how would you feel about your job and benefits being eliminated? They are just lowering the bar.

    We continue to believe that the Wal-Mart-ization of America (and the world) is a story that has vast business and cultural implications, probably more than we can even imagine.

    Much of what Wal-Mart does in terms of efficiency and supply is extremely positive, while its impact on other business can be extremely negative. But unless there are antitrust issues involved, the government won’t and shouldn't legislate its growth. There is no constitutional guarantee that businesses should be able to survive Wal-Mart.

    There is a virtual guarantee (not in the Constitution, but in the marketplace), that if you come up with a unique business model and a compelling product, consumers will give you a look…which is how you build a business. Just check out the growth in dollar stores…

    And speaking of dollar stores, MNB user Mark Shukwit wrote in about their strong growth curve:

    The dollar store format may not be MY preferred choice with their ever changing offerings and my limited schedule. But just look in my 9 year old daughter's eyes when she walks in the store with her allowance.( AN old school behavior, weekly chores = allowance) With the $1 format, she knows she can purchase anything she sees on the shelf and the revolving inventory keeps her shopping experience fresh every time she visits. The statistics show that the customer base is evolving but I would be curious to see how many customers visit these stores as part of their normal shopping routine rather than the special treat.

    About the possible dissolution of Penn Traffic, which is reeling from its second bankruptcy filing:

    I think it might be the best thing for the employees and the management. I hope whatever happens they get rid of the people whose policies have made them uncompetitive. It's basically a simple business, ask Wal-Mart.

    Which means we're back where we started…

    See you tomorrow.
    KC's View:

    Published on: June 16, 2003

    • Roundy's appointed Dale Riley to be executive vice president and general manager of Minnesota Retail, doing business as Rainbow Foods. Roundy's just acquired the 30 Rainbow stores in Minnesota.

      Riley is a longtime executive with Byerly's and Kowalski's, and has broad experience in the Minnesota food retailing market.

    KC's View:

    Published on: June 16, 2003

    • The Associated Press reports that ConAgra Poultry Co. is recalling 129,000 pounds of chicken because it may contain glass.

      Distributors in Georgia, Florida, New York, North Carolina and South Carolina should return 3.5- to 4-pound bags of ''Country Pride Fresh Chicken'' packages that have a sell-by date of 6-20-03, 6-21-03 or 6-22-03; 40-pound cases of ''Fresh Young Chicken 8 PC WOFT/ 20 HD'' with a product code of 019434; and 40-pound cases of ''Country Pride Fresh Young Chicken Whole Wings and Livers" marked with a product code of 019553.

    KC's View:

    Published on: June 16, 2003

    According to the Natural Marketing Institute (NMI), the answer is definitely "yes."

    An annual survey conducted by the Natural Marketing Institute (NMI) reveals that consumers have strong and growing interest in various environmental, social, personal development, and values-based issues.

    The survey indicates that nearly one-third of U.S. consumers, or 68 million adults, are concerned about various environmental and social issues and are conscientious of those issues when making purchase decisions - seven percent growth over a year ago.

    Overall, consumers indicate high interest levels in protecting the environment (91 percent), socially responsible business practices (83 percent), and preference for purchasing products made in a sustainable manner (59 percent) - and seem willing to integrate those interests in their purchase decisions.

    Among the products that these consumers say they are interested in are energy efficient appliances (96 percent), renewable power (74 percent), organic food (53 percent), and hybrid vehicles (56 percent).
    KC's View:
    Clearly, NMI has a bias, and legitimate questions can be asked about whether environmental concerns will be factored into purchase decisions.

    In the long-term, we think the answer to this question is "yes," and that people's buying habits are slowly changing because of environmental issues. Not all buying decisions and not all people. But an evolution is taking place. Ignore it at your own peril.

    Published on: June 16, 2003

    Kellogg Co. has announced that a new Special K collection of women's clothing will be launched this fall, describing it as "fun, comfortable, and versatile."

    The company said it was part of its expanded licensing efforts.
    KC's View:
    We know we're not part of the target audience, but we don’t get it.

    Are women actually going to want the name of the cereal they eat on the clothing they wear?

    Published on: June 16, 2003

    MSNBC reports that the Wm. Wrigley Jr. company has been granted a patent to develop a chewing gum that contains sildenafil citrate, the same chemical that is in Viagra, the anti-impotence drug.

    Initial reports say that such a gum would work faster and be easier on the stomach than Viagra; the blue pill takes an hour to kick in, while the gum would take about two minutes.

    Pfizer, which makes Viagra, is not involved with the Wrigley effort. The US Food and Drug Administration (FDA) would likely have to approve the use of the chemical in a gum, which probably would be available only by prescription.

    Global sales of Viagra topped $1.7 billion last year and Pfizer boasts that “nine of the pills are dispensed every second," according to MSNBC.
    KC's View:
    Nope. We're not going to go there. You thought we would, and we actually considered it.

    But nope. You're just going to have to come up with our own punch lines in the privacy of your offices on this one.

    Published on: June 16, 2003

    The Atlanta Journal-Constitution reports that Coca-Cola is testing Barq's Floatz - a drink meant to taste like a root beer float - in Mississippi and Louisiana.

    Barq's Floatz will be sold in 12-ounce bottles designed to have a "retro" look.

    The test will then be evaluated to see whether a national rollout is warranted.
    KC's View:

    Published on: June 16, 2003

    The London Free Press reports that a new poll commissioned by the Consumers' Association of Canada reveals that one-third of Canadians polled said they are thinking about eating less beef, while the other two-thirds say that they will not be changing their red meat consumption habits.

    Mel Fruitman, president of the consumer group said that the respondents were reacting as much to the confusing information that was available as to the scientific issues involved with mad cow disease, . "This should be sending a wake-up call to the government," he said, noting that information released by Canadian government officials as too technical and focused on the scientific probe. For example, he said, officials have said muscle cuts are safe - but that few consumers have any idea what a muscle cut is.

    Interestingly, it was just last week that The Canadian Council of Grocery Distributors reported that there had been no downturn in the demand for Canadian beef.

    Published reports in Canada suggested that Canadians are undeterred by the recent mad cow disease scare there, and are continuing to consume beef at an increasing rate as the summer barbecue season approaches.

    In fact, according to one report, demand is so high that there could be a shortage - which means that prices actually could go up for Canadian beef. Not many animals are being shipped for slaughter these days because of bans on exporting the product to numerous countries, including the US; exports account for 60 percent of Canadian beef sales.
    KC's View:
    We actually were surprised by last week's report, wondering how there could be so little consumer reaction to the mad cow scare. This report makes more sense…and we think that the point made about scientific information not being very consumer-friendly is an excellent one.

    Published on: June 16, 2003

    The Atlanta Journal-Constitution reports that a California Coca-Cola bottling system employee alleges that he was fired after being spotted sipping a Diet Pepsi, a charge that is being supported by the local Teamsters union.

    The Teamsters also point out that the fired employee was an active union steward. The union has been trying to recruit more Coke employees into Teamsters membership, and says that anti-union workers turned the guy in for drinking a Diet Pepsi.

    The Teamsters have filed charges of unfair labor practices, while Coke is challenging a recent union vote in the courts.

    A spokesman for Coca-Cola Bottling Company of Southern California, which is part of Coca-Cola Enterprises, Coke's biggest bottler, would not comment on personnel issues,. However, he said the firm has a "strict policy against retaliation. We respect the right of our employees to organize."
    KC's View:
    This clearly has nothing to do with what soft drink this guy happened to be guzzling, and everything to do with a power struggle between the company and the union.

    We have to say, however, that as a matter of policy, we don’t understand why anyone being paid by a certain company would drink another company's product. It just doesn't make sense.

    Certainly if any soft drink company would like to become the "Official MorningNewsBeat Soft Drink," we're happy to become exclusive guzzlers of whatever diet products that particular brand sells.

    Published on: June 16, 2003

    The New York Times reports that Procter & Gamble is changing the way it approaches the development of advertising that will appeal to the nation's African-American community, combining the efforts of these specialized campaigns and ad agencies with the broader mass-market pitches.

    In addition, the NYT reports, "Procter will start sponsoring campaigns aimed at black consumers for about a dozen big brands like Bounty, Charmin, Folgers, Pampers and Pringles, which did not have separate campaigns before. That will mean a major increase in spending on such ads, which now account for a tiny fraction of Procter's annual American ad budget of $2.2 billion."

    The goal, according to P&G executives, is to create a more synergistic process that sells more of its products.
    KC's View:
    For companies like P&G, which own so many of the categories in which they compete, a concerted effort to appeal to the minority consumer has got to be a top priority. And it isn’t just African-Americans…it is every other kind of minority, as well.

    The multi-cultural marketplace is here to stay. And we're all the better for it.

    Published on: June 16, 2003

    Reuters reports that Target Corp. has signed a deal with Supervalu to supply groceries to 31 of its supercenters, replacing Fleming.

    Fleming's core-Mark division will continue supplying candy to the 31 SuperTarget outlets in Texas, Louisiana, and Oklahoma, however.

    The announcement comes as Fleming has decided to close three divisions, in Alabama, Louisiana and Wisconsin, and consider the sale of any and all parts of the company.

    With the addition of these stores, Supervalu now reportedly supplies the entire SuperTarget network of 102 store locations.
    KC's View:
    And we watch as another nail in Fleming's coffin is put in place.

    Expect a lot more such nails to be hammered into place over the next few weeks.

    Published on: June 16, 2003

    Reuters reports that the University of Michigan's consumer sentiment index fell to 87.2 from 92.1 in May, which was the opposite of what economists expected to happen.

    The expectations index, which measures how consumers think the economy will perform in the next 12 months, fell to 84.2 from 91.4 in May. The current conditions index dropped to 92 from 93.2.
    KC's View:
    This may have surprised economists, but not us.

    Over on the Phil Lempert site where we contribute a number of stories, consumers' feelings about the economy as measured by one of our polls have seemed to be a mixed bag.

    Short-term, more than half of respondents said they thought the economy would be about the same as it is now, with the balance split between whether or not it would be better or worse in the short term.

    Long-term, there is a lot more confidence, with almost half of respondents saying things are going to get better, 31 percent saying it would stay the same, and 22 percent saying it'll get worse.

    Asked what they plan to do with the money they're going to get from the Bush tax cut, almost four out of then said they'd spend it on daily necessities, and a third saying they'll use it to pay off long-term debt; 22 percent said they'll save the money, and just six percent said they'll spend it on big ticket items like a car, house or major appliance.

    We were interested to know how many people our users knew who had lost jobs and had been unable to find new jobs during these tough economic times…. And the news wasn't encouraging. Thirty percent knew a single person like that, while 16 percent knew two, another 16 percent said three, just two percent said four, and a whopping 35 percent said they knew five or more people who had lost their jobs and were still out of work.

    And that's what economists miss. They look at the numbers, but they don’t see the people.

    Published on: June 16, 2003

    The New York Post reports that real estate developers around the country that traditionally looked to department stores as anchor tenants for major malls now are turning to discounters such as Wal-Mart and Target to fill those spaces.

    And discounters, which traditionally have preferred stand-alone locations with dedicated parking lots, are responding, especially in areas such as the northeastern US where commercial real estate is at a premium.

    However, this creates a problem for specialty retailers in those malls. Chains such as Gap and Casual Corner now fear that their prices will be compared with Wal-Mart's or Target's, and that they will be forced to lower prices and see their margins squeezed.
    KC's View:
    Currently, according to the Post, Target has 30 mall stores, while Wal-Mart operates just four mall stores.

    Expect that to change.

    And if supercenters -- with their broad grocery offerings -- start to become the standard offerings of major malls, expect to see more impact on the nation's supermarkets.

    Published on: June 16, 2003

    The New York Times reports on a new breed of mini-watermelon that is the size of a cantaloupe and now is available in 30 states. The introduction of the "seedless, five pounds, and perfectly spherical" melon - one of two such melons expected to be competing for consumers' attention - "is one of the latest efforts by food scientists to satisfy consumers who increasingly favor ready-to-go meals and less troublesome food preparation."

    And it wasn't created using biotechnology, but rather the same cross-breeding processes "that over the last decade have brought orange bell peppers, golden raspberries and broccolini, a cross between Chinese kale and broccoli, to the world's produce bins."

    So far, the smaller melons seems to be selling for more than conventional watermelons, and retailers told the NYT that they couldn't keep them in stock.
    KC's View:
    Further proof that if you offer consumers something interesting and new, they'll respond.

    A lesson that too many retailers and manufacturers don't seem to get.

    Published on: June 16, 2003

    The Quincy, Mass., Patriot Ledger reports that "with Stop & Shop Supermarkets' corporate parent mired in a $900 million accounting scandal, top New England rival Shaw's Supermarkets is mounting a direct assault on Stop & Shop's dominant market share."

    While Shaw's opened just seven new stores over the past 24 months, it plans to spend $470 million to open 13 new units this year alone.

    Stop & Shop has continued to perform well in the marketplace, with a 27 percent increase in sales last year, but the chain has been distracted by Ahold's financial troubles. Ahold has been forced to deal with a $900 million overstatement of its profits, assorted corporate resignations, and investigations on both sides of the Atlantic into its accounting practices.

    "The company has said it has found no evidence of financial problems at Stop & Shop, its largest U.S. retailer, but it is cutting capital expenditures across the board, in a strategy that could disrupt Stop & Shop's immediate expansion plans," according to the Patriot Ledger story. The company had previously planned to open up to 100 new stores over the next three years, but now is not commenting on the state of its plans.
    KC's View:
    It's actually a little odd for us to be commenting on this story, since we happen to be prominently quoted in it.

    But it's a good piece, and we'll tell you what we told the reporter.

    The New England market is only going to get tighter, as Wal-Mart moves in, probably with supercenters and Neighborhood Markets…we think that if Shaw's doesn't make this move now, the window could close.

    Published on: June 16, 2003

    We had a story yesterday about a Coca-Cola employee who allegedly was fired for drinking Diet Pepsi. (He also was a union organizer, which raises other issues.) The union is taking legal action, Coke is denying the charges, and it'll get messier before it gets less so.

    Regardless of whether the charges are true, the subject caught the imagination of a number of MNB users.

    One MNB user (who asked not to be identified because Pepsi is a client) wrote:

    Based on my own experience I tend to think that the individual involved was fired for being caught with the Diet Pepsi. The fact that he was a union steward probably had nothing to do with it. I have seen how intense loyalty can be in the Soft Drink community.
    A former employee of mine had worked for the local Coke bottler before coming to work for me. To him, being able to openly drink Pepsi again was a fringe benefit of the position. He was very concerned that he would get caught and fired.
    When I was small, my father worked for Coke USA, their fountain sales division, for eight years. I was once grounded for getting caught with a Mountain Dew.

    Today I am a pretty loyal Diet Coke drinker. My father, however, today drinks Diet Pepsi. I still give him a hard time about the grounding.

    Sometimes this world becomes so silly you really have to laugh at our behavior.

    In our commentary yesterday, we wrote that "as a matter of policy, we don’t understand why anyone being paid by a certain company would drink another company's product. It just doesn't make sense."

    Not everyone agreed.

    One MNB user wrote:

    Your comment that it makes no sense for a person being paid by a certain company to drink another company's product is puzzling. Based on that logic an employee of any restaurant chain would be prohibited from eating at any other establishment no matter how sick they become from eating the same food for years. Should an employee of a grocery chain be fired if they were caught shopping in a competitor's store that offered lower prices and merchandise not available at the company store? Should an employee of a clothing manufacturer be reprimanded for wearing another brand? If a low paid employee of a high priced automobile manufacturer or dealership can't afford to purchase the products they sell should they be forced to ride a bicycle rather than park another brand on the company lot? What happened to personal freedoms and the right to choose? The beverage companies are the only companies I have ever heard of that routinely fire their employees if they don't use their products exclusively. I suppose Phillip Morris should make all of their employees take up smoking to maintain a strong bottom line.

    Another MNB user was equally outraged at our point of view:

    You have to be kidding right? What does it really matter to a company if of it’s employees enjoy a competitive brand? You are way out there on a limb. Sounds a lot like left wing capitalism to me. Is the company ego so frail that it cannot accept that someone might enjoy a different brand? Maybe the company should find out what it is that this employee likes about the competitive product and work on overcoming that issue.

    Since when is the moral contract between an employee and employer hinged on using the company's products. As a manager, I witnessed extreme prejudice of a secretary that brought in a competitive company’s name on something that she was bringing into the office to consume for her lunch. The upper management noted in a meeting that she illustrated an un-loyal attitude toward the company. I spoke up in her defense and asked the question, what does it matter to us if she prefers another brand. Her ability to do her job was not increased or decreased by her choice of food. If companies want total loyalty, then start acting on behalf of their employees in a way that illustrates their total care for the life style of their work force… Right, I didn’t think they would want to go that far. It is pure ego that drives their concern. Typical of large company mentality. They have gone too far on this one.

    Clearly the upper management of the company, in my opinion was both insensitive to the diversity of their employee and also very immature as leaders. True leadership would see the bigger picture and not the small issue of personal taste. It shocks me at times to hear management's position on issues such as this. Employers pay for the working time of their employees, and should have no issues of what people prefer to consume (food) as part of their employment.

    My suggestion to any company so small thinking is to retool their leadership and start looking at the greater good of their employees (their best assets) and spend less time flexing their management power. It is such small time thinking.


    Let's all take a deep breath.

    First of all, we don’t know what Coke did or didn’t do.

    Second, our commentary didn't suggest that people should be fired for consuming a competitive product, nor that companies should even look askance at them. Basically, we were just saying that if we worked for Coke, we'd think it is our best interest to consume Coke products…and if we worked for Pepsi, we'd drink Pepsi.

    (Mrs. Content Guy got a good laugh out of the implication that we have a "big company mentality." She wishes.)

    Now, that doesn't mean that if we worked for McDonald's we'd never eat anywhere else, or that if we worked for Gap we'd only wear khakis with the Gap label. That's just silly, and is a little different than choosing from a line of soft drinks. And suggesting that our logic means that people who work at Philip Morris should be forced to smoke…well, you haven't been paying attention to our many rants against the tobacco companies. (Don't get us started…)

    We believe in the exercise of free choice. But guess what? If we worked for Marriott, we'd do our level best not to stay in a competitive hotel. And if we worked for Albertsons, we'd certainly do the bulk of our grocery shopping there.

    Why is this such a bizarre notion?

    Onto other subjects…

    Regarding yesterday's story about a reported drop in Canadian confidence about their beef supply, MNB user Al Kober wrote:

    As usual, these surveys only tell what they said to specifically asked questions. Lets just watch the numbers and see if what they say is really what they are doing.

    We share your cynicism.

    Regarding the licensing of the Special K name for a line of women's clothing, we asked yesterday if women actually going to want the name of the cereal they eat on the clothing they wear?

    One MNB user (a woman) wrote:

    Only if it's free!

    Another MNB user wrote:

    Cereal Names, Sport Star Names, Designer names, Trademarks, Whatever. Look at the wardrobes in your family, I'll bet there are a fair number of pieces with some logo or other licensed mark on them. We're all walking billboards. It doesn't really seem to matter what the product or association is, just whether the design is appealing.

    We suppose so. Though with the exception of our Tommy Bahama shirts, New Balance shoes and socks, MorningNewsBeat t-shirts, and LLBean jeans and shorts, we try and stay away from recognizable labels…


    And MNB user Jim Swoboda had another idea:

    I cannot wait for the Rice Krispies line of clothing. I have always thought that I could use some "snap, crackle and pop"!

    Not being familiar with your sartorial choices, we'll take your word for it.

    We had a story yesterday about how Procter & Gamble is changing the way it approaches the development of advertising that will appeal to the nation's African-American community, combining the efforts of these specialized campaigns and ad agencies with the broader mass-market pitches. In addition, P&G will start sponsoring campaigns aimed at black consumers for about a dozen big brands like Bounty, Charmin, Folgers, Pampers and Pringles, which did not have separate campaigns before, which will mean an increase in spending on such ads.

    We thought this was a good idea, but apparently some MNB users thought we were off our game yesterday. MNB user Ken Carlson wrote:

    How is this a good thing? Was it a good thing when cigarette companies and alcohol producers focused on black communities? I understand alcohol and cigarettes are not the same as overpriced junk food and household goods, but is it really a step forward?

    Actually, we yearn for the day when ad campaigns won’t be black or white or Hispanic…but we do think it is a step forward when major companies recognize that the fabric of the American populace is changing colors, and makes changes that focus on more people.

    And comparing cigarettes to Pringles seems a little extreme…though there probably are some anti-obesity activists who would disagree.

    Regarding Fleming's deciding to close three divisions and accept bids for the remainder of the company, one MNB user wrote:

    Is this a sign of the times? Or just poor management and execution. Are there lessons to be learned for all of us as we seek to improve shareholder value? Sure hope so.

    The converse of the Dizzy Dean quote above is that if you have bad lucky and lousy talent, there's almost no way to survive. Which may be the best you can say about some people in Fleming management.

    Yesterday's story about a recall of various chicken products because of glass in the items prompted the following email:

    Somehow this is totally baffling to me...where does glass even get CLOSE to packaging chicken?

    Just because our last name is Coupe doesn't mean we have the answer to all chicken questions.

    We had a piece yesterday about Dale Riley taking over Roundy's new Rainbow Stores in Minnesota, prompting MNB user Ted File to write:

    Excellent decision. We all know what Dale accomplished with Byerly's and certainly wish him the best as he undertakes a real challenge with the Rainbow stores.

    Agreed. We've written before that Dale is one of the real good guys in food retailing, and we wish him luck…

    In response to last week's story about how a new study by the International Council for Science (ICSU) says that while genetically modified foods are safe to eat, there are greater concerns about the long-term impact they will have on the environment., one MNB user wrote:

    Perhaps the larger issues of the impact of GM on agriculture and agribusiness as a whole are where we might want to enlighten readers and the population as a whole. GM product will NOT prevent starvation. The issues of hunger and starvation are far more complex than simply modifying a crop to an environment. Secondly, I would talk to soybean farmers in South America about how they feel about GM product these days? The fact is that the GM dream of financial freedom and guaranteed yields and pricing for farmers is sadly not true. And for farmers who outright choose not to grow GM crops, they have the pleasure of being sued for having GM product growing in their field which they did not plant.

    In response to yesterday's piece about mini-watermelons in supermarkets, a product we described as being "new and Interesting" and therefore a customer generator, MNB user Julia Hidy wrote:

    I would think that "interesting and new" may only have short-term gain for most retailers and their consumers. Not wanting to drag, balance or carry a behemoth melon at the same time I'm dragging 30 -50 lbs. of other groceries home is more important to me. And wanting to consume the freshest watermelon possible and buy fresh melon(s), when needed - either for a small family or single person -makes mini melons a sensible choice.

    How many of us have thrown out excess produce? I wouldn't mind if more supermarkets would give us a choice of small vs. elephant-sized cabbages, normal vs. on steroids cauliflowers, or fresh bags of potatoes that I don't need a SUV or station wagon for cartage. Well-priced produce doesn't do me any good if I have to trash half of it. And retailers that address these issues get my repeat grocery business. Vive la petit difference.


    And finally, our favorite email of the week so far was in response to yesterday's story about the Wrigley company developing a new gum with the same chemical that is used in Viagra.

    Watch for an increase in choking deaths due to this new gum. Most people can't walk and chew gum at the same time, how are they going to have sex and chew gum simultaneously?

    And no, that email wasn't written by Mrs. Content Guy!

    As you read this, we're probably landing in Barcelona (if all has gone well). We'll be providing coverage of the annual CIES World Food Business Summit (and no doubt indulging in some tapas along the way…we'll keep you informed).

    "Hasta manana!"
    KC's View:

    Published on: June 16, 2003

  • Foodarama Supermarkets, which operates ShopRite supermarkets, reported that its second-quarter same-store sales rose 1.7 percent, from $235.2 million to $254.6 million. Net income was down to $128,000, from $183,000 during the same period a year ago.

KC's View:

Published on: June 16, 2003

The Chicago Sun-Times has a fascinating profile of Ron Shaich, CEO of Panera Bread, that focuses on the need to anticipate consumer desires, not just respond to them/

Shaich, who also started the Au Bon Pain bakery chain, "was among the first chains to offer high-quality meat on fresh bread," according to the Sun-Times. "But its no-frills decor consisted of plastic tables and chairs, and its service was erratic because of high employee turnover…changing customer tastes limited the chain's growth prospects, Shaich came to believe."

Because Shaich and his managers spent a lot of time traveling the country, they came to believe that customers were looking for a more upscale sandwich dining experience. Which is when he really rolled the dice - his company sold off Au Bon Pain to concentrate on what now was called Panera Bread.

The company now consists of more than 500 stores in 32 states, and sales are anticipated to top $1 billion this year. Almost three quarters of the units are franchised and, according to the Sun-Times, "average sales per store were $1.8 million last year, compared with $1.6 million at McDonald's."
KC's View:
Of course, as Dizzy Dean once said, 'I’d rather be lucky than good."

Nothing succeeds like a combination of the two.

Published on: June 16, 2003

The Milwaukee Journal-Sentinel reports that A&P-owned Kohl's Food Stores will shut down its 23 stores on August 16, eliminating some 1,600 jobs in the process.

The company, which was founded in 1927 by a Polish immigrant, once was the dominant chain in the Milwaukee area with a 43 percent market share, but lately has had just a tenth of local area grocery sales.

A&P bought the company in 1983.

A number of the stores are expected to be bought by rivals such as Jewel-Osco. Two options are seen for smaller, neighborhood stores - either they will stay dark for the foreseeable future, or perhaps be converted to limited assortment stores.

A&P already had sold its Madison-area stores to Roundy's, which converted them to Copps Food Centers. But while it continues to engage in sale discussions, A&P clearly felt that it would lose less money with closed stores than by keeping them open.
KC's View:

Published on: June 16, 2003

Retail Merchandiser reports that 99 Cents Only Stores is adding a "Gourmet Fancy Foods" section to its stores, selling milk, as well as adding other products lines such as gardening and bridal products.

The goal of the strategy is to increase shopping frequency and average transaction. The company currently has 155 stores in California, Nevada, Arizona and Texas.
KC's View:
Okay, we can see milk for 99 cents. And even some gourmet products.

But bridal products?

What the hell are they selling?

Published on: June 16, 2003

Dean & Deluca, the New York food emporium, has opened its first cafe located within a Borders Books & Music store, in downtown Manhattan, a store that has just recently reopened after the 9/11 terrorist attacks.

This is part of a broader relationship between the two retailers. Dean & Deluca will open a second café inside a Borders on New York's West Side this fall, and the companies have agreed that Dean & Deluca will sell its branded products in kiosks located in over 120 Borders stores.
KC's View:
Not sure we'd be shopping for gourmet food items when perusing the stacks at Borders, but we can imagine that the impulse to pick up some interesting spice or sauce might strike if the kiosks are set up in the right location (like in between the coffee bar and the cookbook section).

It's certainly no stranger than putting a Dunkin Donuts inside a Home Depot…

Published on: June 16, 2003

Reuters reports that ex-Rite Aid Corp. CEO Martin Grass is expected to plead guilty today in a federal court in Harrisburg, Pa, to the charge of conspiring to improperly boost earnings at the nation's number three drugstore chain.

The trial of Grass and former Rite Aid Vice Chairman and general counsel Franklin Brown was scheduled to begin June 23, after having been delayed when Franklyn M. Bergonzi, the former Rite Aid Corp. CFO, copped a plea and agreed to cooperate with prosecutors in exchange for a lenient sentence.
KC's View:
Sounds like we can expect a plea from Franklin brown any time now…

Hope for Bergonzi's sake they put him in a different prison than Grass and Brown. They're probably not feeling too affectionately toward him right about now…

Published on: June 16, 2003

  • ComScore Networks' Media Metrix reports that online retail sales are up 14 percent for the year through the end of May, reaching $19.5 billion. Average weekly sales are $885 million, up from $776 million for the year to date a year ago.

    The hottest category: apparel, which is up 37 percent from a year ago.

KC's View:

Published on: June 16, 2003

USAToday reports that consumers and manufacturers may actually be getting the message about how fat this country is. (You think that's harsh? Try reading Phil Lempert's lead piece on this week…) Two thirds of Americans are obese or overweight, and there is some evidence that all the ruckus about this figure may finally be paying off.

McDonald's says that its new line of premium salads helped drive same-store sales up 6.3 percent last month, the biggest gain since the last century. (Okay, that's not quite as long as it sounds, but you get the point.) Beverage Digest reports that while bottled water sales are up 26 percent and diet soft drink sales are up almost four percent, sugared soft drink sales are up less than one percent.

Frito-Lay's new line of "Natural" snacks has up to sixty percent less fat that the mainstream versions.
KC's View:
This is all good information, though we're not sure it suggests a revolution in American eating habits. After all, we can tell you from personal experience that just these changes don’t add up to a svelte body and a healthy lifestyle. We eat salads from Mickey D's and Wendy's (as well as making them at home), we drink water and diet soda, and we actually like the "Natural" Frito snacks that we've tasted (especially the blue corn variety), and we still could stand to lose 15-20 pounds.

It's a lot more complicated than that, it takes a lot longer than most people have patience for, and requires diligent exercise and constant vigilance about what you put in your mouth….if only so when you fall off the diet/nutrition wagon, you're not in such sorry shape that recovery is impossible.

And as USAToday reports in another story, there remains a real problem with consumer confusion, because every time you adapt one way of eating to deal with a specific problem, you almost always set off alarm bells on another issue…plus, you make yourself miserable in the process.

It becomes a numbers game, and somehow you never win.

Published on: June 16, 2003

Ananova reports that Boots, the UK-based HBC retailer, is negotiating with several potential partners about bringing its operation to the US, probably as a branded section within another's retailer's footprint.

The arrangement, according to the report, would be similar to Boots' relationship with Watsons in Hong Kong and Taiwan.

"No conclusion has been reached at this stage but if we do go ahead, any trial would be on a very limited basis," a spokesman for the company told the news service, and speculation is that any test would not begin until early next year.
KC's View:
The question isn’t whether Boots can establish a good working relationship with a retailer here in the US, but what meaning - if any- the Boots name will have for American consumers.

We suspect none. So, Boots and its retail partner will have to go to some effort to establish a brand identity, create a differential advantage, and then be very patient to see if it all works.

While Boots reportedly is under pressure at home to build its sales and profits, this is no small venture they are considering.

Published on: June 16, 2003

Reuters reports that Kmart Holding Corp. has reported a first quarter loss of $862 million, which it chalked up to its reorganization costs and the some 600 stores that it closed while under bankruptcy protection.

Sales for the 13-week period ended April 30 were $6.18 billion, down 13.9 percent from the same period last year.

While the chain's loss was narrower than the $1.44 billion reported a year ago, same-store sales were off 3.2 percent.
KC's View:
Maybe they should've held off on giving all those bonuses to executives when the company got out of bankruptcy protection, and made them payable on making the company profitable again.

Published on: June 16, 2003

The Charlotte Business Journal reports that if the US Congress passes legislation that breaks down the barrier between banking and commerce, companies such as Wal-Mart or Merrill Lynch could get an unfair advantage over national, regional and local banks.

The concern is that if Wal-Mart purchases an industrial loan company, which it has said it wants to do in order to reduce costs, it would start off with a customer base, 3,000 stores nationwide, and a proven willingness to do whatever it takes to conquer a market.

"When the specialty banks were first created in the early 1900s, officials designed them to offer services such as loans and deposit accounts to people who lived in less populated areas who were not served by ordinary, full-service banks," the paper reports. "Today, about 50 such loan companies operate in California, Colorado, Nevada and Minnesota, with most in Utah. Most of them are small and specialize in services such as credit cards or small-business loans."

Wal-Mart leases space to more than 900 banks across the country, and already offers check cashing, money orders and wire transfers.

It isn't just Wal-Mart that the banking industry is concerned about. In addition to Merrill Lynch, companies like General Electric, General Motors, and American Express own industrial loan companies, which are subject to less regulation than mainstream banks.
KC's View:
The paper quotes one banking official as saying that nobody is losing any sleep over Wal-Mart's entry into the banking business. Well, we wouldn't suggest that anyone go without sleep, but they'd better get used to the idea real soon. If Wal-Mart and these other companies go into the banking business, it will bring about some fundamental changes in the way products and services are offered and charged for, changes that the banking business cannot even conceive of at the moment.

They'll scream, but it'll do no good.

Funny thing is, anyone who has had to wait eight days for an out-of-state check to clear will almost certainly think that such changes are a good idea.