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    Published on: October 1, 2003

    In Major League Baseball divisional playoff action…

    Chicago Cubs 4
    Atlanta Braves 2
    (Cubs lead best-of-five series 1-0)

    San Francisco Giants 2
    Florida Marlins 0
    (Giants lead best-of-five series 1-0)

    Minnesota Twins 3
    New York Yankees 1
    (Twins lead best-of-five series 1-0)
    KC's View:

    Published on: October 1, 2003

    We got numerous reactions to yesterday's story about how the Food Marketing Institute (FMI) Consumer Affairs Seminar in Philadelphia voted overwhelmingly to recommend to FMI President/CEO Tim Hammonds that the retailer organization embrace obesity prevention as a central theme, devoting resources in the form of personnel and money to anti-obesity efforts.

    MNB user Dave Tuchler wrote:

    Seems that there is a very important distinction finally emerging out of the obesity conversation: the difference between adults and kids.

    Much of the obesity argument assumes that the adult consuming public is essentially directionless and incapable of individual choice, who bump around in the dark until a greater power turns on the light. In this case the burden of being the 'light' -- fixing this situation - - (and apparently by implication the cause of it) seems to fall on the food processors/retailers and various governments in the U.S. They got us into this mess - - they need to save us from ourselves!

    In reality, most adults have for a VERY long time had a pretty good notion of how to eat reasonably healthy, and - guess what? - lots of them choose not to.

    Most adults have also known that getting some exercise and not smoking make sense and - guess what? Lots of them ignore that, too. Not that there's anything wrong with that. We all have the right to control our own lives.

    Children, however, are a different story -- they frequently don't have good information (due to poor parenting, no information from school, or whatever), and are much more vulnerable to forces leading them to eat junk food (availability of in-school vending, peer habits, other distractions, etc.), or to not get enough exercise. But they also seem much more able to adjust basic lifestyle factors.

    In my opinion 90% of efforts towards managing down overall obesity in America should be focused against children up through high school age -through informational programs, mandatory physical activity, messages to parents and food industry efforts to provide much more clear information. After that point, habits are much less likely to change and money spent against adults is much more likely to be wasted.

    By stressing that prevention should be focused on, as opposed to intervention, the FMI group (and a lot of nutritionists) probably would agree.

    We wrote yesterday that the recommended approach by FMI would say to consumers, "We are not just interested in low prices. We are part of this community - we have a stake in its health, its vitality, its longevity. We are advocates for the consumer."

    MNB user Richard Lowe wrote:

    Amen! This will lead to a whole new way of living! Improve the cost of our health insurance. Eliminate and reduce the need for drugs. We need to work on living a natural life. What does this mean? What are its values? Instead of consume, consume , consume!

    Kevin, what ever happened to the sodium issue? Why has it died? It is still a large part of the obesity and health equation.

    True…but for the moment, cutting back on sodium doesn’t seem to be top of mind for a society that increasingly has attention deficit issues…

    Another MNB user wrote:

    I am a little older and go back in time to the "Fit for Life" craze which I became a faithful follower of after quitting smoking three packs a day back in 1982. I still like its premise of going back to our roots in how and what we should eat. How did the cave man live and eat? It is the availability and face-to-face contact with all the bad stuff that has led us to the health crises society is facing today. It is all really common sense, but we have a very difficult time living that way!

    And MNB user Tom Stenzl of the United Fresh Fruit & Vegetable Association wrote:

    Kevin, first things first -- good job covering the Consumer Affairs Conference. You're right, these are important people to listen to.

    Secondly, they're right on this issue. The supermarket industry has a wonderful opportunity to align itself with their customers on health. Sure, it's self-serving, but when the most important "health" department in the store lines up perfectly with one of the most important "profit" departments, retail CEOs should take note. That's why the fresh produce section continues to grow faster and ever more critical in channel differentiation, individual store selection, and overall retail success. The new partnership between FMI and United Fresh Fruit & Vegetable Association for the May convention is a direct reflection of the importance of fresh produce to senior retail management.

    Agreed. Which is why we gave you the free plug.

    In a piece about Wal-Mart yesterday, we made an offhand comment that the Bentonville Behemoth "clearly like to be the only retailer that remains standing."

    One MNB user responded:

    Where has it been stated that Wal-Mart wants to be the only business remaining? That a business cannot compete with another business is whose fault?

    What was the cause of the demise of Sears or A&P?

    They were once the big businesses....

    We've been very clear about our opinion that Wal-Mart is not responsible for the fact that its competition does not seem able to define and implement a differential advantage.

    That said, it seems pretty clear that Wal-Mart subscribes to the Darth Vader view of retail expansion…

    On the subject of catering to low-carb dieters, MNB user Denise Remark wrote:

    Seems to me that the beef & egg councils are missing the boat by not heavily advertising the Atkins / weight-management connection & publishing a barrage of recipes featuring their respective products.

    One member of the MNB community wrote yesterday about the shortsighted and ill-advised approach taken by retailers to loyalty marketing data, unable and unwilling to take innovative steps to utilize the data in meaningful ways.

    To which another MNB responds:

    Please do not mention my name. I had to comment on the program…because I did all the analysis for this program and I remember it like it was yesterday. This program was presented 3-4 years ago. How much has upper management's opinions changed …. Not much.

    The reality is "THIS IS THE NORM" Everyday I do analysis for grocery retailers big and small and they always want to fund these programs with vendor dollars. Believe me who ever funds the program will get the most benefit. My biggest concern is that retailers will start to feel the economic crunch and decide the money they spend on gathering and storing customer information does not have a positive ROI so they will eliminate it. The truth is they have not even started to use the data the in way it would be most beneficial to the long-term value of the company. They talk about data mining but how many of them really understand what it is? They are not even doing the easy segmentations and program and they want to get into customer modeling? My belief is pick the low hanging fruit first but most retailers focus on the 5 oranges at the top of the tree they can't reach.

    In addition, they want a pre-during- post analysis on any program they run that is targeted using their FSC information. How many of them would ever consider doing a pre-during-post analysis on their ROP? Okay lets see if our circular works. 4 weeks prior to the program X number of customers bought Tide, during the program Y number of customers purchased Tide. 4 week later how many of them still purchase Tide? They would never decide not to run Tide in their ad again because only 10% came back and purchased Tide in the 4 weeks after the program. But when they run targeted programs such as direct mail or Catalina they expect to have positive results in the post program. Never mind they got 2% of category never buys to purchase during the program, they expect them to purchase Tide in their stores forever.

    They hold these programs up to a higher standard instead of measuring them the same way. Why would a coupon have a longer effect than their circular?

    All excellent questions…

    And finally, in response to our brief piece about the competition between Netflix and Wal-Mart for the DVD rental business, MNB user Steve Cheatham wrote:

    Netflix is not likely to censor the titles available or edit the content of the DVDs you rent. As for Wal-Mart...

    Actually, this email made us curious…so we went to Netflix to see if we could rent "Last Tango in Paris," the X-rated Marlon Brando movie from 1973 - sexually provocative, but hardly pornography. And Netflix had it - no waiting.

    At Wal-Mart, however, "Last Tango in Paris" isn’t in its DVD library.

    You can, however, purchase the Jimmy Buffet CD, "Last Mango in Paris," for $9.98.
    KC's View:

    Published on: October 1, 2003

    Family Dollar Stores announced the following promotions:

      • Bruce E. Barkus has been promoted to the newly created position of Executive Vice President - Store Operations. Mr. Barkus joined Family Dollar as Vice President of Store Operations in August 1999, and was promoted to Senior Vice President - Store Operations in June, 2000.

      • Charles S. Gibson has been promoted to the newly created position of Executive Vice President - Distribution and Logistics. Mr. Gibson was employed by the Company in September 1997 as Vice President of Logistics, and was promoted in October 1999 to Senior Vice President of Distribution and Logistics.

      • Ramesh Chikkala has been promoted to Vice President - Store Process Improvement. Mr. Chikkala joined Family Dollar in April 2001 as Regional Vice President - Store Process Improvement, bringing over 14 years of engineering experience in the retail industry.

      • Cynthia L. Dunham has been promoted to Vice President - General Merchandise Manager: Softlines.

      • Timothy A. Matz has been promoted to Vice President - General Merchandise Manager: Hardlines.

      • Geno Coradini has been promoted to Divisional Vice President - Real Estate.

      • Christopher A. White has been promoted to Divisional Vice President - Tax.
    KC's View:

    Published on: October 1, 2003

    • Costco employees in four east coast states who are members of the International Brotherhood of Teamsters have voted to approve a three-year contract with the membership club chain.

      The deal covers 3,500 workers in 16 units.

    • Wal-Mart Stores reached an agreement with 43 U.S. states, including California, to improve procedures used to reduce sales of tobacco products to minors, including checking the identification cards of anyone who appears to be under age 27 when they attempt to buy tobacco, and using cash registers programmed to prompt ID checks on all tobacco sales.

      Wal-Mart said it made the agreement voluntarily, but the states targeted the retailer because what was perceived as negligence in enforcing tobacco laws.

    • Delhaize Group, owner of Food Lion and Hannaford Bros. here in the US, announced that it plans to expand its c-store concept beyond Belgium for the first time, opening stores in Germany, Greece, Romania and the Czech Republic. The "Delhaize City" format focuses on fresh foods and meal solutions.

    KC's View:

    Published on: October 1, 2003

    Ahold has announced that on Thursday it will release an audited financial statement for 2002, as well as restated financial statements for 2001 and 2000.

    The company had to release the results by yesterday in order to have access to more than $900 million in financing, but got a brief deferral from its banks.
    KC's View:

    Published on: October 1, 2003

    The New York Times reports that a summertime inspection of prescription medicines being brought into the US from foreign countries showed that "most imported drugs are counterfeit knockoffs that could seriously endanger the health of those taking them" by either under-treating or mistreating the diseases for which they are being taken.

    Mark B. McClellan, commissioner of the US Food and Drug Administration (FDA), said that the inspection results "illustrates the real and serious public health risks created by the importation of unapproved drugs."

    This report comes as there is mounting support for legalizing the import of prescription medicines from other countries because they tend to be vastly cheaper than their domestic counterparts. States such as Illinois and cities such as Springfield, Mass., have already said that they are flaunting federal law by going after such medicines in order to reduce their soaring health care costs.

    Critics of the FDA inspections say that the government is being complicit with the major drug companies that want to keep the exports out of the US.
    KC's View:
    Clearly, there is a big problem here…and it has nothing to do with the quality of imported medicines. Until the issue of the affordability of prescription drugs in this country is dealt with, citizens in need will continue to look for alternatives.

    Published on: October 1, 2003

    The Associated Press reports that Allen Questrom, chairman and chief executive of J.C. Penney Co. Inc., says that he will decide by the end of the year whether or not the company will keep or sell its Eckerd Corp. drugstore chain.

    Questrom said the biggest mistake made with Eckerd was preventing it from building more stores, which allowed the competition to get a greater foothold in the business.
    KC's View:

    Published on: October 1, 2003

    The Austin Business Journal reports that the Texas capital is considering an ordinance that would effectively ban big box store development in a section of the city, limiting retailers to those that are 50,000 sq. ft. or smaller.

    However, there is opposition to the proposed ordinance from developers and residents who believe that shopping choices should not be legislated against, and that big box stores bring in significant tax revenue.

    Companies that have already invested in property approved for supercenter-style stores probably would be grandfathered and not affected by new zoning rules.

    Wal-Mart reportedly plans to build four or five new supercenters in Austin during the next 12 to 18 months.
    KC's View:
    These kinds of community debates are taking place with greater frequency all over the country, and we think that is healthy. Cities and towns that accept rampant superstore development, and all that it means for the future of their downtown shopping districts, at least ought to do so with eyes wide open and all the possible consequences considered.

    Published on: October 1, 2003

    USA Today reports this morning that the Center for Science in the Public interest (CSPI) has issued a report criticizing "Fresh Mex"-style restaurant chains for nutritional shortcomings in many of their offerings.

    At Chipotle, for example, CSPI says that the chicken burrito has roughly 1,000 calories, a day's worth of sodium (2,500 mg) and half a day's saturated fat (12 grams). At Baja Fresh, the nachos have 2,000 calories, 40 grams of saturated fat and 2,900 mg of sodium. And the typical cheese quesadillas served at these chains contain between 850 and 1,150 calories, 25 to 35 grams of saturated fat and 1,400 to 2,200 mg of sodium.

    Ironically, Taco Bell has just announced that it will begin selling lower-calorie versions of its Mexican fast food, called "Fresco Style," that will substitute a fat-free salsa of chopped tomatoes, onion and cilantro for the cheese and sour cream-based sauce on most menu items.

    According to the company, this substitution can lower the fat content of its food by up to 70 percent and reduce the calories by as much as 40 percent.

    CSPI makes the same point in its report - that if you eliminate the sour cream and cheese from most dishes and replace it with salsa, you can have a significant impact on the meal's nutritional content.
    KC's View:
    In reading about the burgeoning low-carb category, we noted that the Don Pablo's restaurant chain is bringing out a low-carb fajita, with chicken wrapped in lettuce rather than a tortilla. Combined with the Taco Bell effort, there seems to be some movement in the right direction from these chai

    Published on: October 1, 2003

    Less than a week after UK Trade and Industry Secretary Patricia Hewitt accepted the Competition Commission's recommendation that William Morrison Supermarkets be the only one of four major food retailing chains allowed to bid to acquire Safeway Plc, the nation's fourth largest food retailer, there continue to be reverberations.

    The Guardian reports that Sainsbury, the nation's third largest supermarket chain, plans to ask the Competition Commission about its ruling that the nation's top three grocers - Tesco, Wal-Mart's Asda Group, and Sainsbury - only can buy 53 stores that must be divested by Morrison.

    The concern is that this ruling makes it extremely difficult for any of the other chains to grow, and may even put Morrison at a disadvantage since it reportedly expected to be able to sell off more of Safeway's 479 units.

    There also are reports that if Morrison and Safeway cannot come to an agreement on the price that is appropriate for the acquisition, Morrison is prepared to launch a hostile bid for the company.
    KC's View:
    If this story continues for much longer, even British stuff upper lips are going to begin to sag. The problem is, there are reports that this whole Safeway acquisition might not be settled until next January.

    In a related story, there were reports yesterday that Asda has decided to cut the price on gasoline sold at its stores, saying the move was prompted by a currency weakness.

    However, we would suggest that this could be just the opening volley in a broad effort by Wal-Mart's Asda Group to create a price war in the wake of its losing attempt to acquire Safeway Plc.

    And there will be more.

    Published on: October 1, 2003

    The Akron Beacon Journal reports that a supermarket price war has broken out in Ohio, as "both Giant Eagle and Tops grocery stores started major advertising campaigns touting thousands of lower-priced goods." Local retailer Acme Fresh Markets vowed to "meet and beat" the price decreases.

    At this point, according to the paper, "the changes affect 100 Giant Eagle stores in the Akron, Canton, Youngstown and greater Cleveland area and 52 Tops stores in Cleveland, Akron and Youngstown."
    KC's View:
    Dumb. Just plain dumb.

    At no point in the story does the paper ever refer to outside competition such as Wal-Mart instigating the price war - not that this would justify the price decreases, but at least it would put them in context.

    Nope, this is just a couple of grocery companies getting the low price itch…which they likely to scratch until they get an infection they may not be able to control.

    Nobody wins the low-price battle. No matter how low you go, somebody always is going to be able to go lower. So all you do is tell consumers in a battle like this is that you've always been overcharging them, and that there is no bottom price on many of the products that you sell.

    No wonder consumers don't think there's any advantage in shopping in a traditional supermarket, and that they might as well patronize any store that offers the perception of lowest price. This industry has gone out of way, time and time again, to destroy whatever differential advantage it might have against alternative formats.

    Published on: October 1, 2003

    by Kevin Coupe
    Like a lot of people, we found yesterday's story in The Wall Street Journal about Wal-Mart's health care policies to be fascinating, even depressing reading. (We're pretty sure that the United Food and Commercial Workers will be adding the piece to its sales brochure for why Wal-Mart employees need to be unionized.)

    Let’s see if we can cut to the chase here…

    According to the WSJ, Wal-Mart makes new hourly workers wait six months to get benefits, and doesn't cover its retirees at all. Its deductibles can be as high as $1,000, and won't cover pre-existing conditions in the first year of coverage. And Wal-Mart doesn't cover things like flu shots, eye exams, childhood vaccinations, and chiropractic services. As a result, Wal-Mart's spending on health care benefits for each of its employees was roughly $3,500, or a third less than the rest of the nation's retail industry.

    And this was according to The Wall Street Journal - not some leftist rag looking to tear down a major US corporation.

    At the same time, the WSJ notes that Wal-Mart's philosophy of preferring to cover 100 percent of catastrophic health care costs can result in some moving anecdotes - the child who requires millions of dollars in care, for example, mostly covered by Wal-Mart's insurance policies.

    We recognize that there are varying points of view here, and that Wal-Mart probably would justify its policies by saying that it has a major responsibility to its shareholders to be the most profitable company possible, and keeping health care costs in line is one way of doing that. And we know that a lot of other retailing entities probably are envious of Wal-Mart's health care cost structure, and would like to emulate it.

    But we're also fairly sure that if Lee Scott or any of the other top executives at Wal-Mart need to get their kids immunized, or get their eyes checked, or even just a checkup, their ample salaries and bonuses make it exceedingly possible.

    That same ease may not exist for the hourly worker who has a couple of kids, and who is struggling to make ends meet. In fact, Wal-Mart is known for keeping the hours down on part-time workers so that they don't qualify for benefits. In places where Wal-Mart is the major employer, or even the only employer, what are the options?

    Anecdotes that support catastrophic health care coverage are just that. They make nice news copy, and we don't doubt the fact that in certain cases, this kind of coverage really makes a difference.

    We happen to know something about this, however, because for a long period of our life that's the only coverage we had for our family. We were freelancing, our wife wasn't working, and the only kind of health coverage we could afford was the catastrophic kind - it was expensive, and for day-to-day issues, it was useless. Luckily, we didn't face any major problems, ort we would have had a nice anecdote to share. No, we just had to deal with the flu, and viruses, and the various bumps and bruises of childhood that can send you to the doctor's office, but scarcely qualify for any kind of coverage.

    The fact that Wal-Mart - the biggest, most profitable retailer in the world, and a company that trumpets its commitment to family values - takes this approach to covering its employees' health care costs seems unconscionable.

    We're not suggesting that Wal-Mart lose all fiscal sense in changing its policies. (We don't think that anything short of broad unionization would force such a change, which is just one of the reasons the company fights the UFCW so diligently.) And we don't think that Wal-Mart is operating in a vacuum - it has been forced into this approach by a health care system that clearly is too expensive for many Americans - witness the sudden popularity of Canadian prescription medications.

    But we see little compassion, little heart in the policies described by The Wall Street Journal. Which makes its public relations efforts and advertising campaigns that stress its small-town soul and people-oriented policies seem like so much hypocrisy.

    It's all a crock. And it makes us despair about the future.
    KC's View: