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    Published on: October 10, 2003

    Random and occasional musings from the Content Guy…
    Saw a couple of wonderful movies that definitely are worth catching…and they couldn’t be more different.

    "School of Rock" is a hysterically funny movie starring Jack Black in the tale of a down and out rock 'n roll musician who deceives his way into a job as a substitute teacher at a classy prep school. When he discovers that the 10-year-olds he has in class know nothing of the music that defines his life, he takes it as a challenge…and the result is a movie that has something for everyone, but never condescends to its audience.

    We also have to admit that we liked "Under The Tuscan Sun," a movie that features Diane Lane as a writer who, after a divorce, finds herself inexplicably buying a house in Tuscany and rebuilding her life. While the first reaction to a movie like this is that it is a "chick flick," "Tuscan Sun" actually transcends that definition with good writing, sharp acting, and wonderful scenery. And, it has Lane…who ranks up there with Charlize Theron in our mind…

    Finally, on the subject of wine…

    Our local wine merchant has turned us onto a couple of nice Spanish wines that we've enjoyed, a 1997 Bodegas Luberri Monje Amestoy Rioja Reserva that is thick with flavor, and a 1999 Bodegas Ostatu Rioja Reserva that is a little lighter, but no less satisfying.

    Cheers! And have a great weekend.
    KC's View:

    Published on: October 10, 2003

    The New York Yankees defeated the Boston Red Sox 6-2 in Game 2 of the best-of-seven American League Championship Series, which is now tied 1-1.
    KC's View:

    Published on: October 10, 2003

    This week's story about how some popular diet foods contain trans fats, which are believed to cause as much damage to the heart as saturated fat, prompted the following email:

    One item that has escaped much of the media fervor over the labeling of Trans Fatty Acids is that the USDA is NOT requiring their products/labels to declare trans fat. USDA (in a decision that I'm sure was in no way swayed my marketing concerns or lobbyists) has declared that listing of trans fat values on USDA certified products (meat containing products with labels carrying the familiar circular "bugs" certifying product inspection) is "optional." If the manufacturer chooses to list trans fats, they must do so according to the new laws for format etc., but they are not required to list them. How about that for consistency. You gotta love a government that splits food labeling and regulation between two different agencies with two different agendas.

    The irony of this? Many of the Healthy Choice, Weight Watchers, etc. meals which are healthy but have trans fat, are not going to be legally required to declare trans fat on 1/1/06 the way FDA regulated labels are. That is what makes Tuesday's news story all the more amusing. Not only do these products contain "hidden" trans fats, but they are going to remain legally hidden unless ConAgra, etc. decides to voluntarily list the trans fat levels.

    In addition, many of the manufacturers of USDA products (especially pizza) that I have spoken to are receiving strong peer pressure from their respective trade groups to not list trans fats (cheese pizzas must list trans fat as they are not meat containing and, therefore, not USDA labels). The argument being used is one that is typically brought up when discussing adding voluntary allergen declarations to packaging. The argument goes something like this: "If you list it, and nobody else does, it's going to put you at a disadvantage in the marketplace. Consumers are going to assume that you're the only product with those 'issues.'" This is the completely wrong message to be sending to manufacturers and is extremely short sighted. Shouldn't we give the consumers a little bit of credit for intelligence?





    Regarding yesterday's story about mixed marriages among retailers, MNB user Bill Kadlec wrote:

    While I agree with your assessment as to whether having a recognized toy retail store within retail store will cause the draw they want, how much risk the big box is taking on depends on the arrangements. If I were Sears/Saks, I’d have these products there on consignment so that I wasn’t the one that got stuck with the leftovers. Of course, the question has to be asked, “What else could we have put in that area of the store and what effect on the net outcome might it have had?”.

    We commented that installing branded sections inside supermarkets might not help build the supermarket brand, which prompted another MNB user to write:

    I don't think bringing a toy brand endangers the hosting brand as much as it does the tenant brand. If I can save some time by picking up a present or two at Albertsons, my opinion of the grocer improves. But a visit to Toys
    "R" Us then becomes less of a unique experience.


    MNB user Paul Schlossberg wrote:

    Kevin, don't get stuck on the old fortress model of retailing. There are some unknowns in what you described. If the departments are leased, the other brand pays for the inventory and eats what doesn't sell, not the retail host. A leased department avoids capital for inventory - and generates sales volume and income. Think about it as consignment inventory or perhaps scan-based trading.

    During the upcoming holiday season, toys might be an impulse item. Shoppers, pressed for time, can pick up a toy/gift while shopping for groceries, without making another stop.

    Building your own brand takes time, especially in a new category. It's expensive and risky. Capitalizing on another brand, in this case a category killer, is faster, less expensive, and much less risky.

    It's simply an element of the four-box marketing model. This is selling new products to current customers. Once they are in the store you should sell them everything you can.





    Regarding the rumor that Wal-Mart might be interested in acquiring Casino of France, one MNB user wrote:

    Just returned from France a couple of weeks ago -- didn't hear anything about the rumor, but just a thought.

    As far as market position, this would seem logical -- Casino is definitely the lowest on the totem pole for the supermarkets in France. (Not the small Petit Casinos in the villages, which are usually a good quick stop -- crammed with merchandise, but they almost always have what you need. I'm referring to the bigger stores on the outskirts of towns.) Lowest price, dark unkempt stores, and lots of merchandise that looks like it's been shipped via donkey (banged-up corners, scuffs, etc.) Intermarche does a better job, taking the middle of the pile (and some being really superb stores), with E. LeClerc being the bright, clean, wide-aisled stores with the best selections -- sure wish someone would put a store like LeClerc in the States! (Note: the area we were in didn't have Carrefour, so can't honestly compare -- Aldi and Lidl are present as well, but as sidebars, not the main players.)

    It would fit right in with the unkempt, half-stocked mix of most Wal-Marts here that have been open for more than a few weeks.


    We think there actually was a Le Clerc hypermarket in the Baltimore-Washington area…but it wasn't appealing to US consumers.




    We questioned yesterday whether people who say they'll eat better and cook more of their own food will actually live up to those lofty goals, and MNB user Amy Garland responded:

    I agree with you, Kevin. In fact, I thought the exact same thing when I saw the story. There is a big difference between what consumers SAY they will do and what they actually do. Especially when it comes down to eating. I think the obesity epidemic sweeping our nation is proof enough of that.

    But then again, I could be wrong. I'd like to be proven wrong in this instance actually. Consumers eating a healthier diet and cooking at home more would be a positive thing -- for everyone's health.


    Another MNB user wrote:

    I just have to laugh when I read all of the reports about how serious consumers are starting to become about good nutrition, trans fat, low carbs and the problems of obesity in America. Wishful thinking or reality? Our actions are often in conflict with our words.

    I just witnessed a grand opening of the first Krispy Cream Donut store in our area. Hundreds of people actually camped out all night just to be first in line at 6 AM on opening day. By 7 PM that evening the wait in line was still over 40 minutes long. The news reported something like over 2000 dozen donuts were produced the first day alone. After several days the line of traffic still persists. Police have had to screen off traffic patterns to divert the incoming lines of traffic all week. A dirt overflow parking lot of several acres in size has been constantly filled with cars for days and this is a store that is open 24 hours a day.

    I wonder how many of these tasty little obesity bombs went into the bellies of people genuinely serious about good nutrition. How many Americans would you suppose have a garage full of the latest dusty exercise equipment and a shelf full of the latest diet books and an empty Krispy Cream Donut box in the trash can? Indulgence is a terrible thing to waste!





    We wrote yesterday about a new, smaller Publix store in Florida, which prompted one MNB user to write:

    This is not the first store that Publix has that is 29,000 sq.ft. They have several, in fact the one in Acworth Ga. was opened in 1997 and this is a small town 35 miles north of Atlanta with a population of 8,000. It's a full line store with a deli, floral and pharmacy. It is profitable and still increasing in sales and customer count.

    And MNB user Greg Buzek wrote:

    Hey KC, I think your "If you assume that one of the reasons that companies like Publix are focusing on this niche is because Wal-Mart is forcing them to feed in areas that they might have ignored in the past, it just means that the pickings are going to get slimmer and slimmer for independents" quote may apply in aggregate to retail but is a bit out of place using Publix as the example.

    Publix is simply expanding to increase market share in a store format that makes sense for the customer base in that region. In fact, Publix has done quite well against Wal-Mart because they don't try to compete against the Supercenter on price. A perfect example is Publix entering the Nashville, TN grocery market. Publix entered this market (and in our area 1 mile from a giant Wal-Mart SuperCenter) by taking over 6-7 existing Albertsons locations that could not produce. Under the Publix moniker they are growing in market share even as Wal-Mart continues to expand because they have far superior service, meats, and baked goods. They also bag and take the groceries to your car. (which for my wife lugging a 2 year old and a 7 month old is a huge deal to not have to juggle putting the groceries and the kids in the car then take the cart back to a corral). There are 5 other major supermarket chains in the area, Publix is gaining share as is Wal-Mart.

    If you look closer to Florida and Georgia where Publix is also located, you will see they compete quite well in regions where Wal-Mart is expanding. And here is the kicker. Financially, their % net profit margin is one of the best in Food/Grocery and rivals that of Wal-Mart even when Wal-Mart's traditional discounter margins (higher than food) are added in. So overall the Wal-Mart effect is forcing retailers to compete in different niches, in some cases perhaps smaller, but Publix is the wrong example to use as the example whipping boy.

    Thanks for the great work.





    In a commentary yesterday, we wondered if, with the level of dominance that it has achieved, Wal-Mart "should do more to raise standards, not keep them in check; to pursue highest common denominator marketing, not appealing to the lowest common denominator.

    "Now, we know that this very statement implies a bias. And it is certainly arguable that while Wal-Mart keeps salaries and benefits in check, at least it is hiring people instead of laying them off…and therefore can be said to contributing to economic growth and not economic malaise. And while Wal-Mart may source many of its goods from overseas to keep prices down, that's hardly a strategy of its own invention.

    "But we cannot help but feel that at the end of the day, there is something, well, mediocre about what columnist Gross describes as "the slavish devotion to consumer demand." When all is said and done, does this approach to life and business give inspiration to anyone not wearing a green eyeshade?"


    Not surprisingly, this generated some response.

    One MNB user wrote:

    In depressed areas such the town where I grew up, Wal-Mart is inspiring to employees because its one of the few employers that provide benefits (yes, the area is that bad). In an area that suffers from such a prolonged economic malaise the low-price factor does indeed “inspire” consumers, if not to have an premium shopping experience, to at least buy their basics and perhaps a little more at Wal-Mart.

    I’m torn between admiration for Wal-Mart’s undeniable success and concern that the tactics used to become that success make everything a price war. Supposedly nobody wins in a price war…but Wal-Mart has figured out how.

    A factor that makes this possible is that consumers are not only thinking “lowest price” when they think of Wal-Mart but they are also (rightly or wrongly) equating that with honesty. Consumers like the steadiness of knowing that “I can buy this at the lowest price right now” without worrying that they’ll miss the item going on sale next week. Don’t overlook the fact that this has built trust – the keystone of brand-building.


    Another MNB user wrote:

    Thank goodness hundreds of millions of American shoppers are more pleased with Wal-Mart's devotion to their needs than you are.

    Sam's guiding principle, carried forth to this day, was that satisfying the customer should be uppermost in the company's goals. It is and may it stay there.

    There are alternatives to Wal-Mart, but, unfortunately, the vast majority of the American public doesn't have to, care enough to, or can afford to shop for or at many of the retailers offering them.

    I don't believe the majority of shoppers will ever care enough to have an experience shopping as opposed to getting the best price for the quality they want and need in a product.


    Another MNB user wrote:

    Oh for more companies that would take some "mediocre" concept such as "slavish devotion to consumer demand" and pursue it with the passion and focus of Wal-Mart. Whether they're right, wrong or otherwise, knowing what you are or want to be - and pursuing it with everything you have - doesn't sound like too bad a business philosophy.

    And yet another MNB user wrote:

    It is the public's belief in corporate capabilities, rather than the loss of confidence in them that inspires criticism. Because of Wal-Mart's demonstrated success in expanding their business and elevating their business to such a high level, the public now looks to Wal-Mart's impressive business record to achieve some social improvements. If the political and economic subsystems of American society are to interact in the public interest, it is desirable that the business community facilitate rather than obstruct the political and market changes called for by shifts in public values. This is where Wal-Mart performs poorly - they have elevated the level of frustration with many associates and in communities in which they do business.

    And another MNB user wrote:

    I dunno, doesn't seem like "mediocre" describes anything Wal-Mart undertakes. And I find it pretty hard to whack them for having a "slavish devotion to consumer demand". Not having that kind of devotion has been a significant part of the problems at many retailers and other companies as well.

    Still, it would be nice to have the company acknowledge its leadership role in business by being a leader as well in how employees are treated and seen. Just from a business standpoint, employee turnover of 44% annually has to result in significant costs. Taking better care of employees might lower that rate somewhat and help pay for the effort.


    We would agree that "mediocre" isn't a word often applied to Wal-Mart.

    Let's be clear about our opinion. We don't think Wal-Mart is a mediocre company. We believe that Wal-Mart is a great American success story, and a quintessential reflection of how business works in the US.

    We don't want to suggest that Wal-Mart has a fatal flaw that will eventually undermine its operations. Flaws, sure…but it is hard to see that they are fatal.

    PlanetRetail.net reports this morning that Tom Coughlin, the company's executive vice president, recently emphasized the importance of thinking small if the retailer wants to keep getting bigger. "Success in the future will be dictated by acting like a small company," he said.

    Whether that can be accomplished as the company reaches even more gargantuan proportions is anyone's guess. But it means they have their eye on the ball.

    Do we think that a Wal-Mart shopping experience is inspired, uplifting, illuminating, and innovative? Nope. We think that most of the Wal-Marts we've been in have been mediocre.

    So, by the way, are many American supermarkets. This isn’t just an anti-Wal-Mart bias.

    We can't help it. We have a problem with and a bias against lowest-common-denominator marketing.

    But we also have a problem with lowest-common-denominator websites, books, movies, TV shows, restaurants, beers, and wines.

    Go figure.
    KC's View:

    Published on: October 10, 2003


    • Wal-Mart Stores reported net sales for the five-week period ending October 3, 2003, of $23.390 billion, an increase of 13.0 percent over the $20.703 billion in the similar period in the prior year. Sales for the thirty-five week period were $163.510 billion, an increase of 11.2 percent over $147.035 billion in the similar period in the prior year.

      The Wal-Mart division's sales for the five-week period were $15.850 billion, up 12.7 percent over sales of $14.064 billion in the similar prior year period. The division's sales for thirty-five weeks of $111.122 billion were up 10.6 percent over the $100.507 billion in the similar prior-year period.

      SAM'S CLUB sales for the five-week period were $3.210 billion, up 11.8 percent over sales of $2.870 billion in the similar prior year period. Club sales for the thirty-five weeks of $22.343 billion were up 8.6 percent over the $20.575 billion in the similar prior-year period.

      The International division's sales for the five-week period were $4.330 billion, up 14.9 percent over sales of $3.769 billion in the similar prior year period. The division's sales for the thirty-five weeks of $30.045 billion were up 15.8 percent over the $25.953 billion in the similar prior-year period.



    • Target Corporation reported that its net retail sales for the five weeks ended October 4, 2003 increased 12.3 percent to $3.937 billion from $3.507 billion for the five-week period ended October 5, 2002. Comparable-store sales increased 5.4 percent from fiscal September 2002.



    • Wal-Mart de Mexico SA , or Walmex, posted total September sales of $782 million (US), up 5.5 percent from the same month a year ago. Same store sales were up just 0.3 percent.

      Walmex reported same-store sales growth of 3.7 percent during the third quarter, while total sales rose 9.1 percent on sales of $2.4 billion (US).

    KC's View:

    Published on: October 10, 2003


    • Elizabeth H. Avery, currently senior director, government relations in ConAgra Foods' Washington office, will join the Grocery Manufacturers of America as vice president, government affairs.

      Avery, who was GMA's director, environmental affairs, from 1991-96, will manage the State Affairs Group, the Consumer Products Policy Committee and serve as GMA's representative on the Executive Board of the American Council for Fitness and Nutrition. She also will direct GMA's federal affairs activities related to member company business issues such as privacy, energy, taxation and similar issues.



    • Walgreen Co. reported that CFO Roger Polark will retire in January, to be succeeded by William Rudolphsen, currently divisional vice president of accounting and controller.

    KC's View:

    Published on: October 10, 2003

    Martha Stewart Living Omnimedia announced that it is cutting the guaranteed circulation of Martha Stewart Living, its flagship magazine, by 22 percent, from 2.3 million to 1.8 million. The move is seen as an admission that Martha Stewart's legal troubles are having an impact on her fan base, though the company says that there is a general softness in the magazine subscription business.

    The company also announced that it is lowering its advertising rate by 17 percent - which means that, in essence, it is raising its rates while lowering its guaranteed circulation.
    KC's View:
    Prison library subscriptions, however, reportedly have begun to see a sharp increase.

    Published on: October 10, 2003

    Published reports say that the Swiss Official Food Control Authority and the School of Hotel Management have developed a method of cooking French fries that creates between five-to-ten times less acrylamides than are produced in conventional cooking methods.

    There have been concerns about acrylamides, which have been proven to be carcinogenic in animals, since scientists discovered that there was a high level of the chemical in starchy products that were cooked at high temperatures.
    KC's View:
    You can always count on those crafty hotel management folks…

    Published on: October 10, 2003

    PlanetRetail.net reports this morning that Bill Grimsey, CEO of the Big Food Group in the UK, has criticized the Competition Commission's decision allowing only William Morrison Supermarkets to bid for Safeway Plc.

    Grimsey's complaint is that the Commission has ignored the encroachments on the nation's c-store industry by companies such as Tesco, and he argues that the government needs to break the industry up into two groups - supermarkets and c-stores, for regulatory purposes.
    KC's View:

    Published on: October 10, 2003

    Ahold announced this morning that it has hired Arthur Brouwer to be the company's new Chief Business Support Officer (CBSO), a new role.

    According to a statement by CEO Anders Moberg, Brouwer's role will be to work with the company's various businesses in the US and Europe to lower costs and oversee common processes in the areas of sourcing, information systems and technology and supply chain management.
    KC's View:
    Once again, evidence that Ahold seems to be moving away from its decentralized past and toward a more centralized, streamlined future.

    The question that remains to be answered is whether in places like the US this will work, especially since allowing Ahold's chains to be fairly independent has been a hallmark of how the company does business.

    Published on: October 10, 2003

    The Conference Board's measure of business confidence, which had improved to 60 in the second quarter of 2003, climbed to 67 in the third quarter. The quarterly survey covers approximately 100 CEOs in a wide variety of industries.

    A reading of more than 50 points reflects more positive than negative responses.
    KC's View:

    Published on: October 10, 2003

    After a difficult first half of 2003, retailers saw a pronounced jump in third quarter sales, according to a new report from the National Retail Federation (NRF). Sales gains came from a solid back-to-school season, pent-up demand for apparel, more seasonable weather, and strong demand for home merchandise led to an estimated 5.8 percent jump in sales.

    This was a significant jump after the relatively sedate first quarter increase of 1.4 percent, and a second quarter hike of 3.1 percent.

    “The long-awaited bounce in economic activity has finally arrived,” said NRF Chief Economist Rosalind Wells. “While we had forecast a pick-up in the second half of the year, this kind of strength was not anticipated.”

    The NRF projects that third quarter sales will increase a 5.8 percent and fourth quarter sales will be up 5.5 percent.
    KC's View:

    Published on: October 10, 2003

    The US Labor Department reported yesterday that for the work week ending October 4, new applications for jobless benefits dropped by a seasonally adjusted 23,000 to 382,000, the best showing since February and down markedly from mid-April's high of 459,000.

    In addition, new claims for unemployment insurance fell last week to their lowest level in eight months,.

    Some analysts believe that this may mean that major employers are easing the rate of layoffs out of a greater conviction that an economic recovery may be in the offing.

    According to the Associated Press, the economy actually added jobs in September — 57,000 of them — for the first time in eight month.
    KC's View:
    We know that we're beginning to sound like the eternal pessimist, but we still have to say that we know too many people who are unemployed - and seemingly without prospects in their chosen, long-term professions - to completely believe the statistics.

    Published on: October 10, 2003

    Great story in the Cincinnati Enquirer about where local chefs shop for their fresh foods.

    "Who you gonna call if you're searching for the freshest fish, best beef, exotic vegetables and hard-to-find spices? A chef, of course. Chefs shop for food like the rest of us - for their restaurant and home meals. But because it's their business, chefs have keener senses of where to buy food."

    Apart from the expected small gourmet shops and farmers' markets that are preferred by many chefs, the clear winner from among traditional supermarkets is the estimable Jungle Jim's in Fairfield, Ohio.

    Among the comments:

    "Jungle Jim's definitely has the best prices and the biggest variety for things like bitter melon or Chinese broccoli." -Kim Moy, chef-owner, Moy Moy's

    "Sometimes we go to Jungle Jim's just to get inspiration. If we don't have any idea what we're going to do for a special, we'll just walk around Jungle Jim's and look." -Michelle Brown, executive chef, Jag's

    Other stores that get positive mentions are Costco, Meijer, and Kroger.
    KC's View:
    If you've never been to Jungle Jim's, you owe yourself a trip. It is not just a fabulously successful supermarket that revels in an incredible selection and an info-tainment approach to marketing, but also is a testament to the enduring power of an independent with vision, ambition and more than a little chutzpah.

    Published on: October 10, 2003

    The Associated Press reports that negotiators for three Southern California supermarket chains and the United Food and Commercial Workers (UFCW) union have agreed to federal mediation now that their contract talks ended without resolution, and members of the UFCW voted overwhelmingly to authorize a strike.

    The mediation is to start on Friday, and a strike by as many as 70,000 employees at some 900 stores could begin as early as Saturday.

    The supermarket chains say they are under pressure from nonunionized Wal-Mart to keep their labor costs in line
    KC's View:

    Published on: October 10, 2003

    Under new federal bioterrorism rules, beginning Dec. 12, food importers will have notify the U.S. Food and Drug Administration (FDA) at least two hours before food shipments arrive by land, four hours before they arrive by rail or plane and eight hours before they arrive by ship.

    The new rules are designed to improve efforts to monitor and inspect imported foods and will allow quick identification of food processors and other facilities involved in deliberate or accidental contamination of foods, according to a statement by the FDA.

    The final bioterrorism rules for prior notice and registration require registration with the FDA by domestic or foreign facilities that manufacture, process, pack, distribute, receive or hold foods for human or animal consumption in the United States.

    Overseas facilities that export goods to the United States are also included under the rules.

    "The bioterrorism regulations issued today strike a good balance between strengthening food security and enabling food retailers and wholesalers to provide consumers the fresh and healthful products they demand," said Food Marketing Institute (FMI) President and CEO Tim Hammonds, commenting on the rules released today by the Food and Drug Administration (FDA).

    "We applaud the agency for the flexibility allowed when importing perishable products. The shorter prior-notice requirements (two to eight hours) will help ensure that these foods have ample shelf life. And the revised registration requirements ease the need for copious and duplicate records that already exist in state and local government offices."

    The Grocery Manufacturers of America (GMA) concurred. "GMA and its member companies are pleased that FDA appears to have given a great deal of consideration to making the bioterrorism regulations workable," said GMA Vice President of Federal Affairs Susan Stout. "These interim rules are an example of what can be accomplished when the government engages all stakeholders to create regulations that meet the needs of FDA, the food industry, and consumers to further protect the food supply without creating overly burdensome requirements."
    KC's View:

    Published on: October 10, 2003

    Next week marks the Food Marketing Institute's Public Policy Conference in Washington, DC, designed to bring food industry leaders into contact with elected officials who are able to influence the important decisions being made in the nation's capital. Business sessions, visits with Senators and Representatives, and a White House briefing all are on the agenda…and we conducted an exclusive e-interview with FMI's president and CEO, Tim Hammonds, to get an advance perspective on the sessions.

    MNB: It has been awhile since FMI hosted a government-related conference in Washington. Why the lapse, and what makes this year so important? And what’s behind the change in names from “Public Affairs Conference” to “Public Policy Conference”?

    Tim Hammonds: In the past FMI held its Washington public policy meeting with other organizations, including FDI. This was a complicated exercise. FDI was one of our partners, but since FMI and FDI are now one, the process can be streamlined and is easier to coordinate. Since we have an opportunity to redesign this meeting under the merged umbrella, we decided to try it in conjunction with an FMI Board meeting in Washington. If our board likes the format, we could repeat it in the fall of every other year, giving us the perfect opportunity to bring together the most influential executives in the industry with key officials in government.

    The reason this year is important is simple: it’s the multitude of issues vital to our industry before government right now. These include Country of Origin Labeling, WIC reauthorization, a Medicare prescription drug benefit, legal reform, FLSA reform, bioterrorism regulations, permanent estate tax repeal, generics and re-importation of drugs, and many more.

    As to the name, the old name was Public Affairs Assembly. Since we’re starting a new tradition, a new name seemed appropriate.


    MNB: While it would seem that most of the industry’s positions would be in pretty good shape because there is a Republican president and the GOP controls both houses of Congress, does this situation invite unwarranted complacency that has to be guarded against?

    Tim Hammonds: In an industry this big, an industry that touches every community, every consumer in America, there can never be any such thing as complacency. Our issues are too numerous and our priorities too broad to allow ourselves that luxury. All we need to do to remind ourselves of this is to remember that it was Richard Nixon who put wage and price controls into effect in this industry. A Republican administration is no guarantee of a benign business climate. On the other side of this coin, we need to find allies on both sides of the political aisle before we can make anything happen here in Washington. Both parties are important to us.


    MNB: For the first time in this Bush administration, the president’s approval ratings have begun to dip, and there seems to be some impatience with the conduct of the war in Iraq and the state of the economy. Any concerns about the 2004 election?

    Tim Hammonds: In October of the year preceding an election, the job approval rating of the previous 6 sitting presidents (Nixon through Clinton) have all clustered between 50 and 53 percent regardless of where they were in prior months. This is a remarkable pattern of convergence that seems to be typical of our modern election cycles. President Bush’s own ratings are there right now. By the end of January, we will see the trend up or down from here that historically tends to persist into November. This is how we will know if there is cause for concern or not. Right now, the approval rating pattern is normal for this point in the cycle.


    MNB: You were heavily involved in the 2000 election; will you be as involved with the 2004 effort?

    Tim Hammonds: I think it’s fair to say that I was visible but many in the industry were involved. This year, we have several within the industry who are actively involved in the campaign and actively helping to raise campaign donations.


    MNB: Let’s tick off a couple of issues, and you tell me where they stand at the moment, and what industry wants to achieve:

    Country of Origin Labeling:


    Tim Hammonds: We have made remarkable progress on building a consensus that the current country of origin labeling law has to be pulled back or changed dramatically before it goes into effect in September of 2004. While we’re still a long way from a legislative victory, I believe there is now widespread recognition within the producer community that this law is expensive, unnecessary and unworkable. When the USDA issues their proposed implementation regulations later this month, we believe it will become clear that the law itself is flawed and needs to be changed as quickly as possible.

    GMO Labeling:

    Tim Hammonds: FMI works very closely with GMA on this issue. It’s a global issue but it’s also true that Americans are not as concerned about GMO products or ingredients as are the Europeans. We continue to feel that the strong U.S. regulatory approval process guarantees the safety of our food without the need for this type of labeling. Ultimately this will play out in the context of international trade and America’s need to keep our European export markets open. Our role is to keep advocating an approach based on sound science while those negotiations play out.

    Food Safety/Security

    Tim Hammonds: These are two separate issues, but let me tackle the security aspect of this. FMI continues to work with a partnership of 40 different associations sharing information with the US intelligence community now organized under the new Department of Homeland Security. People can find a description of this activity on the web site: FoodISAC.org. The key objectives of this group are to make the food industry a difficult and unattractive target for terrorists and to position the industry to recover quickly from an attack should one ever occur. We continue to work on the implementation of the new Bioterrorism rules. Our goal in this effort is to make sure we comply with the needs of the regulators without creating an expensive record-keeping nightmare that duplicates the effective recall programs already in place throughout the food industry.

    Counterfeit Online Coupons

    Tim Hammonds: I think we have effectively delivered the message in cooperation with GMA that coupon fraud is not a victimless prank; it’s a crime that hurts your own neighbors in your local community. Both associations have jointly approached eBay asking that coupon auctions be stopped and we have jointly asked the state Attorneys General to actively investigate coupon fraud within their home states. We’ve begun to see some progress. The volume of fraud that spiked in September is showing some signs of receding, but the Joint Industry Coupon Committee has an active network of subcommittees working on a wide variety of innovative solutions. We don’t have a total solution yet, but I think we are on the right track.

    Organized Retail Theft

    Tim Hammonds: Organized Retail Theft (ORT) has become one of the most serious loss prevention, security issues confronting the retail community. We currently estimate that professional shoplifting rings now account for more than $30 billion in stolen merchandise each year. FMI is heading a coalition to make ORT type crimes a federal felony. Legislation (S. 1553) that would achieve this result has been introduced by Senator Larry Craig (R-ID). In the coming months we will work with the ORT coalition to move that legislation forward.


    MNB: There have been a number of states that have said they are looking into the acquisition of inexpensive prescription medications from Canada as a way of tamping down on exploding health care costs, a position with which the FDA is in violent disagreement. Is this a debate that FMI tends to get involved with?

    Tim Hammonds: This is an important issue for our member pharmacies and we will be talking about it with our Board during the public policy conference. Re-importation was a bargaining chip used to secure the necessary votes to pass the Medicare reform bill in the House of Representatives. It’s an attractive idea because it could help to address the high cost of
    brand-name prescription drugs and it might help our member pharmacies who are caught in the middle because they can’t access this market but consumers can, and do, through the internet. However, we do have a number of concerns including the quality of drugs coming in from other countries, the challenge of keeping counterfeit drugs out of the market, and the possibility that name-brand manufacturers might cut off exports of popular drugs to Canada if re-importation is allowed. Because this is not a simple issue, we are not ready to finalize a position on it just yet.


    MNB: What kinds of positions/actions do you believe that the federal government ought to be taking with regard to the outcry about obesity and nutrition?

    Tim Hammonds: The government is uniquely positioned to unite all of us around the science-based messages that can be effective in changing consumer behavior. Obesity, especially childhood obesity, is a growing problem here in America and throughout the world. The solutions require all of us recognize the magnitude of the problem and to recognize that the causes involve dietary choices, lifestyles and healthy exercise. There is no single cause and no single solution. Behavior research shows that if we have any hope of changing behavior, we must repeat a simple and effective message over and over and over. If government can help us agree on the message, the industry can help to deliver it. This is the formula that has worked so well in the public/private partnership we used to create the Fight BAC food safety education program. If people become convinced that the solution is just to sue someone, no progress on improving health is going to be possible. If people become convinced they can make the personal choices to better the lives of their own families, then we have a chance to see real results.


    MNB: Finally, what’s the one sleeper issue that you think could emerge from the government over the next year or so, but may not be on the industry’s radar at this moment?

    Tim Hammonds: Since you ask, take this as a concern, not a prediction. The cost of food has the potential to become an issue after decades of decline as a percentage of disposable income.

    America’s food miracle has been built on science, technology, access to imports from all over the world, and the faith that we can commingle items for the most efficient processing and distribution without regard to safety issues. All of these foundations are now under some degree of attack.

    Country of origin labeling threaten our ability to commingle items, bioterrorism rules threaten our ability to streamline distribution without an unmanageable paper trail of records and shipping manifests, GMO disputes with the Europeans threatens the ability to base technology decisions on sound science, and the recent collapse of global trade talks in Mexico threaten the trend toward increasingly open markets. All of these issues are manageable, but all are troublesome as they play out in the context of our upcoming national elections, and in the face of struggling economies worldwide.

    Note: FMI's Public Policy Conference is scheduled for October 15-17 in Washington, DC.
    KC's View:

    Published on: October 10, 2003

    Published reports this morning say that the All-China Federation of Trade Unions (ACFTU), that country's leading trade union with more than 100 million members and close links to the government, has threatened to sue Wal-Mart after the company refused to allow its workers there the right to union representation.

    According to reports, the ACFTU urged Wal-Mart to set up a union in its stores "sooner rather than later, and actively rather than passively."
    KC's View:
    Yeah, like that's gonna happen…

    They'll have to get in line.

    Right now, Wal-Mart is wondering where it can get a good Arkansas judge to hear a Chinese lawsuit…

    And the Chinese are thinking about how they are going to most effectively teach this American interloper a lesson in diplomacy. After all, those union members aren't just potential employees…they’re also shoppers. And we suspect that the ACFTU has a little more discipline in these matters than the UFCW.

    Though when we think about it, we keep conjuring up an image of Wal-Mart CEO Lee Scott standing in the middle of a wide boulevard, holding up his hand, trying to single-handedly stop a Chinese tank from proceeding down the street…

    How great would that be.

    Published on: October 10, 2003

    The Chicago Sun-Times reports this morning that the United Food and Commercial Workers (UFCW) union is accusing Safeway of not living up to its commitment to sell its Dominick's division in Chicago, a commitment made last year during labor negotiations.

    Safeway's promise to sell the company helped to avert a strike. Safeway had said it needed concessions from the union in order to be competitive, while the union charged that Safeway's policy of centralization had resulted in business practices that had driven the chain's customers away.

    The United Food and Commercial Workers union Locals 881 and 1546 said in a joint statement that they "have no proof that there is or ever has been a true bidder for the Dominick's chain. Safeway has failed to show any evidence verifying serious bidders for the chain, and they refuse to outline any procedure supposedly used for the bidding process."

    Safeway, however, maintains that a winning bidder has been identified, but that the company needs a union agreement to proceed - and that talks between the bidder and the unions have collapsed.

    Safeway never identified the winning bidder, though it was widely believed at one point to be Supervalu.

    The company has been sued by Yucaipa Cos., which sold the company to Safeway, and which now says that the bidding process to reacquire the company was rigged against it.

    The unions also have called for Safeway to appoint a new CEO at Dominick's if it no longer plans to sell the company.
    KC's View:
    It is amazing how the value of Dominick's has just been driven into the ground as all this hassling back and forth has taken place. Whatever it does, it would appear to look worse and worse for Safeway's interests…unless, of course, it has a plan in mind for Dominick's that we can't figure out.