Published on: November 7, 2003
On the subject of Kraft, Dean Foods and Frito Lay looking at SEC investigations into their relationships with Fleming, we wrote yesterday that "it figures that Fleming, even in rigor mortis, would figure out a way to drag a few more souls into hell with it."
user wrote:I am sure that Fleming details will be coming out for quite a few years, and it will go down in history as the “Enron” of the grocery wholesale business.
We also wrote yesterday that as the SEC looks at the financial arrangements between Fleming and these three companies, the problem could be "figuring out what proper behavior and appropriate bookkeeping are in the supermarket industry may be next to impossible."MNB
user Glen Terbeek responded:For once, I take exception to your comment "figuring out what proper behavior and appropriate bookkeeping are in the supermarket industry may be next to impossible."
The answer if very simple; the conversion is tough! If the industry eliminated the unproductive and corruptive selling and reselling of product until it gets to the store's back door, and if promotional dollars were paid for real shoppers' purchases (i e POS), all the accounting problems would go away. Why, because this simple model matches the real economic value added created in the industry's supply chain. It also might make the grocery industry more competitive to Wal-Mart again, since all the focus would return to the stores' performance in their marketplace. For sure it would quickly rationalize the current, redundant logistic systems in place today.
Unfortunately it has taken bankruptcy, government threats, and financial scandals to point out the obvious disconnect the industry has with the economic realities of today's marketplace.
My favorite saying about the industry is: "No one wants to be first, every one wants to be second." In this case, I would guess that Fleming and others didn't want to be first, and I would guess that no one wants to be second. I believe that it is up to them.
We misspoke, and didn't mean to trivialize the obvious corruption in the financial infrastructure of the food business. We just meant that for people outside the industry, it's all gonna look like a helluva mess…
And another MNB
user wrote:Regarding the stories yesterday, first, about Kraft and Frito-Lay and their suspect dealing with Fleming and, second, how Wal-Mart has zoomed to its size and impact perhaps on the backs of its employees:
Not too many years ago, we would have expected some federal agency or a Congressional committee to thoroughly dig into possible violations of the old Robinson-Patman Act which assured all retailers that promotional allowances and other practices that had an effect on costs must be even-handed and available to all competing retailers on proportional and equal terms. This would have included ad allowances, display allowances, slotting allowances and even payment terms including cash discounts.
I don't know if Robinson-Patman is still in effect, whether it has been replaced or revised by some other federal law. But I do know we did not have these type problems in those days, and that manufacturers, distributors and retailers (chain and independent alike) feared being accused of violating the laws in effect at that time.
It seems anything goes these days, especially if it could result in special treatment from the big guys, like Wal-Mart today and Fleming yesterday. I'm sure many wholesalers and retailers alike, whose plants or stores have been gobbled up or boarded up, long for the good old days when the feds cared about a level-playing field.
In a piece earlier this week about Wal-Mart's trouble with the immigration authorities, we wrote that "the all-consuming drive to lower costs can sometimes lead to an organization being blind to the law."
This prompted one MNB
user, a Wal-Mart employee to respond:I don't believe that you will find that Wal-Mart, on the whole, is "being blind" to the law. That some members of the organization are, in their quest to advance, will and do cut corners that could lead the company into situations that reflect on the company more so than on the individuals themselves.
Or, at least, that's what Wal-Mart opponents would have us believe; that it is the company, solely the company, not the individuals that do the unlawful acts.
As an example of the responsibility of the individual rather than the company, this MNB
user quoted extensively from a posting on The Motley Fool website on the subject of working employees off the clock at Wal-Mart:
"There is no doubt in my mind this has happen. But I do know it is not directed by WMT and it is not tolerated. When WMT finds this happening they do take action including making back pay to the associate.
I will relate an issue that happen with a friend of mine who was a district mgr. about a year and half ago. His asst. would come in and often go to work without clocking in and often without clocking out. At some point during the week someone would bring this to her attention and she would then fill out a time adjustment sheet but never gave herself over 40 hours even though many times she had work over 40 hours. Because she did this, others felt they might be thought less of for not working over 40 hours and not accepting the overtime.
Instead of bringing this to the dist. mgr. attention (I guess they felt he was directing her to do this) they called the home office. Later he was demoted for allowing it to happen. Even though he said he didn't know and his asst said he hadn't directed her to do so he was demoted because he should have known. I relate this because it is not something that WMT take lightly."
We'll accept that story on face value.
However, would it be fair to suggest that maybe, just maybe, Wal-Mart actually created the environment in which those kinds of offenses take place?
And by the way, maybe the district manager actually got demoted because he didn’t know what was going on in his own office…
On the general subject of Wal-Mart, one MNB
user wrote: Wal-Mart is not driving any one out of business. Consumers are driving others out of business because they prefer to shop at Wal-Mart because of price and selection. Wal-Mart employee pay and benefits are comparable to other non grocery retailers. Most non union grocery retailers pay employees less than unionized grocery retailers. Most unionized companies in many industries ie autos steel trucking etc are seeing dwindling sales due to make-work contract language along with low productivity.
We don't disagree. Retailers have spent so much imitating Wal-Mart that they've forgotten to offer a compelling alternative.
Can't blame that on Wal-Mart.
And another MNB
user wrote in about our comment, "With great power, however, comes great responsibility - and this…is where Wal-Mart is accused of skirting the edges of what is ethical and appropriate."As a manufacturer who calls on/sells to Wal-Mart, let me share our view. They are the "squeakiest clean" company we deal with. Buyers are not allowed to even take a lunch invitation. Samples may not be left behind for office personnel to take home. Etc. Compare that to the norm in the industry. Expensive dinners. Sporting event tickets. Gift certificates. Golf outings. And so on. I can't speak for other areas of their business, but, in the buying department, as stated above, they are the most ethically pure company we deal with.
Regarding Randall Onstead's new leadership at Dominick's, one MNB
user wrote:Give the guy a chance. As we look around the landscape of retail companies, unions and legal counsel that are tasked with managing labor relations I don't see too many people who have cornered the market on world class conflict resolution. A fresh perspective might be just what the situation needs.
We wrote the other day about how Kmart hopes its new urban, ethnic strategy will bolster its sales over the holidays, and commented that we're not convinced. "We see no evidence of any grand new vision that will propel Kmart into a brighter future," we wrote, prompting one MNB
user to observe:Once upon a time Kmart was one of my more favorite places to shop. However, many of my personal issues with the store seem to have been a major part of their long term troubles. Prices escalated, variety decreased, inventory was ALWAYS lousy, sale items were almost leftover amounts and sizes, lack of sales personnel and the list goes on.
During the recent bankruptcy, obviously their stock was at very low levels, and we waited to see what would happen after they emerged. Well, they have emerged, a while ago!
At least in our local store - inventory levels are still ridiculously low, variety is about non existent, prices are even higher, and unless you are under the age of 25 you can forget buying clothing. Sales associates are still scarce, and the word courtesy still is not part of their vocabulary. Personally, I see no positive changes in Kmart, and frankly the frustration of trying to shop there is just not worth it. Maybe they will do better in urban markets, but it would seem that abandoning suburban markets and relegating older shoppers to bath accessories and curtains is not the way to grow and prosper and certainly not the way to encourage new and loyal consumers.
But then maybe that is not important, as long as they can pay their execs what the heck!!!
But not everyone shares our cynicism:I have to hand it to Kmart for at least taking a step forward and not just blaming all on Wal-Mart. You may be right they may not make it out alive. I hope they get a lift out of all their effort and ability to be somewhat creative this Holiday Season . They just may have the strength and enthusiasm to prevail. I really want you to be wrong this time.
This time? Hey, we're wrong lots of times. (Just ask Mrs. Content Guy and the Content Kids…)
We had a story earlier this week about some of the problems being created for the baking industry by the popularity of low-carb diets, especially the Atkins plan. (We noted that we haven't eaten a slice of bread in two months, and have lost 15 pounds.) As usual, the subject of diet and health generated a number of emails…
user wrote:Your comment on simply skipping the bread reminded me of what the Hartman Group found in their new report "The Low-Carb Diet and Today's Consumer." Essentially, low carbers use a principle of restriction. Rather than add new foods, they simply cut out entire categories. Dis-assembling a sandwich, and throwing away the bread, is the classic strategy. Wonder how much more bread is going into the garbage at fast food restaurants?
Anyway, just wanted to give a plug for the Hartman report. When you're out in the trenches trying to provide the right products it's helpful to get a snapshot of what's going on with consumers.
(And that wasn't even from someone at the Hartman Group…)
We agree with the "principle of restriction," by the way. It's a lot easier just to cut out a food group or category than it is to start measuring and counting grams and portions…
For example, as we've moved through the diet, we haven't had a beer for two months…but have added red wine back into our diet with seemingly little impact (as long as we keep exercising). And in addition to bread and beer, we almost completely eliminated all desserts. (We say "almost" because we broke down and ate some fabulous ice cream cake from Cold Stone Creamery on our birthday…what the hell.)MNB
user Kathleen Whelen wrote to tell us about a company called the Alvarado Street Bakery…This bakery from San Francisco is starting to show up here in Stop and Shop, D'Agostino's, Food Emporium and even Shoprite! Their breads are made from whole grains, not flour, and have very low carbs compared to other breads - and they don't taste like tree bark!! Whole grains and sourdough slow down the breakdown of the carbs, so you don't get the big spike. I notice that Arnold's has come out with a low carb bread, which isn't bad as toast, but it's not whole grain and it has a kind of gluey consistency.
Thanks for the recommendation.
user Gary Lind wrote about the "principle of restriction":Absolutely true.
I haven't had a piece of bread for over a year. Even on trips to Italy.
And we're sure you look mahvelous…
And regarding Pepsi's new ad campaign, one MNB
user wrote:Kevin, I read your daily column for many reasons, although to make me laugh has not been a priority. But today, I laughed out loud when I read that Pepsi's new campaign is expected to focus on Pepsi's compatibility with food.
Are they kidding??? I can hardly wait to see these ads! That being said however, I have to admit that I watch very little TV (I iron my work clothes while "Bewitched" is on & that's about it) so the whole campaign could come & go without my notice.
Thanks for being here to both inform & entertain!
Though not necessarily in that order…
In our story the other day about Shopping For Health 2003
, the newest version of the annual report issued by Prevention
magazine and the Food Marketing Institute (FMI), we noted that consumers' confusion about nutrition issues gives retailers and manufacturers a terrific opportunity to become resources for these shoppers. Which prompted one MNB
user to respond:True, confusion about nutritional issues is a key barrier to healthy buying and eating habits among Americans. However, the key issue creating that confusion is that experts cannot be completely trusted--"45 percent of shoppers strongly agree that during the next five years, it is very likely that the experts will have a completely different idea about which foods are healthy and which are not."
What can retailers and manufacturers consider "clear and comprehensive
educational programs" when consumers have noticed that nutrition rules change regularly? It seems the opportunity may be to face complicity in this "deception".
We think "duplicity" may be the wrong word here. Science changes, and while the pace of change in the modern world is faster than ever before, the ability to communicate information almost instantaneously clearly creates a lot of this consumer confusion.
Does that mean we should work toward a world in which information is communicated less quickly? Obviously, based on what we do for a living, we don't think so - and it doesn't matter, because that particular genie isn’t going back into the bottle anyway.
What we think retailers and manufacturers need to do is be up front with consumers about the currency of the information they offer, creating an interactive environment in which people understand and even appreciate the evolution of ideas. (We'd love the opportunity to set up that kind of program for a retailer tomorrow…if you're interested, just call us at 203-662-0100.) If nothing else, changing notions of what works and does not work in this arena could actually create greater credibility and dependence, not less.
We also had a story the other day about different pieces of research suggesting that it may be genetics or a virus - or, we suppose, both - that cause some people to be obese. These studies and our story - entitled So It's Genes That Prevent You From Getting Into Your Jeans? Or Is It A Virus?
- prompted several emails.MNB
user Denise Remark responded:And they say there's nothing new under the sun! What about self restraint? Is there such a gene for that? Perhaps scientists will discover that slender people possess an enzyme that can more effectively metabolize "self-restraint" chemicals in the body. It may even be linked to brain-chemistry, which results from ocular stimulation. I know this works for me because when I see someone who is fat, I realize I could look like that; consequently, I don't reach for every tempting morsel that is placed before me.
Boy, do I ever sound cranky! But really, loosing weight is not rocket science: Monitor quality & limit what you eat, and exercise regularly. This should work for most people.
user chimed in: This is a mark of how much our society has declined in this Atkins/Reality TV era. You are reporting that genetic makeup or viruses are the cause of unhealthy living in America, and the scientists just may be right. It is in my most humble opinion that as a society we would be better suited to allocate some of these fat researchers to some more obvious threats like heart disease and cancer. Brilliant scientific minds should not be wasted on these sort of discoveries, because the accountability for America's obesity problem lies in ourselves and the food manufactures of the U.S. For the wide majority of people, we are fat because of the products we buy and how we consume. This is a problem better suited to be discussed in public dialogue, like the government is trying to encourage. The last thing we need is more Americans with an excuse, saying "The genes made me fat" as they sit on the couch, slamming down their third big mac and a coke.
I've seen this before...Maybe its a bit too early to say these types of things, but modern American society is looking more and more like Rome before it fell. Circuses are reality TV, Cheap pottery has it's equivalent in Wal-Mart, and our obsession over diets to purge fat is just a modern version of the binge and purge.
Did you mean to say "wide majority of people"…?
And, in what may be our favorite letter of the week, another MNB
user wrote:I can't speak for anyone, but myself. It's my fat ass that keeps me from getting into my jeans. I have a propensity to be heavy, but I know that. So it's all back on me if I let myself go.
Americans need to quit looking for excuses and start being accountable. Eat less and exercise or simply be more active and most people will lose weight. I know it works for me.
I know, some folks have medical problems, OK whatever. I have my own medical problems, but I don't use that for an excuse.
I go up and down like a yo-yo because my metabolism needs constant attention. If I enjoy the wrong foods too much I pay the price. As I get older I tire of fighting the weight, so I enjoy the foods I love with more moderation.
Spoken like a true veteran of the weight wars…
And finally, we got this email from MNB
user Natalie Berg:I am 22-year-old recent college grad now working in Boston. I read your column every day and find it very insightful. However, I was quite disappointed when you referred to a famous Boston pub as Boston BREW Works when it is, in fact, Boston Beer Works.
Let’s not forget about the retail’s most important vignettes.
It was 5 a.m. when we made that typo. (Not an excuse, just an explanation.)
Mea culpa. Mea culpa. Mea maxima culpa.
We owe you a beer…