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    Published on: November 19, 2003

    …will return. Soon. We promise.
    KC's View:

    Published on: November 19, 2003


    • Nash Finch Company named Michael J. Lewis as executive vice president and president of retail, with responsibility for operations, retail merchandising and marketing, real estate, and construction.

      Lewis has more than 25 years of varied retail responsibility including service as Vice President of the No Frills Division for Loblaws Supermarkets, President of Willson Stationers and Division President at Scott's Food Service. Most recently, Lewis was President of Conquest Management Corporation, Toronto, Canada, a consulting firm specializing in growth strategies for retail companies.



    • UK retailer Sainsbury has named Justin King as its new CEO, replacing Sir Peter Davis, who is moving into the chairman's position.

      King formerly ran Marks and Spencer's food business and also spent seven years at Wal-Mart's Asda Group.

    KC's View:

    Published on: November 19, 2003


    • Marsh Supermarkets reportedly has started using biometric technology to prevent check-cashing fraud at nine stores in Indiana and Ohio,



    • Grocery Gateway, the Canadian e-grocer, reportedly will begin delivering office supply products from Staples as part of a new deal it has struck with the retailer. The company has a similar deal with Home Depot.

    KC's View:

    Published on: November 19, 2003


    • BJ's Wholesale Club reported third quarter net income declined to $20.4 million, compared with $23.4 million during the same period a year earlier. Revenue for the period climbed to $1.64 billion from $1.39 billion, attributed to a 6.2 percent sales increase in membership fees and an 11 percent rise in same-store sales.



    • Alimentation Couche-Tard Inc., the Canada-based c-store retailer with an expanding presence in the US, reported a 24 per cent jump in second-quarter profit Tuesday and an 18 per cent rise in sales.

      Earnings reached the equivalent of $20 million (US), up from $16 million (US) during the same period a year ago.

      Sales grew to $732.2 million (US) from $620 million (US).

    KC's View:

    Published on: November 19, 2003

    A familiar sight in many supermarket supplement aisles is a customer staring at the shelves, reading all sorts of exotic and unfamiliar names, and having absolutely no idea what most of them mean and what the products are for.

    The December 2003 issue of Men's Health magazine offers a primer that a lot of retailers could either use of model their own efforts on, as it defines in simple terms "The Top 10 Supplements For Men" (page 106).

    Examples:

      Boron protects your prostate.
      Calcium helps you lose weight and strengthen your bones.
      Chromium wards off diabetes.
      Coenzyme Q10 helps to boost energy.
      Creatine boosts muscle and memory.
      Folic acid cuts Alzheimer's risk.
      Glucosamine greases up the joints.
      Omega-35 protects the heart.
      Selenium fights off cancer.
      Vitamin E slows the effects of aging.
    KC's View:
    Wasn't that easy? We feel better just typing in the words…

    The Rodale Beat is a regular series of brief pieces that uses a number of Rodale Press magazines to illustrate just how easy it is for retailers to educate consumers about the health and wellness issues of the day. This is a perfect example of how to cut through the clutter and present user-friendly information that can be judged on its own merits.

    Published on: November 19, 2003

    In what is perceived as a preemptive strike meant to leave all other toy retailers in the dust, Wal-Mart reportedly has launched a price war in the category - cutting the prices of more than a dozen hot items so that they are significantly cheaper than the competition's.

    The Wall Street Journal reports that on one item, Hokey Pokey Elmo, Wal-Mart's price is 22 percent Lower than Toys R Us. On average, Wal-Mart's prices on certain toys are eight percent cheaper than Target's, and 12 percent cheaper than Toys R Us.
    KC's View:
    It may be about toys, but it is no game. And it explains why Toys R Us had to make some big store cuts, as reported yesterday in MNB.

    Published on: November 19, 2003

    The Boston Globe reports that there seems to be a growth in vegetarianism among six-to-seven year old children, which now is the group second most likely to give up meat after teenagers.

    However, nutritionists tell the Globe that parents of these young vegetarians need to be concerned that their children get enough high-quality protein, as opposed to being on a "bad vegetarian diet" that consists of French fries, sugary cereal, and dairy.

    "A vegetarian diet can support optimal growth," Jan Hangen, a clinical nutritionist at Boston Children's Hospital, told the Globe, but only if the child consumes enough protein and calories to grow. Hangen recommends tofu, beans, and eggs as sources of high-quality protein for meals, supplemented by high-protein snacks, such as yogurt, nuts, and even those candy-like energy bars.

    However, an organization called the Vegetarian Resource Group suggests that all vegetarian children need to do is eat a variety of healthful foods, such as whole grains, legumes, fruits, vegetables, eggs, and soy products.
    KC's View:
    Once again, this seems to us to be an opportunity, especially if this subset of the vegetarian movement really is growing. Providing good and useful information for parents with children who are considering such a lifestyle shift - or have actually made it - can be a noble pursuit.

    Published on: November 19, 2003

    The Wall Street Journal reports this morning that the Federal Trade Commission (FTC) is investigating KFC's advertising claims that fried chicken is health food.

    A new series of commercials says that if you eat fried chicken, you will be consuming less fat and carbohydrates and can lose weight and live a healthier lifestyle.

    The FTC reportedly has issued a civil subpoena to KFC asking to justify its claims.
    KC's View:
    Maybe the FDA ought to looking into what appears to be an appalling lack of knowledge about what actually makes up "health food."

    Published on: November 19, 2003

    Reuters reports that 15 Dominion stores in the Newfoundland province owned by Loblaw Cos. have locked out their employees because of what is termed a "labor disruption."

    The company did not say how many employees were involved, what they were asking for, or how long the dispute might last.
    KC's View:

    Published on: November 19, 2003

    The Los Angeles Times reports this morning that a Southern California union leader is accusing Kroger, Safeway and Albertsons of stalling any return to negotiations.

    Rick Icaza, president of the United Food and Commercial Workers (UFCW) Local 770 in Los Angeles, said he was told that talks with a federal mediator would resume this week; they broke off last Wednesday after the two sides convened for the first time the strike/lockout began. But no follow-up talks have been scheduled.
    .
    "We want our members and the public to know that we are willing, able and ready to negotiate around the clock to end this protracted labor dispute," Icaza said in a statement. "The fact that we have not heard from the mediators leads us to believe that the employers are refusing to meet."

    Neither the mediator nor the three chains would comment on the charge.

    It was on October 11 that union members of the UFCW walked off the job at Safeway's Vons and Pavilions units, followed quickly by a lockout of union employees at Kroger's Ralphs units and Albertsons' stores, in what was termed a "show of corporate solidarity."

    The face-off is over the union's desire to preserve or improve current wage and benefit packages, while the chains are looking for a wage freeze, cuts to health and pension benefits for current employees and a substantially lower wage and benefit package for new hires.

    Much of the conflict is being driven by the arrival of new Wal-Mart Supercenters, which are non-unionized and therefore boast lower cost structures, and therefore lower prices.
    KC's View:
    It's called hardball. And we keep thinking that there is no end in sight here.

    Published on: November 19, 2003

    The Detroit Free-Press reports this morning that a new civil suit has been leveled at six former Kmart executives, accusing them of essentially bleeding the company dry for perks, loans and bonuses even as it was teetering on the edge of bankruptcy. The suit says that these executives cost Kmart more than $1 billion before the January 2002 bankruptcy filling.

    According to the Free-Press, the suit alleges that former CEO Chuck Conaway expanded the company's private jet fleet from three to six, hired a dozen pilots and then used the fleet for personal family trips. Former company president Mark Schwartz is said to have charged the company for a new fence and gate as well as more than $2 million in moving expenses; in addition, Schwartz is accused of authorizing more than $100,000 in nanny payments for some company executives.

    And Kmart's former executive vice president and chief supply chain officer, Anthony D'Onofrio, according to the paper, "had Kmart pay for his apartment, a Jaguar, food for a year, $15,000 in dental work for his wife and gifts. He also is accused of taking a $12,000 payment from one vendor and accepting a trip to Asia for him and his girlfriend from another vendor."

    The civil suit was filed by the Kmart Creditor Trust in Oakland County Circuit Court.
    KC's View:
    Sounds like the only supply chain that D'Onofrio, Schwartz and Conaway were interested in was the gravy train that kept dropping goodies at their doors.

    Forget civil reparations. The better question is whether these guys will burn in hell.

    Published on: November 19, 2003

    The Cincinnati Enquirer reports that privacy advocates continue to criticize Procter & Gamble's efforts to put Radio Frequency Identification (RFID) tags on all its products, claiming that "information on individual buying patterns could be shared with marketers or government."

    The new objections are being raised because of the revelation more than a week ago that a Tulsa Wal-Mart worked with P&G to conduct a study about RFID tags earlier this year - a study it hoped would not be made public.

    Shelves in a Wal-Mart in Broken Arrow, Okla., were equipped with hidden electronics to track the Max Factor Lipfinity lipstick containers stacked on them, according to the report.

    "Not only would they be reading who buys what, but also who buys which one," Katherine Albrecht, founder of activist group Consumers Against Supermarket Privacy Invasion and Numbering (CASPIAN). "It doesn't matter so much with a can of Coke, but then we start talking about things like a pair of athletic shoes, where it starts to matter a great deal more."

    Retailers and manufacturers, of course, believe to varying degrees that RFID will help them smooth the supply chain.
    KC's View:
    We tend to go back and forth on the privacy issue. We believe that there's nothing wrong with consumers being vigilant about privacy concerns, though we don't worry a helluva lot about institutions tracking products into people's houses and onto their persons.

    The industry does tend to marginalize CASPIAN, believing that it is a fringe organization that doesn’t represent mainstream concerns. We're not sure that is a smart idea…fringe organizations do have this surprising ability to attract mainstream attention, and the industry needs to be forthright and candid in dealing with the issues.

    Published on: November 19, 2003

    Wal-Mart Stores announced yesterday that it has created a new Office Of Diversity, announced a new Office of Diversity, reporting to Wal-Mart Vice Chairman Tom Coughlin, and serving "as a focal point for all of Wal-Mart's diversity initiatives, including employment practices, supplier relations, and community outreach."

    Named to head the office was Charlyn Jarrells Porter, an attorney who began her career prosecuting crimes against women and who has been with the company for more than a decade. Porter most recently ran human resources for the company.

    "Diversity doesn't just happen," said Wal-Mart CEO Lee Scott. "Success in this area requires us to approach it the same way we run our stores -- with focus, energy and enthusiasm. Just saying we are committed to diversity is not enough -- we must put in place the right systems, processes and leadership to make it happen."

    Wal-Mart also announced that Esther Silver-Parker will join the company as Vice President of Diversity Relations, effective December 1. She is currently AT&T's Vice President of Corporate Affairs and Corporate Citizenship. In this role, she leads AT&T's Foundation and corporate social responsibility programs, including diversity, philanthropy, community affairs, and employee volunteerism.
    KC's View:
    Cynics will say this is too little, too late, and that it is window dressing to improve Wal-Mart's image.

    We would prefer to think that Wal-Mart has recognized that there is a flaw in the system and is making a good faith effort to correct it. We've never met either of the women who have been drafted to lead Wal-Mart's diversity efforts, but neither sounds as if they would have much patience with window dressing and matters of image.

    Published on: November 19, 2003

    The Boston Globe reports that the representatives of the US and Canadian governments will sign an agreement that will restrict the export of lower cost Canadian prescription drugs to the United States.

    The US Food and Drug Administration (FDA) told the Globe that the two governments will work together "on enforcement issues," especially Internet pharmacies.

    The main target of the agreement is companies like CanaRx Services Inc., a Canadian mail order service that delivers prescriptions to the city of Springfield, Mass., which are then distributed to both city employees and retires covered under a city insurance program. "The FDA," according to the Globe, "has concluded it has few legal options to block CanaRx and is seeking Canadian help."

    The practice of bringing inexpensive Canadian medicines into the US - commonly called "reimportation" - has become the rage du jour lately especially among states and municipalities looking for ways to reduce their health care costs and close budget gaps.
    KC's View:
    The horse is out of the barn. The genie is out of the bottle. The toothpaste can't be gotten back into the tube.

    Choose whatever cliché you want. It seems to us that the popular mood will prevent the US government from taking too hard a line on this one.

    Published on: November 19, 2003

    The Natural Marketing Institute (NMI) has released a study focusing on what it calls "wellness polarization" - a move by consumers "away from more moderate attitudes about health and wellness and toward opposing ends of the spectrum."

    The result: people are either embracing health and wellness issues with fervor, taking a holistic approach, or they are abandoning health and wellness in favor of other priorities.

    NMI president Maryellen Molyneaux says that this polarization is caused when people feel uncertainty "caused by factors including continued national security threats, the struggling economy, and many other external events." When faced with the need to prioritize, it seems, people don't understand the meaning of moderation.

    Indeed, NMI has broken down the consumer population into give health and wellness-related segments:

    • People who choose health first across all categories (21 percent of the population, according to NMI research).


    • People who focus on health through proper nutrition, diet and exercise (16 percent).


    • People who are seeking both a healthier lifestyle - and a "magic bullet" that will help them achieve it (20 percent).


    • People who are "fence sitters," neutral on health and wellness issues (18 percent).


    • And then, there's the "eat, drink and be merry for tomorrow we die" crowd, seeking instant gratification whenever possible (25 percent of the population).



    Notably, both the two most extreme categories grew over the past year, with people choosing health first up from 17 percent to 21 percent, and the "eat, drink and be merry" group up from 20 to 25 percent of the population.

    NMI suggests that the fact that the "health first" group is now one-fifth of the general population indicates that it is now a mainstream approach to health and wellness, and needs to be taken seriously as more than just a transitory trend.
    KC's View:
    True…except that we have to note that virtually every one of these categories hovers close to the 20 percent range. While the fringe categories may be seeing the biggest shift, you still have to concede that about 54 percent of the population occupies the middle.

    The reason, we suspect, that the fringe categories are seeing such investment by consumers is that retailers, manufacturers, and the media tend to cast these issues in black-and-white terms. It's either all-natural or all-carbs or all-protein or all-whatever.

    One the one hand, many in the industry resist the notion that they should be in the education business. But then, we often latch onto the latest trend or fad because it spells fast sales.

    It would make more long-term sense to present an educated, measured approach to food and nutrition, health and wellness - and then become an active partner in the consumer's pursuit of a beneficial lifestyle.

    Published on: November 19, 2003

    Sources tell MNB that ShopRite of Oakland, New Jersey, a single-store independent owned by Bob Clare, will license the NetGrocer.com business from MyWebGrocer, which acquired the business when it bought NeXpansion.

    MNB exclusively reported yesterday that MyWebGrocer.com, which provides e-commerce functionality to brick-and-mortar supermarket retailers, acquired the assets of NeXpansion - including its NetGrocer.com business and its Endless Aisle technology.

    NetGrocer.com had been a "pure play" grocery e-tailer for a number of years, managing to survive the dot-com meltdown of several years ago and generating annual revenue of about $10 million. While MyWebGrocer now owns this business, CEO Richard Tarrant told MNB that "we will not be in the business of selling groceries. We don't have any desire to source and make margins on products."

    Instead, sources say, ShopRite will license the NetGrocer name and service the online accounts from its single store - from which it has been selecting product for online shoppers since June 2002. The costs will be minimal, beyond shipping costs, but ShopRite should be able to add NetGrocer's $10 million in annual sales to its balance sheets.

    MyWebGrocer plans to use NeXpansion's Endless Aisle technology as a complementary product offering to go along with its other Internet-based infrastructure services. "This allows us to continue to use the channel we've developed to enhance retailers' sales," said Tarrant, noting that several grocery chains had offered both e-tailing powered by MyWebGrocer and the Endless Aisle technology when they were owned by separate companies.

    New deals will have to be struck with the companies that previously offered the Endless Aisle technology to consumers.
    KC's View:
    Seems like a smart move by ShopRite, which already has the picking infrastructure and is just going to have to invest in some shipping equipment.

    This ShopRite store instantly goes from being a single-store independent to being an international company; roughly 20 percent of NetGrocer's sales have traditionally been to US embassies and global military installations.

    Published on: November 19, 2003

    While Wal-Mart has successfully moved beyond US borders to a number of countries around the world, there remain plenty of markets for it still to conquer.

    Retail Forward, the global consultancy, recently published a new study of the subject entitled Wal-Mart International: The Challenge Abroad in which it explores the Arkansas retailer's global future.

    (To get a copy of the report, go to:
    http://www.retailforward.com/freecontent/Walmart_global.asp )

    To find out more about Wal-Mart's global intentions, and the mood of the world that it no doubt wishes to conquer, we conducted an exclusive e-interview with Retail Forward's Steve Spiwak.

    MNB: Wal-Mart sometimes is criticized (as in the new Fast Company cover story) for putting an obscene amount of pressure on manufacturers, even putting them in a position where they are hooked on Wal-Mart’s size and sales...even though, in the long-term, it isn't healthy for their businesses. Does this same situation exist presently with global sourcing?

    Steve Spiwak: There is some evidence this is also occurring in some foreign markets. Importantly, Wal-Mart may be squeezing some suppliers in China, which is facing a growing domestic supply glut. As a result, large global retailers such as Wal-Mart and Carrefour are able to exert more pressure on suppliers to extract the lowest price. This is putting intense pressure on factory margins, which is forcing Chinese manufacturers to keep a lid on wages and employment levels – the same issues faced by US domestic producers. In other markets, such as Brazil and Germany, a lack of operating leverage and technical issues with its Retail Link system are dampening Wal-Mart’s ability to lean on suppliers. In Japan, where it has a minority stake in Seiyu, Wal-Mart is only now plugging in its Retail Link system and has had very little impact so far.
    MNB: Wal-Mart clearly wants to stay non-union in all the markets where it operates, despite pressure from countries like China to accept unionization. Do you see this wall breaking down anytime soon? Would it be your expectation that Wal-Mart would get unionized outside the US before it happens inside the US?

    Steve Spiwak: I would expect that Wal-Mart would become unionized outside the US long before it would in the US. Bigger unions with more backing from governments exist in some other countries, such as China. Don’t hold your breath though. The key component of Wal-Mart’s offer – EDLP – is driven in part by its control over wages. It will defend its position vigorously in court if need be. Indeed, Wal-Mart has seen some success in changing labor laws and store hours in Germany.

    MNB: How would you characterize Wal-Mart’s relationship with its employees in the various countries where it operates? Do you think it is spreading its culture too thin?

    Steve Spiwak: Wal-Mart encountered problems early on in its foreign ventures when it relied too much on expatriate management, which hurt its relations with employees and slowed cultural adaptation. Wal-Mart is taking steps to remedy this by increasing the number of local managers and bringing them to the US for intensive training to acclimatize them to Wal-Mart’s corporate culture. Wal-Mart’s recent shake up of its European management structure has cast a spotlight on this important issue. Other foreign retailers such as Carrefour, which has been a strong global player longer than Wal-Mart, have had more success recently employing local management.

    MNB: What has Wal-Mart learned from its troubles in Germany and its successes in the UK, besides the fact that the British and the Germans are as different as night and day?

    Steve Spiwak: Not only are the British and Germans different as night and day, the retail structure is as well. Wal-Mart entered both countries with an acquisition. But the German operations Wal-Mart purchased were woefully underinvested and required a significant amount of money to upgrade, which caused Wal-Mart to abandon expansion plans in that country. Overall investment in the retail sector in Germany has been hurt by government restrictions on labor deployment, prices, and new store expansion opportunities. Technological problems, supply chain issues, and management defections have also slowed progress. In contrast, ASDA in the UK was a strong performer at the start, with a loyal following and modern stores.

    The lesson: be realistic about market opportunities. Countries in the same region, such as the UK and Germany, can have vastly different market needs. Today, Wal-Mart is learning to capitalize on its opportunities in the UK through best practices and is adjusting its expectations in Germany. Indeed, Wal-Mart’s short-term goal in Germany appears to be simply to turn a profit rather than expand as quickly as possible. The retailer is applying these lessons in Japan, where it is taking a go-slow approach in order to implement its Retail Link system and learn about the Japanese market.

    MNB: You quote Wal-Mart CEO Lee Scott as saying, “Simply put, our long-term strategy is to be where we’re not.” So based on what you know of the company’s strategies and plans, where is next?

    Steve Spiwak: It’s not clear at this time where Wal-Mart will move first among the untapped major markets. It will depend on a number of factors, including the addition of new distribution centers and the existence of available acquisition targets. Spain could be the most attractive market in Western Europe right now, whereas Poland looks like the most likely candidate in Central Europe. Prospects in Russia may be dampened by the recent political turmoil. In Asia, the Philippines are an attractive market, which has relatively low retail saturation. In the short term, the most likely new country would be Peru, which is part of Wal-Mart’s bid for Ahold’s Latin American assets.

    MNB: Finally, put into context how Wal-Mart represents the US abroad. Is it perceived as part of the “ugly American” trend? Is it seen as the best of American exports? Or is there an ambivalence about the Bentonville Behemoth’s power and influence? And how does the global perception of America dovetail with and affect the global acceptance of Wal-Mart?

    Steve Spiwak: Again, this is something that depends on the country - in my view there is no “global perception” of America. There are more than six billion individuals in the world making their own decisions. And while there is much disagreement on US foreign policy right now, many global consumers prefer Wal-Mart’s offer of lower prices and good service. The global economic slowdown is helping drive that trend. In Canada and Mexico, Wal-Mart is very popular and many communities are clamoring for their own Wal-Mart store, for instance. Puerto Rico has turned in Wal-Mart’s best store productivity in terms of sales/store among the retailer’s global operations. Growth in China is accelerating. The Japanese have become more price sensitive over the past decade and will likely respond to lower prices generate by Wal-Mart’s Retail Link system. And though German performance has lagged, this has been driven in large part by a dislike for quality service and the strong hard-discount competition rather than a rising backlash against America.
    KC's View: