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    Published on: November 21, 2003

    One of the things we're always trying to figure out at this time of year is what wine we'll be serving with Thanksgiving dinner.

    At the moment, we're leaning toward a 2001 Pedrocelli F. Johnson Pinot Noir that we tasted the other night…a nicely balanced, full-bodied wine that we think will be nicely paired with turkey.

    MNB user Marv Imus wrote to us the other day, suggesting:

    How about a round of “your views” on what MNB users are drinking for Thanksgiving ? Ask them and they will tell ALL ! We’re having a bottle of MacMurray Ranch Pinot Noir ’00 and Beringer Knights Valley Cabernet ’00 !

    Okay, Marv has started the ball rolling…tell us what you'll be drinking next Thursday, and we'll share it with the MNB community.
    KC's View:

    Published on: November 21, 2003

    We got the following email - and offer for members of the MNB community - from one of our favorite people, Glen Terbeek, author of Agentry Agenda:

    The recent news about NeXpansion, NetGrocer, and the involvement of independents is exciting to me because it demonstrates that the "true and rationalized" shopping experience, business model is starting to emerge. As normal, this is being driven by independents who understand the shoppers and their shopping needs, and the real economics of the industry.

    The combination of the above mentioned technology enabled services combined with the value added, local store could offer the shoppers a complimentary real and virtual shopping experience versus the overlapping and competing shopping experiences offered today. Just think, a smaller store creating value and loyalty through services, solutions, ideas, and a convenience selection of core items; leveraged by a "Frictionless" process that lets any item the manufacturers offer available for home delivery or pick up at the value added store. The ROI would be significantly better for everyone.

    The adaptation of this new model will accelerate when someone like SuperValu or C & S Wholesale, or even a nonfood fulfillment service provides the pick, pack, delivery service (to store or home) for a fee, and the manufacturers own the product until it is delivered. This would enable the manufacturers to reach all their targeted consumers with a "Frictionless" process aided by the retailer, regardless of how small the market is; while it enables the retailer to serve their customers by making all items available. Accordingly, the retailer would be compensated for virtual sales with a connection fee, not a gross margin, consistent with the service they provide. Everyone is happy; Shopper, retailer, and manufacturer.

    These above mentioned initiatives provide a great opportunity to break from the old economic model and start the alignment of the new model with the realities of the future marketplace! NetGrocer and NeXpansion were a good start, it is too bad that they couldn't adapt the new economic model several years ago.

    If you would like to explore the economic impact of the above model, send an e-mail to for an Excel spread sheet pointing out the opportunity.

    You can't get these kinds of offers on the other sites…

    We continue to get tons of email about various aspects of the California grocery strike.

    One MNB user wrote:

    Safeway has been using the same excuse in all the contracts they have been negotiating. Wal-Mart!

    There are no Wal-Mart Superstores in the city of Chicago but over a year ago THAT was Safeway's reason for trying to gut our contract. Same goes for Canada and they used the same excuse in Oregon. There are 40 Wal-Mart Superstores planned for California, are they there YET?

    Have they caused Safeway to lose any profits, YET?

    It almost seems instead of coming up with new innovative ideas to entice customers into their stores, to generate new business, these major grocery chains would rather just take away from the workers. They have time to think of ways to compete but aren't willing to do that.

    "We won't try to compete. We'll just take away from our workers and bring them down to what Wal-Mart employees make!"

    We've been so critical of companies like Safeway for not being prescient in their long term strategies that we would find it difficult to criticize them for not preparing for Wal-Mart's arrival.

    That said, we're pretty sure that it is counter-productive to lay all the blame at the union's feet.

    Another MNB user wrote:

    Each day when reading about the SoCal Strike update, I must plow through the same last paragraph that indicates that the impending arrival of Wal-Mart Supercenters is the driving force behind this polarizing strike. Wal-Mart has nothing to do with it from either side of the fence. The Labor Unions don't want to admit to the rank and file that they will have to absorb higher health care costs. Welcome to the real world. Most companies have absorbed the majority of increases over the past few years, but are unable to keep pace with 40-50% increases. From the retailer point of reference, their implied rationale is the wage freeze and passing along of higher health costs will help them compete more effectively with Wal-Mart. I don't believe this to be the case, what I do believe is it will help them maintain their current margins and protect their stock prices. The biggest single reason Wal-Mart has lower prices is that they built a business model based on selling product. If you asked any Manufacturer today if they had $100,000 in new trade, who would they spend it with, the answer would be Wal-Mart and the other Retailers who effectively and efficiently pass these dollars through to reflect in productive promotions. Retailers who continue to believe there is an endless pot of money at the end of the Manufacturer Rainbow are dreaming. ROI is driving these investment dollars. Retailers who function this way are winning with the manufacturers and the consumers.

    Both sides need to wake up, if not, the workers will be working at Wal-Mart with no health care for 6 months, with in the next few years. Those winning the battle with Wal-Mart are developing an effective point of difference, not price.

    If the argument here is that even if the unions make major concessions to management, the chains will use the savings to shore up their bottom lines as opposed to making the very real changes needed to be long-term competitive with Wal-Mart, we think that is a position that seems eminently reasonable.

    Not that such a decision by the chains would be reasonable. Far from it.

    We agree that both sides have to wake up and reinvent the labor-management relationship…but we believe that they are so busy refighting old battles that nobody is thinking that way.

    By the way, as a point of interest, the reason we include much of the same information about the strike's background with each strike story is that we need to be cognizant about the new users we get each day.

    MNB user Al Kober had another perspective:

    One of the things that the strikers are not taking into consideration is the issue of case ready meats. As happens when meat cutters go on strike, the retailer fills in with case ready meats. The longer the strike continues the more retailers and consumers get used to the case ready, and the more the retailers realize that they may not need those meat cutter even when the strike is over. This looks like it is the "hill to die on" for both sides as the issue of health benefits and wages will become even more critical for the success of "Regular" retailers in the light of Wal-Mart's plans to take over the world.

    Reaction from an MNB user to Coors' announcement of a new, low-carb beer launching next year:

    I would think by next March, Coors is running the risk of an new "fad beer" being all the rage and missing the boat....

    A number of MNB user have opinions about the KFC "fried chicken is healthy" argument:

    • It's stunts like this that make me wonder about personal responsibility
      versus corporate responsibility when it comes to obesity.

    • You mean fried chicken ISN'T healthy for me? Wow, I'm shocked! I guess you'll be telling me next that the triple cheeseburger with mayo I had for lunch is bad for me as well.

    • Have to roll my eyes over the FTC’s investigation of KFC. I saw the commercial and thought it was pretty funny. All they were pointing out is that you can get fried chicken that’s all white meat. The “health claims” were tongue firmly in cheek.

    We got the following note about the spread of obesity beyond US borders to other countries around the world:

    Thought we wanted to spread Democracy around the globe, not supersized fries and thighs.

    We got the following email about our story about the FDA reconsidering food label content:

    I can only assume that the current standard of stating figures 'per serving' were designed to apply to most people. If we could stop eating more than one serving the current standards are just fine. I don't care about the nutritional information for a large bag of potato chips if I'm just eating a serving. If I'm going to eat a large bag of chips myself, then I probably also don't 'care' about the 'nutrition' at all, I'm going to eat it anyway.

    My vote goes to changing eating habits not labels, on this one.

    Another MNB user wrote:

    We have experienced label revisions in the past for the purpose of providing better information for the consumer. However, to make a label change requirement from "serving size" to the "entire package" is not going to make a difference in consumer eating habits. Consumers have to make a choice as to what they will consume and a label change to "entire package" is not going to reduce obesity. We have to depart from the idea that a government label regulation change will cause consumers to be more concerned with nutrition. Instead of spending millions of dollars on a label change, the FDA should create a campaign to educate consumers on what constitutes good nutrition.

    The most significant damage to the consumer by changing the label will be the increased cost manufacturers will pass on to the consumers.

    We wrote the other day about what we've been doing at home to try and improve our kids' eating habits, and one MNB user responded:

    Good for you! Kids learn eating habits from their parents – whether those habits be good, or bad. I applaud you for exerting your parental authority and setting a good example for your kids. While they may still eat junk at school or at a friend’s house, at least they will learn good habits at home. If all consumers learned that you can’t eat the junk if you don’t keep it in the house, we might make some progress against the spread of obesity.

    And finally, there was an MNB user the other day who questioned how fair and balanced MNB is. (We've actually never claimed to be fair and balanced…just occasionally open-minded.)

    MNB user Ron Cook was kind of enough to leap to our defense:

    One of the major attractions to your site is the fact that after presenting news you offer opinion and allow readers to offer opinion.

    To further speculate that any major "fair and balanced" news provider (place network letters here) is actually fair and balanced is absurd. Keep up the good work and the opinion from all parts of the country and both sides of the fence.

    We'll do our best…
    KC's View:

    Published on: November 21, 2003

    • Williams-Sonoma Inc. , the upscale housewares retailer that also owns the Pottery Barn chain, posted chains third quarter net income of $23.9 million, compared with $15.1 million in the year-ago period.

    KC's View:
    This is interesting because it reflects the nesting instinct that still seems to be alive and well in America. If people are willing to spend more on housewares and homewares that they perceive raise their quality of life, perhaps it is time for supermarkets to take the hint.

    Published on: November 21, 2003

    • Interesting piece in The Wall Street Journal this morning detailing Wal-Mart's move to electronic data interchange (EDI) between it and its suppliers.

      "Today, more than 98% of Wal-Mart's EDI exchanges with suppliers are done over the Internet using AS2, a software package from Isoft Corp., Dallas, that suppliers must purchase and install if they wish to continue selling to the chain," the WSJ reports. "The change at Wal-Mart underscores the way the Internet and simple off-the-shelf business software are overhauling the retail-distribution system, making transactions cheaper and faster for both retailers and their suppliers. With razor-thin profit margins that= recently have been pressured further by deflationary prices and rising costs, these industries find saving even a few hours a day and a few thousand dollars a month important to their bottom lines."

    • The Financial Times reports that CVS Corp. and buyout firm Kohlberg Kravis Roberts (KKR) have indicated their interest in bidding or all or part of JC Penney's 2,700-store Eckerd drugstore chain.

      Also expected to make a bid is Canadian drugstore chain Jean Coutu.

    • The American Veteran Awards (AVA) announced that Wal-Mart Stores will receive its "Corporate Patriotism Award" sponsored by the Employer Support for Guard & Reserve (ESGR), given annually to a company that "exhibits exceptional support and dedication to the ideals of AVA in raising awareness and support of U.S. service members and their families."

    KC's View:

    Published on: November 21, 2003

    The Boston Globe reports this morning that going against the prevailing winds, the Group Insurance Commission in Massachusetts has recommended against importing inexpensive prescription drugs from Canada for state employees and retirees, even though such a move could save the state more than $10 million a year.

    The reason? The commission, which administers health insurance for state employees and retirees there, said the potential savings would not be worth the liability risks and the disruption to existing insurance contracts.

    The actual savings are not as high as believed, the commission said. About $9 million would go to the system's 250,000 employees and retirees in the form of waived co-payments, giving the state net savings of just $1.4 million.

    However, this hardly kills the reimportation trend. States such as Minnesota, Illinois, Iowa, and Wisconsin still are considering getting prescription drugs from Canada as a way of cutting significant budget gaps.
    KC's View:

    Published on: November 21, 2003

    Carrefour, the French retailer that trails only Wal-Mart in terms of size and volume, reportedly will open 200 hypermarkets over the next three years.

    In 2003 alone, the company has spent close to $3 billion (US) opening 55 hypermarkets, more than 130 supermarkets and some 450 discount outlets.
    KC's View:

    Published on: November 21, 2003

    Safeway Plc, the UK supermarket retailer that has seemed forever on the verge of being sold, reportedly has received bids for 39 of its stores that exceed the equivalent of $923 million (US). In addition, the company says it has gotten inquiries about 13 other units likely to be sold.

    The company has been told by UK regulators that if it is to be sold to William Morrison Supermarkets, it must divest 52 units in order to keep the competitive playing field reasonably even. Morrison, in fact, is the only UK chain that has been cleared by the government to make a bid for Safeway; Tesco, Wal-Mart, and Sainsbury all were denied the right to bid, though one or more of them could pick up one of the 52 divested stores.

    Morrison, which made an initial $4.9 billion (US) bid for Safeway 10 months ago that instigated this whole feeding frenzy, is expected to make a new, higher offer for Safeway before the end of the year.
    KC's View:
    This thing has been going on for almost a year, and we can't wait to get the thing concluded.

    Both Morrison and Safeway need to bring this to some sort of conclusion. While Morrison has been showing growth, Safeway Plc reported that its most recent pre-tax, pre-exceptional profits were down 8.6 percent on sales that rose 1.2 percent.

    It's time to get back to business without the distractions of acquisition frenzy.

    Published on: November 21, 2003

    The Wall Street Journal reports this morning that according to a new study by NPD Group, "sales of food-related toys and kits climbed seven percent in the last year to about $110 million."

    Some interesting facts about the trend:

    • The surprising growth isn’t just coming from girls; it also is being fueled by boys, who seem to attracted by "the Iron Chef" on the Food Network.

    • Analysts believe that "guilty parents" are helping to prod their children into cooking, perhaps thinking that if they play their cards right, the kids will have dinner ready for them when they get home.

    • Cooking classes for kids seem to be increasingly popular.

    KC's View:
    We recently picked up an Emerilware Cooking Set for our nine-year-old daughter, which includes a two-quart sauce pot, Emerilware Apron, three junior size non-stick tools, "Baby Bam" Essence, and a "There's a Chef in My Soup " Cookbook.

    She loves it, and we're doing some cooking together.

    This is a great opportunity for retailers, who ought to be targeting these kids with laser-like precision. They’re the future.

    Published on: November 21, 2003

    The Dallas Morning News reports that Wal-Mart is testing a new in-store coffee shop concept, Kicks Coffee Café, that is designed to compete at a lower price point with both freestanding Starbucks and the Starbucks found inside SuperTarget stores.

    Kicks Coffee Café is owned in part by Benny Medina, co-creator of the sitcom Fresh Prince of Bel-Air, who helped convince the retailer that it needs to compete in this arena.

    The test is being conducted in a Plano, Texas, Wal-Mart Supercenter, and is selling coffee for $1.25 a cup, compared to $1.40 a cup at Starbucks. The store also sells includes ice cream, fruit and sandwiches.

    The test is slated to be expanded to four Dallas/Forth Worth Wal-Mart locations early next year.
    KC's View:
    Almost certainly a good move for Wal-Mart, though we don't think the Bentonville Behemoth should consider getting its stores into the "third place" business. That would be stretching credibility.

    Published on: November 21, 2003

    Newsday reports that the New York metropolitan area's largest supermarket chains - including A&P, ShopRite, Pathmark, and King Kullen - have reached a contract accord with some 4,000 employees represented by the United Food and Commercial Workers (UFCW) union. The old contract expired about a month ago, but the union never went on strike.

    While neither side would discuss the settlement, sources told Newsday that the union had prevailed in the battle over health care costs - the chains wanted employees to contribute to their benefit plan, but the new accord reportedly does not require such contributions.
    KC's View:

    Published on: November 21, 2003

    R. Randall Onstead Jr., the just-named president of Safeway-owned Dominick's Finer Foods, told Chicago reporters yesterday that when the company resumes negotiations with the United Food and Commercial Workers (UFCW) there, it will still be seeking the kinds of cost-saving concessions that it was looking for when acrimonious negotiations with the union led to Safeway's decision to sell the company.

    That sale, of course, never was completed, and Safeway has said it is because bidders couldn’t come to an agreement with the union.

    Onstead said that he will respond to union suggests for how costs can be cut, and also plans to close between 12 and 20 stores. On the bright side, he said, the company is beginning to reintroduce local products that it believes will bring shoppers back into its stores.
    KC's View:
    Onstead seems to believe that because he has seen the chain that his family once owned, Texas-based Randalls, lose market share once Safeway acquired it, he has an understanding of how to turn Dominick's around. (Of course, that begs the question of why Safeway didn’t put him back into Randall's…) But we'll accept on faith Onstead's belief in his own abilities. He needs time to prove himself in a tough situation.

    The bigger issue may be whether Safeway will allow him room to maneuver. We have a lot harder time accepting that on faith.

    Published on: November 21, 2003

    A federal mediator said yesterday that negotiations between the United Food and Commercial Workers (UFCW) and representatives of California's three biggest food retailers will resume tomorrow, 10 days after they were suspended after just a couple of days of talks, and six weeks after the strike/lockout began.

    "This is a further effort at resolution of the issues," said Peter Hurtgen, director of the Federal Mediation and Conciliation Service. He said that the talks would continue "as long as is appropriate."

    Meanwhile, a UFCW-supported consumer lawsuit against the three chains alleges that an agreement among Safeway, Kroger and Ralphs insures that if any of the chains sees a business improvement during the strike, it will share the revenue with the other two companies.

    The suit says that this mutual aid pact violates California antitrust law, seeks to have it nullified, and is looking for unspecified damages.

    The Los Angeles Times reports that none if the chains will discuss the arrangement in detail, except to say that the deal is permissible by law.

    Compensation and health care costs are at the core of the dispute between some 70,000 employees and Safeway (which owns Vons), Kroger (which owns Ralphs) and Albertsons. Employees walked out of Safeway's Vons stores back on October 11, and then were locked out of Ralphs and Albertsons units.
    KC's View:
    They ought to lock all these folks in a room with a thousand bottles of water and no access to a bathroom…and tell them they can't come out until they come to a deal.

    What the hell. Nothing else has worked.