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    Published on: November 25, 2003

    In Monday Night Football action between two of the NFL's most disappointing and underperforming teams, the Tampa Bay Buccaneers defeated the New York Giants 19-13.
    KC's View:

    Published on: November 25, 2003

    We got several fascinating emails about yesterday's story (taken from SupermarketGuru.com) about the possible mainstreaming of stomach stapling surgery, including this one from a member of the MNB community who had a personal experience with the procedure:

    My wife had gastric bypass surgery in December 2002. In 2003, she has been hospitalized 3 times for dehydration and malnutrition and had to go through an additional surgery related to her original operation. She has suffered from loss of her hair, loss of muscle tone and is currently bedridden with an IV feeding her. She went from a stomach the size of a deflated football (normal) to one the size of a golf ball. Medical costs have well exceeded $100,000 for 2003. The surgeon who performed this operation had little understanding of basic nutrition and, even after the second operation (when she weighed 120 lbs.) insisted she follow a high protein low carb diet that was designed for someone who needed to lose 150 lbs.!!! This is essentially a production line concept with little or no follow-up where the patient is left to fend for themselves if there are complications. I am convinced she would have died had it not been for very aggressive follow-up on our part, beginning with confronting a surgeon who informs us that he does not make mistakes and convincing him that perhaps he should look again.

    Bottom line, people can and do die from this operation. You see the success stories but it would be very, very difficult to track down those who don't do well as they tend to fall through the cracks.


    Heart-wrenching. And worth considering for people who are pondering the surgery. Of course, there is another side, as one MNB user linked the surgery story to another piece that ran yesterday:

    Krispy Kreme profits are up 43%, and over 100,000 gastric bypass surgeries are being performed yearly. Golly, do you think there might be a connection?

    All kidding aside, why the Supermarket Guru is so concerned about the proliferation of the surgery? The screening process is extensive, intense, expensive, and candidates are not considered for the surgery unless they have an absolute acceptance of the life-long commitment to cleaner living.

    While the morbidity numbers are enough to make anyone pause, is it better to live with coronary disease, diabetes, or stroke?

    I thank God this surgery is available for those who need it. I wish my father could have had it...maybe he'd still be here, buying fewer highly processed foods and more natural and organic perishables. Wait, it couldn't be about the potential cost to the grocery industry, could it? Nah, that would be shallow.


    We can tell you without any reservation that the SupermarketGuru.com piece was written without any thought of trying to preserve sales for the grocery industry. It was written out of genuine concern about consumer health and the worry that this could become an assembly line surgery with greater risks than people realize. (Our first letter today suggests what can happen under the wrong circumstances…)

    MNB user Phil Smith chimed in:

    "Our revenue is down; let's raise prices!"

    "Our business did not return desired financials; let's cook the books!"

    What do these have in common with Stomach stapling?

    Oblivious to the problem.

    And the punchline: "I have a fat gene and can't help it"

    Just wait, it will happen.





    Fascinating letter from MNB user John B. Moss:

    You quote a report (in the 11/24/03 MNB) from the Associated Press regarding 'a pair of pension funds have sued Safeway management and board of directors, charging that the company "has been decimated by rampant conflicts of interest, managerial bungling, deceit and greed"'.

    Earlier this year, terminating on 9/26, I managed a group of salaried IT support employees responsible for corporate warehouse distribution issues rising from IT-related causes: job scheduling, bad data, data timing integrity, that sort of thing. We were on call 7*24*365, working a normal 40 hour week and in addition all 11 of us were available at a moment's notice should there be a support issue. An estimated average of our ACTUAL working hours would approximate 65 hours a week. We were efficient, effective - and it seems, our annual salaries were TOO costly. We were outsourced. Offshore outsourced. In a quiet and unannounced manner, one morning we reported to work and heard - "Sorry, you aren't needed any more".

    We were expendable, in exchange for less costly offshore resources. And you reported this at the time, near the end of September/beginning of October, so this is 'no new news'. However, we thought it strange at the time that the Safeway Manager spearheading this structural change within Safeway was also the Chairman of the Board of Directors of the Philippine company newly tasked with taking over our job responsibilities. It seemed that we were being released so that this individual's company - and pockets - would benefit.

    We only saw a little of the 'big picture'. There were hundreds of positions 'let go', and many more employees were directly effected than the dozen or so I'm referring to here. But it DID seem that the personal care for quality employees was less important than the bottom line - in someone else's trousers. Am I bitter? Not really, I cannot afford the expense of rancor. But I CAN express myself, tell it like I saw it, and it is fair to say that MANY Safeway employees have been embittered by the offshore outsourcing experience and that the morale situation hasn't improved.

    Incidentally, and a far greater concern than the simple expediency of having one's job replaced by someone else, is the recognition that money which stayed in the American economy and cycled here is now being sent offshore, effectively lost to America. I paid taxes, fueled my car and warmed my home, bought newspapers, got haircuts, ate at restaurants, shopped in Sears and Safeway by buying my groceries there. I bought at local stores, contributed to the church, and political campaigns, and spent my salary here, locally, supporting the merchants who depend on my dollars. No more. Not with Safeway dollars. If I were employed at Safeway, as are the folks on the picket lines in Southern California, I'd want a better accounting of how dollars are being spent. Rather than limit my argument to continued health and welfare benefits, in addition I'd want to see where the dollars are being spent that (apparently) are too costly to provide me with what I currently earn and still make a profit. Wal-Mart? The enemy isn't Wal-Mart, it is using management techniques and structure such that corporate policy can be understood, effectively applied, and consistently so throughout the entire enterprise.





    We got a couple of very different responses to yesterday's piece about Lowe's Home Improvement Centers greater appeal to women, and how it is helping the chain compete with Home Depot.

    MNB user Bob Vereen questioned the original report, which was published by Bloomberg:

    The Bloomberg report is not quite up to date. About two months ago, consumer research conducted by a neutral third party (which I don't remember) found that a higher percentage of women preferred Home Depot to Lowes, surprisingly, since some industry observers have said what Bloomberg reported. Turns out it "ain't necessarily so."

    If Indianapolis is typical (which I am sure is true), the new look of Depot's major appliance section is better signed and more informative than that of Lowes (or Menards, the other big home center chain operating here.) Under Bob Nardelli's leadership, Depot has been busy upgrading its stores with better signing ala Lowes. Its Color Center is especially well done. Some of the stores even are downplaying the traditional orange on warehouse racking.

    I interviewed founder Bernie Marcus last June, and he says he thinks Depot can double its sales - lots of room to go with new retailing concepts.


    However, MNB user Jerry Gelsomino had a different perspective:

    I've worked with the Lowe's stores to help them "Improve Home Improvement" and it's a classic marketing story. When a retailer become so heavily skewed towards one gender, or lifestyle of customer, a door is open for a competitor to strike an opposing chord. In this case, the industry (home improvement) also changed. You may also point to the show "Home Improvement" as a satire on we men can get in trouble with power tools in our hands. Can we get in the same trouble with pots and pans?




    We got a terrific - and pithy - response to yesterday's story about the growing popularity of starvation diets:

    Once upon a time anorexia was a bad thing.

    And still is.




    MNB user Jerome Schindler responded to an email yesterday that supported the notion that the FDA ought to change food labeling regulations so that the nutritional information for entire packages - not just serving sizes - is included:

    Currently, FDA regulation 21 CFR 101.9(b)(6) provides that "Packages sold individually that contain 200% or more of the applicable reference amount may be labeled as a single serving if the entire contents of the package can reasonably be consumed at a single eating occasion."

    All FDA needs to do is change that "may" to "shall". That makes sense, but it makes no sense to label a 64 oz bottle of soda or a 16 oz box of cereal package the same way.
    KC's View:

    Published on: November 25, 2003


    • Campbell Soup Co. reported first quarter earnings of $211 million, compared with $161 million in the year-earlier period.

      Net sales rose 12 percent to $1.91 billion.



    • UK retailer Tesco announced this morning a third quarter sales increase of 17.5 percent, with UK sales up almost seven percent, and a 31 percent increase in foreign sales.

    KC's View:

    Published on: November 25, 2003


    • Kroger has recalled Deli Chef Sour Cream & Cheese Macaroni Salad from its stores in southern and Midwestern states after a sample tested positive for listeria.

      The company said it has not received any customer complaints of illness related to the product.

    KC's View:

    Published on: November 25, 2003


    • The San Francisco Business Times reports that Safeway.com has doubled its online grocery business in the San Francisco Bay area, and expects to achieve that level of growth next year as well.

      While it will not divulge specific figures, the company also said that online delivery in its eight existing West Coast markets to grow more than 40 percent next year.

      The company ascribes its growth to the shift from a warehouse pick model to using personal shoppers to pick product off store shelves - a model that it learned from Tesco.com, which owns 3 percent of Safeway's online business, GroceryWorks.



    • A new Shop.org/BizRate.com survey commissioned by the National Retail Federation (NRF) suggests that 67 percent of online retailers are optimistic about this year’s holiday season, up from 60 percent last year. According to the survey, 62 percent of online retailers have experienced revenues more than 25 percent higher than last year at this time and almost a quarter of retailers have experienced more than 80 percent growth.

      The survey also revealed that 31 percent of consumers are planning to spend more online this year and 45 percent plan to do a higher percentage of their shopping online than last year.



    • Safeway.com has introduced a new program designed to offer cheaper delivery to people willing to show greater flexibility in scheduling.

      In an email to its Internet customers, the chain wrote that "when you select a new 4-hour delivery slot, we will bring all your groceries to your front door for only $2.95."

      The available windows are 10 a.m. to 2 p.m., or 5 p.m. to 9 p.m.

      The usual cost of delivery during a two-hour window is $7.95 for grocery orders of less than $150 and $3.95 for orders of more than $150.



    • The US Census Bureau announced that the estimated US retail e-commerce sales for the third quarter of 2003 were $13.291 billion, an increase of 27.0 percent from the third quarter of 2002. This compared to total retail sales for the third quarter of 2003 of $872.5 billion, an increase of 6.1 percent from the same period a year ago.

    KC's View:

    Published on: November 25, 2003

    A new study released by the Natural Marketing Institute (NMI) suggests that Hispanic consumers are significantly more interested in natural and organic products than the general population, more likely to shop the natural products channel, and more likely to want their stores to carry natural and organic products. In fact, despite higher price sensitivity, Hispanic consumers actually spend more than the average consumer on healthy, organic and natural products.

    The implications of this higher interest in the category, according to NMI president Maryellen Molyneaux, is that manufacturers and retailers that cater to it are positioned to generate greater sales since the US Hispanic population is expected to top ninety million by 2050.
    KC's View:
    And all you have to do is stay in business until 2050 to take advantage of it…

    Just kidding.

    Even though NMI has a vested interest in the results of this study, we'll accept the basic accuracy of the results. Like most things, however, it made us think about the possibility that Wal-Mart might identify this category as ripe for entry.

    Could Wal-Mart enter the health and wellness segment in a big way and drive prices down in the same way that it has in so many other categories? Anything is possible…

    Published on: November 25, 2003

    President George W. Bush won a victory in the US Congress, as the legislative body agreed to his plan to revamp the nation's overtime pay policies.

    The Bush plan would allow businesses to classify workers as administrators, professionals or other exempt employees, and therefore deny them eligibility for overtime pay that is usually time-and-a-half after 40 hours of work in one week.

    While organized labor has objected to the reclassification, the administration says it in fact will make many low-income workers eligible for overtime.
    KC's View:

    Published on: November 25, 2003

    CNET News.com reports that Wal-Mart plans to sell notebook computers under its own label during the first quarter of 2004, assuming it can reach a deal with a computer manufacturer.

    Wal-Mart would not confirm the plan, saying only that it constantly evaluates new product possibilities.

    The news service notes that private label computers have not been generally successful, with retailers as varied as CompUSA and Best Buy trying and failing.
    KC's View:
    The difference is that Wal-Mart probably will be selling the laptops for about $99…

    Published on: November 25, 2003


    • Ukrops reportedly has decided to delay its plans of opening a spa/fitness club/doctor's office in a new store scheduled to open next week because deals could not be reached with the proposed tenants. However, the company is said to be seeking new occupants for the space so the services can still be offered.

    KC's View:

    Published on: November 25, 2003

    The Wall Street Journal reports this morning that Visa USA and MasterCard International are both negotiating with the nation's largest retailers, hoping to strike a deal that would result in lower transaction rates on purchases made with debit cards.

    It is about six months ago that, facing an antitrust suit brought by Wal-Mart and four million other retailers over the card companies' debit card policies (forcing retailers to take them if they wanted to take charge cards), Visa USA agreed to a $2 billion settlement, and MasterCard made a $1 billion settlement.
    KC's View:

    Published on: November 25, 2003

    The United States Congress has agreed to delay the implementation of most Country of Origin Labeling (COOL) regulations for two years, bowing to pressure applied by the Bush administration and many segments of the food industry, which maintained that complying with the rules would have cost billions of dollars, and would have translated into higher consumer costs.

    The delay, according to a report from the Associated Press, applies to meats, produce and farm-raised fish - but not to wild fish, which will see no such delay. The reason for the different deadlines seemed largely political - Sen. Thad Cochran, R-Miss., favored the delays because his home state has a major catfish farming industry and the new labels were [perceived as raising prices without benefit. Wild fish, on the other hand, are believed to benefit from the labeling - which is why Senate Appropriations Committee Chairman Ted Stevens, R-Alaska, favored the regulations - his state is a major source of wild salmon.

    The new COOL regulations were created by the 2002 farm bill, though the House of Representatives last summer voted to block their implementation. The Senate had, until now, not shared that opinion.

    The House voted last summer to block the labeling requirements from taking effect, which they were to do by September 2004. But the Senate, led by some Western lawmakers, voted to keep the labels on track.

    Senate Minority Leader Tom Daschle (D-South Dakota) accused the Bush administration of delaying implementation until after the 2004 presidential election because it did not want to alienate business and knew that consumers want better labeling of food products.
    KC's View:
    The ultimate question is how consumers will respond to this decision. We continue to believe that the industry underestimates consumer sentiment in favor of more comprehensive labeling policies and that it ignores these concerns at some peril.

    Published on: November 25, 2003


    • The state of Ohio has decided that Kroger employees there who have been on strike since October 13 are not eligible to receive unemployment benefits because they were not locked out by the company.

      In West Virginia, on the other hand, the state has ruled that Kroger employees are entitled to unemployment benefits because the company decided to close stores affected by the strike.

      Some 3,300 members of United Food & Commercial Workers (UFCW) in West Virginia, Kentucky and Ohio went on strike on Oct. 13 when their contract expired and talks broke down over salary and health benefits.

      Kroger said it plans to appeal the West Virginia ruling. But not, presumably, the Ohio decision.



    • The Toronto Globe and Mail offers details of a labor dispute affecting 15 Loblaws stores in Newfoundland.

      According to the report, Loblaws locked out some 1,600 employees after the workers started rotating walkouts to protest a management demand for wage and benefit concessions.

      Loblaws believes it needs such concessions in order to compete with non-unionized retailers such as Wal-Mart, and already negotiated a deal that it perceives as being more in its own interests with the UFCW in Ontario. However, the Newfoundland situation is complicated by the fact that the grocery workers there are represented by a different union, the Canadian Auto Workers, which to this point is a little more militant.

    KC's View:

    Published on: November 25, 2003

    The International Herald Tribune reports this morning that Royal Ahold executives are saying that as they attempt to return the company to respectability after a year in which an accounting scandal rocked its world, it remains possible that the company will sell off some US holdings to help pay off a pressing debt.

    In previous statements, the company has said that it will not sell its US Foodservice division, preferring to hold onto it until the division's value can be restored and make it more saleable.

    Bruno's and Bi-Lo are considered by analysts to be the most likely candidates to be sold.

    CEO Anders Moberg also said charges are likely to be filed against some executives at US Foodservice, where overstated earnings created a firestorm of criticism and regulatory investigations on both sides of the Atlantic.

    In other Ahold news…

    • The company said that CEO, Anders Moberg could get a 250 percent bonus this year if he reaches certain performance goals.

      Moberg's base salary is $1.2 million. The potential bonus could be as high as $2.8 million.

      There are three separate categories in which Moberg must perform: financial, strategic, and stabilization, with a variety of criteria applicable to each category.


    • Chilean retailer Cencosud announced that it will work with Capital International, AIG Capital Partners and the International Finance Corp. to acquire Ahold's Argentine Disco supermarket chain.

      The cost of the acquisition is estimated to be between $200 million and $350 million. The deal is expected to close by the end of the year.


    • Published reports say that France's Carrefour is strongly considering making a bid for at least part of Ahold's Spanish operations, which the Dutch retailer is planning to sell as part of its move to divest non-core operations.

    KC's View:
    We wonder if Ahold shareholders - already reeling from mismanagement of the company over the past year - will be sympathetic to Moberg's level of compensation.

    After all, it almost implies that if Moberg completely screws up, he still makes more than a million bucks a year…and that he gets a bonus just for doing his job right.

    Published on: November 25, 2003

    As the Southern California grocery strike/lockout drags on, there continue to be developments making the news…

    • Albertsons, Kroger's Ralphs stores, and Safeway's Vons stores announced that their stores will remain open during their previously scheduled hours, and that they have plenty of food on the shelves to cater to customers' Thanksgiving holiday needs.


    • The Teamsters union has ordered its more than 8,000 drivers and warehouse workers to honor picket lines at 10 grocery distribution centers in Southern California, which is likely to have the effect of disrupting food deliveries during one of the busiest shopping weeks of the year.


    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.

    As often is the case in these disputes, 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:
    We keep hearing from MNB users in Southern California that the stores are a lot less well-stocked than the chains would have us believe. We suspect that it probably depends on the store…but that things are only going to get worse for Albertsons, Safeway, and Kroger if the unions manage to hang in.

    And it sounds as if they will.

    Published on: November 25, 2003

    The Los Angeles Times completes its three-part report on Wal-Mart this morning, underlining the kind of scrutiny the world's largest retailer is receiving these days.

    Today's piece looks at the ongoing battles Wal-Mart has with the nation's labor unions, seen within the context of the broad impact that the company has on communities, other companies, employees, people's families - in fact, the broad economic and social fabric of the country.

    The LAT writes: "The unions and their community allies have stopped Wal-Mart in some places and slowed it down in others. They have persuaded officials in at least a dozen cities and counties to adopt zoning laws to keep out Supercenters and stores like them.

    "Homeowner groups, backed by union money, sued to stop construction of two Supercenters in Bakersfield, arguing that the stores would drive local merchants out of business. Contra Costa County and Oakland also have passed measures that could block Supercenters.

    "In Los Angeles, several City Council members are drafting an ordinance to require an examination of how large-scale projects such as Supercenters would affect the community, including the possible loss of union jobs. As envisioned by supporters, the measure would allow the city to insist on higher wages as a condition of project approval."

    You can read today's LAT article at:

    http://www.latimes.com/business/la-fi-walmart25nov25,1,3647063.story?coll=la-headlines-business


    You can read MNB's coverage at:

    http://www.morningnewsbeat.com/archives/2003/11/24.html#MNB1
    KC's View:
    This piece was an outstanding piece of reportage, and we repeat our comment from yesterday - it is worth reading whether you like the Bentonville Behemoth or not.