retail news in context, analysis with attitude

MNB Archive Search

Please Note: Some MNB articles contain special formatting characters, and may cause your search to produce fewer results than expected.

    Published on: December 19, 2003

    "Something's Gotta Give" is a movie that proves two things.

    One is that Jack Nicholson is the coolest guy on the planet. Bar none. In this very funny romantic comedy, there is no moment - even while his character is suffering a heart attack - that you don't wonder how he manages to be so cool, so self-assured, so absolutely in love with his own life.

    The other is that Diane Keaton is every bit as sexy and desirable as she was in "Annie Hall" and "Manhattan." Now in her fifties, she is wonderful as the mother of Nicholson's twenty-something girlfriend who suddenly finds herself the object of Nicholson's (and Keanu Reeves') affection.

    This is a grown-up movie about grownups. Sure, it is light and fluffy and a Hollywood romantic comedy. But it is about as much fun as you’re going to have at the movies this year…at least if you are over 40.

    Some wonderful wines to talk about this week…

    We really liked a 2002 Cabernet Sauvignon from Chile's Casa Julia. This is a rich wine that we had with pizza, and the fruit seemed to counter-balance it nicely.

    Also excellent was a 2000 Cabernet Sauvignon from Ramsay in the Napa Valley, which is rich and thick - great with steak or lamb.

    And we also enjoyed a 2000 Claret "Wild Card" from Murphy-Goode…which we just sipped while reading a good book in front of the fire (during last weekend's blizzard).

    Finally, about that good book…

    We finally found the time to read Jane Leavy's excellent "Sandy Koufax: A Lefty's Legacy," which is far more than a biography of the famed Dodger southpaw. It also is a meditation on growing up in Brooklyn in the forties and fifties, and on the nature of celebrity and dignity, and about a life lived in context and with perspective. We love baseball, but we think this book would be of interest even to people who are not baseball fans, because Koufax is a figure with broader symbolic meaning. Good stuff.
    KC's View:

    Published on: December 19, 2003

    We continue to get email contributing to the slotting allowance debate.

    One MNB user wrote:

    I agree with the idea that slotting allowances should go away, but quit blaming only the wholesaler/retailer. It takes two to tango. "Good" products don't need to pay slotting allowances. A fair number of vendors refuse to pay slotting. I happen to be a wholesaler and we'll quit asking for slotting:

    -When and if they are ever declared illegal.

    -When manufacturers quit throwing them at us. We've turned down items up to 5 times because we know they won't sell and the rep just keeps raising the incentive until you would be stupid not to take it. Then 6 months later we delete it.

    -When new item success rate gets better than 1 out of 10.

    -When manufacturers, after a turn down at the wholesale level stop going to the indirect accounts and offering them a bigger incentive to force the wholesaler to put the loser item into the warehouse.

    -When manufacturers take some responsibility for inventory on items that fail.

    -When manufacturers put sales people on the street to call on stores and see that the item is cut into the shelf.

    A lot of manufacturers get passionate about products that will never sell. When they are turned down they can tend to get stupid and offer things like slotting allowances…When will one of them stand up and say, for example, "Effective January 2005, our company no longer will offer slotting allowances. We will offer one cost of goods to everyone."

    This is an excellent point that needed to be made.

    Sure, retailers and wholesalers are hooked on the heroin of slotting allowances.

    But manufacturers started the whole problem by getting them hooked.

    The problem is, nobody is willing to take the first step. And the addiction continues.
    KC's View:

    Published on: December 19, 2003

    The Canadian Air Transport Security Authority, that country's version of the federal Aviation Administration (FAA), is urging citizens of that country not to bring fruitcake on airplanes when traveling during the holiday season.

    The reason? Holiday fruitcakes are so dense that they could be used to hide a weapon, so travelers bringing them on-board will be facing extra security screenings and possible delays.

    Therefore, if travelers don't want to deal with delays, they're better off leaving the fruitcakes at home.
    KC's View:

    Published on: December 19, 2003

    • Hershey Foods Corp. in introducing a new chocolate Sugar Carb bar that has just one gram of carbohydrates, targeted at the some 30 million people who are considering or using the Atkins Diet or one of its low-carb brethren.

    • Alimentation Couche-Tard Inc. closed on its acquisition of Circle K Corp. from ConocoPhillips for about $803 million.

      The deal makes Couche-Tard the fourth largest convenience store operator in North America with a network of 4,672 stores.

    • The New York Times reported that Gristedes Foods has agreed to pay $3.25 million to settle a lawsuit that charged the retailer underpaid home delivery workers between 1994 and 2002.

    KC's View:

    Published on: December 19, 2003

    • Rite Aid Corp. posted a third quarter profit of $22.5 million, compared with a loss of $16.4 million during the same period a year before.

      Third-quarter revenue rose 6.1 percent to $4.1 billion, and same-store sales rose 6.4 percent.

    • Family Dollar Stores Inc. reported that first quarter net income reached $64.5 million, up from $57.5 million a year earlier.

      Sales jumped 12 percent to $1.24 billion from $1.11 billion a year earlier. Same-store sales were up 2.6 percent for the period.

    • General Mills Inc. posted second quarter earnings of $308 million, up 12 percent from $276 million in the same period last year.

      Sales rose nearly four percent to $3.06 billion, from $2.95 billion.

    • PriceSmart, which operates 26 warehouse clubs in 12 countries, restated its results for the year ended August 2003, reporting that total revenues rose by five percent to $660.7 million (US), with operating losses amounting to $24 million (US), compared to a profit of $13.5 million (US) in 2002. Net losses were $32.1 million (US), a contrast to profits of $10.4 million (US) in the previous year.

    KC's View:

    Published on: December 19, 2003

    Brazil's antitrust regulators have ruled that Ahold cannot bundle all of its G Barbosa and Bompreco chains there together for sale to a single entity, but rather must sell the stores to at least two different companies.

    The ruling by the Administrative Council for Economic Defence means that Ahold will likely be negotiating with potential buyers Wal-Mart and Brazil’s Companhia Brasileira de Distribuicao.
    KC's View:

    Published on: December 19, 2003

    Published reports say that Food Lion has signed a deal to test hot meals developed by Boston Market in some 10 stores over the next 18 months, including its usual chicken and meat load dishes as well as seasonal items.
    KC's View:

    Published on: December 19, 2003

    Add a scathing column in this morning's Minneapolis Star-Tribune to the list of stories and commentaries aimed at criticizing Wal-Mart.

    Columnist Jack Gordon writes that "for the past two decades the United States has pursued a reorganization strategy modeled on the two-caste system popular in banana republics and other Third World oligarchies. The push is toward a society with a handful of extremely rich people, a teeming mass of peasants and very little in between…The middle class is shrinking -- or sinking, rather, into a disposable peasantry, as high-wage jobs are digitized out of existence or exported to low-wage countries."

    How does this all come back to Wal-Mart? Gordon refers to the recent Fortune article about Costco that referred to the membership club chain as the only company that Wal-Mart is afraid of, and notes that Costco CEO James Sinegal is routinely criticized because he doesn't follow the Wal-Mart model and trim benefits and cut labor costs, therefore making the company more profitable. And as Wall Street measures such things, Wal-Mart is a better-rated company than Costco, Gordon writes.

    "Bearing in mind that Enron, right up until the house of cards collapsed, was a company that Wall Street loved, we find that Costco is a company Wall Street hates? Even if his business is fantastically successful, an executive who doesn't behave like a greedy swine is letting down the side? Whose side would that be again?"
    KC's View:
    This is a fascinating and entertaining article, brimming with left-wing bile that will only serve to set right-wingers' teeth on edge.

    We're not sure things are as black and white as Gordon would have them, but we note his premise for two reasons.

    First, it is worth paying attention to the small but growing drumbeat of criticisms against Wal-Mart. This particular article isn’t exactly a broadside, but the criticisms of the Bentonville Behemoth are implicit.

    Second, there are legitimate and persistent questions being raised about the vanishing middle class and the rise of what is referred to as the "disposable peasantry." This isn't to say that everybody needs to be unionized, nor that big corporations are always on the wrong side of this argument.

    But there is a difference between how, say, Wal-Mart deals with its labor force, and how Costco does. They seem to be two different philosophies (and as long as no laws are broken, both have the right to pursue their own labor strategies).

    But there are cultural, social, economic and political issues at work here. They are worth paying attention to.

    Published on: December 19, 2003

    The Los Angeles Times reports this morning that a pair of community groups in Inglewood, California, have sued to prevent a ballot initiative next April that would allow Wal-Mart to build a discount store there that could someday be expanded into a supercenter.

    When it appeared that the Inglewood City Council might pass an ordinance that would have blocked the building of a supercenter, Wal-Mart convinced the council to instead allow a ballot initiative that would put the question to the voters.

    But the Coalition for a Better Inglewood and the Los Angeles Alliance for a New Economy filed suit saying that a ballot initiative actually violates state law, and that the City Council needs to deal with the issue, even if it doesn't want to.

    Wal-Mart plans to build 40 supercenters in California over the next five years.
    KC's View:
    It is sort of amusing that in California of all places someone is trying to prevent a ballot initiative…since it is, after all, a place where you can overturn elections via ballot initiative.

    That said, we're also intrigued by Inglewood's role in all this. We used to live there - we had a cheap apartment in the city during part of our college years - and we remember a lot of small apartment buildings, office parks and strip malls.

    But it's probably changed.

    Our most vivid memory was the fact that our apartment house was on the landing approach for Los Angeles International Airport, and it often seemed that plans had to bounce their wheels off the roof our building to slow themselves as they landed.

    Published on: December 19, 2003

    The Detroit Free Press reports this morning that Kmart, looking to reverse perceptions that it is a dying chain out of touch with consumer needs, is making a major push this holiday season.

    Beginning Sunday, the paper reports, Kmart will begin a last-ditch four-day sale that is "designed to pump up sales that flagged throughout Kmart's 15-month bankruptcy and continued to droop since it emerged on May 6."

    The Free-Press reports that there have been improvements in a number of the company’s stores: "wider aisles, improved lighting, better signs placed more at eye level, less clutter and more ordered merchandise," as well as "more employees around the store, keeping merchandise stocked and assisting customers."
    KC's View:
    We remain skeptical. At best.

    Published on: December 19, 2003

    • The Financial Times reports that Jeff Dunn, president of Coca-Cola North America, has resigned from the company after a 22-year tenure. In a statement, Coke said he wanted to pursue "entrepreneurial goals."

      The company will not name a replacement immediately. Instead, Steve Heyer, Coke's president and COO, will take over the duties for the immediate future.

      FT notes that Heyer has been remaking the country and consolidating businesses, leading to the departure of several executives, including chief marketing officer Steven Jones, and now Dunn.

      During the past year, Coke North America has lost 1,000 jobs and faced slowing sales and a scandal connected to a rigged marketing test at Burger King.

    KC's View:

    Published on: December 19, 2003

    The Seattle Times reports this morning that several dozen Seattle-area grocery workers held a rally yesterday to support the some 70,000 supermarket employees who are either on strike or have been locked out of Southern California's top three supermarket chains since early October.

    In addition, officials at the Seattle local of the United Food and Commercial Workers (UFCW) said that they have raised $200,000 that is being donated to the California workers.

    The support for employees at Southern California's Vons chain (owned by Safeway), Ralphs (owned by Kroger), and Albertsons isn't just a matter of empathy. There are some 30,000 UFCW members in the region who have a labor contract expiring next May, and the settlement terms in Southern California undoubtedly will have an impact on their negotiating position.
    KC's View:
    Those are storm clouds on the horizon…

    Published on: December 19, 2003

    The Wall Street Journal reports this morning that Wal-Mart is defending itself in the probe into its use of illegal immigrants to clean the floors of some of its stores by saying that the company's managers not only knew of the probe before a series of October 23 raids, but in fact were cooperating with the government.

    The WSJ reports, "Wal-Mart says it was led to believe it wasn't a target of the investigations, and it says it didn't take action to sever its ties with the contractors because federal officials specifically asked it to leave the relationships in place."

    Wal-Mart spokesman Mona Williams told the WSJ that for three years, the company cooperated with federal agents. "Throughout that time they specifically told us we were not the target of any investigation and that we would be given a heads-up before any arrests were made in our stores. Instead, they conducted unannounced raids on our stores and created a well-planned media frenzy by saying they had proof that Wal-Mart executives knew what was going on. All we knew was what they had told us."

    Sources tell the WSJ, however, that the government probably moved against Wal-Mart because it believed the retailer wasn't being cooperative enough, which is why it engaged in unannounced raids on 61 stores back in October, arresting several hundred illegal immigrants who were cleaning floors at the stores, though they actually were employed by an outside contractor.

    A Pennsylvania grand jury currently is looking into the relationship between Wal-Mart and its cleaning contractors and sub-contractors.

    Wal-Mart's defense up to this point has been that it did not know that the cleaning crews had illegal immigrants on them, and therefore cannot be held responsible for them - though clearly the new defense tactic suggests that this is not entirely accurate.

    Critics of Wal-Mart have suggested that the company needs to be held responsible because one of the way it maintains low prices and low costs is by having a "wink and a smile" relationship with contractors who are behaving in an illegal fashion - though of course, this has not been proven.
    KC's View:
    It is hard to comment intelligently on this case, simply because we don't know what proof is being laid out before the grand jury. And these issues are so convoluted that they are difficult to make sense of without all the information.

    But it just feels like the messiness hasn't been completely exposed yet.