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    Published on: January 8, 2004

    In commentary about the mad cow situation the other day, we urged the government to take the bull by the horns and create a meaningful and credible infrastructure to track and deal with these issues…though we also said that sometimes there seems to be a different kind of bull involved. Which led one MNB user to write:

    I think you're absolutely right about another bull at work here. This whole issue has been dealt with in a very negligent way. And the benefactors aren't scared and confused consumers.

    Why would an agency knowingly put people's lives at risk (no matter how small they might think the risk is)? The repercussions would far out weigh any short term profits/benefits.

    All of the efforts made by the USDA seem to be incredibly short sighted. Enforcing feed laws that should have been strictly enforced when they were first introduced in 1997, banning downer cows from the human food chain (wasn't this something that was already supposed to be happening too?), destroying questionable cows but not testing them?? Most of this appears to be too little to late. And some of it seems pretty suspect - by not testing any of the destroyed animals, there won't be any more bad news that another infected animal has been found. And the consumer will have the "confidence" to continue to eat meat.


    Earlier this week, we referenced a line from a Newsweek article that noted that allergy-related recalls seem to be given higher priority than the current mad cow-related situation. This prompted one MNB user to write:

    I have heard several references to the high priority given to recalls involving potential allergens, like eggs or peanuts. The Newsweek piece stated, "let a noodle fall into a vat of soup and the food safety net is there to catch it," and your comments yesterday also referred to this. The implication seems to be that if these are high priority recalls, warranting immediate action, why then are BSE-related meat recalls not given the same attention?

    As parent of a severely allergic child, I can certainly understand the disconnect, and think we need to apply a bit more common sense and perspective to our reasoning. If my child - who is highly allergic to eggs, peanuts, tree nuts, and seeds - eats a mislabeled product that contains any of these ingredients, he will have a reaction, likely an anaphylactic, life threatening, lung-squeezing one. There's no maybe - he WILL have a reaction - and it will be immediate and serious, not something that may or may not affect him ten years from now. Accurate labels are the only way I can ensure this will not happen to him.

    Let's all keep a sense of perspective: there have been only 150 deaths from the human form of mad cow disease in the UK (the most affected country in the world) in the past decade, while each year about 200 children die in the U.S. from food-induced anaphylaxis . I certainly agree that many aspects of this case have been mishandled, but let's not allow irrational fear to dominate the BSE discussion.


    Fair point. Sometimes those of us lucky enough never to have had to deal with kinds of life-threatening allergies forget about the very real dangers that some parents and children live with every day.

    One MNB user shared the following story:

    A friend works for a large, privately-owned natural foods grocer in the Midwest. I asked why they had not jumped on the BSE issue to promote natural beef & by extension, themselves. Friend tells me that the store is sitting on it until they could ascertain from their suppliers that their meat was actually grain-fed & naturally raised. Seems to me that if you are a natural foods grocer & have made your reputation based on standards that you publish to the world, including carrying ONLY naturally-raised, grain-fed meats, you damn well better be selling only that! But honestly, I'm not surprised--disappointed, not surprised.

    On the subject of mad cow, MNB user Linda Allen had the following observation about one of the phrases we used:

    What constitutes being "widespread in Canada and Japan"? My understanding is that for Canada there is the one last May, and now our Washington Canadian animal! And in Japan, about 8 animals. If that is the case, "widespread" would not seem to be the case in my definition.

    That was a misstatement on our part - fueled, we suppose, by either too little or too much coffee at too early an hour. Clearly, the UK is the region with the biggest problem in the past…and that's what we should have written.

    Sorry about that.




    MNB user Michael Davis had some thoughts about yesterday's report about the decrease in the number of c-stores in the US:

    While the decrease in the number of c-stores is a bit alarming, many of stores that closed were smaller units with a couple of gas pumps and a limited assortment of products (Cokes & smokes). These units could not compete with other c-stores let alone the clubs and supermarkets. Also one other point, a few of the big oil companies (that expressed their desire to reduce their retail operations) have closed sites and cashed in on the real estate, selling it to the big drug chains.

    I would say the industry is actually in a renaissance period. If you look at the designs, sizes, and assortments of the newest stores, say Sheetz, Quick Chek, Wawa, etc. have opened on the East Coast alone, I think most people would agree. Also, a rather powerful competitor from Canada - Alimentation Couche-Tard - has entered the Midwest in a big way and will be opening some rather remarkable locations as well. Se many of us are very optimistic about our industry's future.





    In response to a line of discussion that spoke to the importance of building community in stores by stressing education and information, one MNB user wrote:

    Just think, we could make good happy customers and keep them around for awhile instead of trying to kill them off with chemicals and mad cow disease. The customers would still shop at our stores like we cared for them…

    Wild Oats offers discussions on new food trends, diets, yoga, pilates, message, disease etc.


    Which may be why the Wild Oats-type retailers in the US are seeing healthy growth.

    Which reminds us...we got the following email from MNB user Bill Jones, who illustrates why having smart, engaged people at the checkout lanes (and even in the aisles) can be a critical difference in the shopping experience:

    I applaud your insight. So many times I have said to those who comment on what I do at Whole Foods, "Their time on line is no less because I am there, but I'm a distraction and they seem to like that.

    From my side in the situation, it's fun to meet so many different people. Their kids love me and that makes my job worthwhile.


    A great person at checkout can be an enormous differential advantage for a retailer. And too few retailers make that a priority.

    As our friend Glen Terbeek is fond of pointing out, shoppers care a lot more about the people who work in a store than they do about the company's CEO…and yet which search is given greater priority by most companies?




    Two of the ongoing issues - they are connected, really - that concern the supermarket business are productivity and compensation. MNB user Ted Vinzani offered some good insights on both:

    Pay-by-the-hour does nothing to truly increase productivity. A raise will produce increased productivity initially. After some time the person believes they are “worth” the new rate and the old productivity level returns. When they feel they should be given another raise, they tend to be less productive. ”They aren’t paying me what I am worth. Why kill myself?”

    Until pay plans include incentives that can mean significant additional pay for increased productivity, productivity will always be either at a pace less than optimum or begrudgingly given at optimum.

    If a person is forced into increased productivity by the economy or whatever, how productive will she truly be? What will be the long term ramifications? There are numerous discussions of a coming manpower shortage in the years to come.

    Though completely outside this industry, Nucor Corp. is the perfect example. This is a US steel producer that can compete handily in the markets they chose. Their employees can make multiples of their base pay. Union organizers have been physically threaten by employees and had to be protected by Nucor managers while escorted off of the properties.

    I doubt we will ever see a similar pay-for-productivity plan in a food store. But before someone says it cannot be done, let’s ask this question: “How many store owners would like to have their employees anti-labor union and doing everything they can to make the store more profitable?”


    That's been our point all along. Until management and labor can forge some sort of new agreement that takes these issues into consideration - perhaps through some sort of profit sharing - then old battles will continue to be played out and no new progress will be made.




    On the subject of Southern California's troubled labor relations, one MNB user wrote:

    Having been associated with one of the more recent debacles in labor relations, I come to wonder if attitudes will ever change between management and labor.

    The grocery business was one of the most highly organized areas of labor at one time. Union workers had some of the best wages, benefits, and working conditions of any group in the country. Working in the grocery business was a sought after occupation of the middle class, (fast disappearing, the only thing that Robert Reich said that I ever agreed with) in this country. Whether you work at retail or wholesale, you did not need a college degree, (although skills could be involved), and you could work your way up to a comfortable life.

    In the early eighties that began to change, as companies sought to become more competitive, labor began to take the first hit, productivity became a central issue, as well as wages and cost of benefits. These have been ongoing concerns, and of course brought to the forefront by Wal-Mart, who controls all of these factors very well, if not the best.

    Organized labor saw its base diminishing as labor saving practices came into play, boxed beef, bar codes, scanners, computerize labor standards, and RF technology, among many others.

    Management saw these as ways to become more competitive, labor saw these as ways to lose good jobs.

    Management moves up the ranks based on tenure and skill, (of course, it does not always work that way), and Union leaders are by and large elected. Both have bottom lines they are held accountable for, however they are not the same. Maybe they should be the same but in reality they are not. Throw into the mix some giant egos, and its hang on for the ride.

    A great deal of time and money have been spent trying to find the answer to this vexing issue referred to as labor management relations, but not with a great deal of success for combatants such as in Southern California. My guess is there is total mistrust by both sides, and that will be a huge hurdle for the participants to overcome. There may be a settlement but neither side will be satisfied, and will be looking forward to the next encounter.

    In the meantime the Bentonville behemoth just keeps flattening everything and everyone in its path.





    We also got some email about Michael Kinsley's pro-Wal-Mart perspective that aired on National Public Radio and was dutifully reported upon here:

    One MNB user wrote:

    In one breath Michael Kinsley says that people are free to shop elsewhere and in another admits that Wal-Mart’s tactics may have closed the downtown district. When Wal-Mart forces out the competition, what choice is there but to shop there! It’s a self fulfilling prophecy! That is precisely what has happened to our New Hampshire town. All the self-serve, low end department stores are gone. Want a small appliance, kids cloths, college furniture, or batteries? Wal-Mart is your only in-town option. Before Wal-Mart there were several options and they competed against each other. Not now.

    We honestly grieve for towns that go through what you describe. But what Kinsley is saying - and he has a legitimate point - is that Wal-Mart didn't make this choice. It provided choice, and it was the everyday decisions made by consumers that put the competition out of business.

    Is it a level playing field? Hell, no. Does there need to be careful scrutiny of Wal-Mart's growth to make sure that it doesn't get so big and powerful that viable competition simply isn't possible? Hell, yes.

    But the stores that didn't provide consumers with viable choices after Wal-Mart came to town have to shoulder some of the responsibility in this turn of events, don't they?

    Another MNB user wrote:

    Kinsley makes a fine point. This is America, the land of choice. I chose not to haul for Wal-Mart & wait 90 days to be paid my freight bills. Most temp controlled product is sold way before 90 days. When there is no one left to haul for but Wal-Mart, then it is my choice to sell my fleet & retire. These choices are what makes America GREAT.

    Regarding Subway's decision to create Atkins Diet-friendly products, MNB user Philip Herr wrote:

    I cannot help but wonder what Jared will be eating now. After all he lost weight by eliminating fat (or so they tell us). Now that Subway has positioned itself as the "healthier" alternative to burgers and fried chicken, how can they sell high fat sandwiches also intended to help you lose weight, without confusing their customers? I eagerly await their advertising for these new sandwiches.

    We've seen some of the ads. Jared seems to be AWOL.




    Regarding the ongoing troubles at Safeway and its Dominick's chain in Chicago, MNB user Mark Heckman wrote:

    Kevin, to the extent (new CEO) Randall Onstead is successful navigating through the issues at Dominick’s and the Chicago-based marketplace, the model he creates should have application at other underperforming Safeway acquired properties - particularly Randalls/Tom Thumb in Houston and Dallas.

    Safeway appears to be in the process of better understanding the negative ramifications of transitioning the marketing of an established retail brand (Dominick’s and Randalls) to a more standardized, less personalized corporate image. While measurable efficiencies are gained on the “buy side” of the business, clearly consumers relate to the image, services, and quality that took the acquired retailers years to cultivate. Many consumers defect when they sense that “their store” is losing its persona.

    Leveraging, not destroying, the equity of the acquired retailer brand is answer for Safeway. Randall Onstead, having been a big part of the successful branding at Randalls, understands that concept as well as anyone in the industry!


    For Dominick's sake, we hope you’re right.




    We received the following email from MNB user David J. Livingston regarding A&P's steps in Detroit as it works to keep Farmer Jack competitive:

    This is typical A&P. Out of touch and of step. They hire people to develop stores. The problem is A&P runs bad stores and therefore new stores are not successful. So what happens? The development people can't go back to Montvale and say "Listen, we run bad stores so there is no point in us building new ones. All we will have is just newer and more expensive stores doing low volume and losing money." If they did that they would be fired. So what they do is take whatever deals they can find, convince Montvale it will work, and it buys them time on their job for 2-3 more years. Then they get fired and the cycle starts all over.




    One MNB user weighed in about the recent suit filed by the UFCW in Southern California:

    How is it that when a company locks-out its employees and then allows a few to return using false names and Social Security numbers they should be allowed a free pass?

    The UFCW has tried to negotiate, removed pickets at the warehouses, and made concessions, only to be faced with an opposition who refuses to budge. Ralphs obviously is looking for qualified, trained personnel since their business is better than the other 2 chains involved. They got caught with their fingers in the cookie jar. They now will be investigated to determine whether or not they are playing fair.

    Let the courts decide!


    We suspect there will be other precincts heard from on this subject…




    On the subject of yesterday's report about President Bush advocating amnesty for the nation's illegal aliens and a change in immigration laws, MNB user and Santa Maria, California, resident Don Edwards wrote:

    My most emphatic "NO," on any sort of approval of illegal aliens. Our city is a glaring example of the problems they have caused.




    Not surprisingly, we got a lot of email about our report that a new study says that six cups of coffee or more a day can help reduce the risk of diabetes. We were thrilled by this, and only wished that the same could be said of doughnuts.

    MNB user Martin Samuelson wrote:

    Of course we like your opinion, it agrees with ours. Ditto on the donuts.

    MNB user D. Ayer wrote:

    I am glad to hear that much coffee is good for something, but before we all get too excited, it is important to remember the key is no sugar and no cream, unless we all want to die off heart complications due to high blood pressure and clogged arteries. If we were to follow every new finding, we could never keep up. I still say, everything in moderation is still the key to a happy lifestyle.

    Another MNB user chimed in:

    Why not coffee? Dr Atkins has finally proven that greasy, fat laden bacon with eggs and a side of sausage is actually healthy for us. Can it be far behind that research will prove cigarettes to be a healthy for society's population control? How about discovering that a pint of whisky a day will kill the new strains of viruses that have become immune to modern antibiotic drugs?

    Maybe our forefathers had it right - eat what you want and die peacefully when the good Lord decides to take you home.


    And another MNB user wrote:

    Of course 6 cups of coffee a day reduces your risk of diabetes -- with that much caffeine in your system, your metabolism is wired to a level at which any sugar in your bloodstream is not metabolized -- it's vaporized!

    If that were true, we'd be the shape of a broom handle…not that of a fire hydrant.




    We recently ran a piece about a store in Germany that is specially designed for elderly shoppers, which got one MNB user to email us:

    It's about time, I say.

    Only - I don't think their should be a specific age associated with our elders... (I think it is really important to not label people).

    For that matter, working moms and tired people in general or folks that
    are not well would benefit from such a store.


    How about tired working dads?

    Y'know what really annoys us? Over the years, when Mrs. Content Guy has gone out somewhere and we've stayed home with the kids, people say we're "babysitting." But we're not…we're just taking care of our kids, which is different. (You hire babysitters, and babysitters aren't responsible for college educations.)

    The same goes for the whole "working mom" thing. If mom works full time and has kids, she's gets called a "working mom" because the assumption is that in reality she is holding down two jobs. Which she is.

    But so, very often, are dads.

    And it is about time that they get a little credit.




    MNB user John Welsh had the following observation:

    Saw a story in the newspaper this week that said that children in the U.S. were more obese and overweight than in any other industrialized nation. The headline said our kids were heavier than even those in Israel or Greece.

    Greece? Next thing you know the Greek filmmakers will produce "My Big Fat American Wedding."


    Hey…we're supposed to be doing the jokes here!




    Regarding our opinion at Pete Rose ought not to be cut any slack by Major League Baseball for admitting - after 14 years of steadfast lying - that he bet on baseball while managing the Cincinnati Reds, MNB user Glen N. Foresman wrote:

    It’s interesting to note that in the US we hold our athletes to higher standards than our Presidents………………

    First of all, baseball is more sacred than government. Second of all, if we find out that an administration has been laying odds as to when Saddam Hussein would be caught or when the war in Iraq will end, we'll have some serious questions to ask.




    The other day, MNB user Mark Boyer waxed enthusiastic about the public relations value of the new black-and-white M&M's, noting that Oscar Wilde once said that "the only thing worse than being talked about, is not being talked about."

    Which prompted MNB user Kathleen Whelen to email us about another famous Wilde quote:

    His other famous quotation, which was about foxhunting, nevertheless
    rings true about the USDA:

    "The unspeakable in pursuit of the uneatable."


    Ouch.

    True. True.

    Wilde, of course, being an Irish writer, is a font of great wisdom. He once wrote about wine:

    "Now and then, it is a joy to have one's table red with wine and roses."

    Words to live by.
    KC's View:

    Published on: January 8, 2004


    • Wal-Mart Stores reported December net sales of $33.657 billion, an increase of 11.3 percent over the $30.251 billion in the similar period in the prior year. Sales for the forty-eight week period were $237.626 billion, an increase of 11.3 percent over $213.528 billion in the similar period in the prior year.

      The Wal-Mart division reported December sales of $23.106 billion, up 10.2 percent over sales of $20.967 billion in the similar period in the prior year. The division's sales for forty-eight weeks of $161.448 billion were up 10.6 percent over the $146.012 billion in the similar period in the prior year.

      Sam's Club sales for the five-week period were $4.078 billion, up 8.8 percent over sales of $3.747 billion in the similar period in the prior year. Club sales for the forty-eight weeks of $31.900 billion were up 8.6 percent over the $29.372 billion in the similar period in the prior year.

      The International division's sales for the five-week period were $6.473 billion, up 16.9 percent over sales of $5.537 billion in the similar period in the prior year. The division's sales for the forty-eight weeks of $44.278 billion were up 16.1 percent over the $38.144 billion in the similar period in the prior year.


    • Costco Wholesale Corp. reported that December same-store sales rose 11 percent, with total sales for the month up 14 percent to $5.2 billion from $4.58 billion the year before., the company said in a press release Wednesday.

      Costco said US same-store sales were up eight percent, while international same-store sales were up 23 percent.


    • It is expected that when Ahold announces fourth quarter sales tomorrow, it will reveal that sales for the period were down 10 percent from the year before.

    KC's View:

    Published on: January 8, 2004

    Retail Forward, the global management consulting and market research firm, has released a study saying that while sales for holiday 2003 were comparatively weak at four percent growth, stronger sales growth is expected during the first quarter of 2004.

    In the last quarter of 2003, high end retailing was the only stand-out sector, with most other retail sectors either at the low end of their projections or falling short.

    While Retail Forward expects sizeable tax refunds to propel strong retail sales growth for the first quarter of 2004, results from the December 2003 Retail Forward Monthly Shopper Update indicate that this upturn will be most notable starting in February. For January, consumer spending plans point to continued sluggish sales growth, with all but the most upscale consumers maintaining a cautious approach to spending.

    Compared to January 2003, survey results indicate that more households overall plan to spend less this month at retail stores (29 percent) than plan to spend more (17 percent). The lowest income households (under $25,000) are particularly cautious, with a full third planning to spend less. Only the highest income households ($100,000 and over) are planning to spend more (24 percent) than less (19 percent) in January.

    One bright spot of the holiday season was online retailing. While 60 percent of all respondents bought gifts online this year, even more (84 percent) shopped for gifts online, regardless of whether they bought anything.

    For more information about the study, go to:

    http:// www.retailforward.com /
    KC's View:

    Published on: January 8, 2004

    Global notes and commentary from PlanetRetail.net…

    Content Guy's Note: While the Southern California labor strife certainly has gotten plenty of attention here and elsewhere, sometimes it is interesting to see how folks outside the US view the situation.

    This exclusive column from PlanetRetail.net offers a look at how the situation is affecting Stater Bros…


    At the end of last year, Stater Bros., the leading Californian supermarket chain, announced record sales for the fiscal year ended September 28, 2003, noting that total sales climbed by 3.3% to USD2.754 billion, a comparable sales increase of 2.8%. The retailer has benefited from the disruption affecting its key rivals as they struggle with industrial action, with sales in the fourth quarter up by 4.5% as dissatisfied shoppers began to desert Vons, Kroger and Albertsons stores in Southern California. The company reported a net income of USD10.1 million for the fiscal year. Jack H. Brown, Chairman, President and Chief Executive Officer, stated: "We were pleased with the fiscal year results and see positive momentum going forward. We have been able to protect our sales base by focusing our efforts on serving our 'Valued Customers' one at a time." The company ended the year with 157 stores and is poised to open three new outlets by the end of Summer 2004.

    This represents a solid performance by the privately-owned supermarket operator. Stater Bros. has successfully driven its business forward in the face of intense competition from its larger rivals and is exploiting their current travails in order to push growth ahead at a faster tempo. Stater Bros. is not alone in seeing an increase in popularity as a consequence of the industrial disharmony besetting Safeway, Kroger and Albertsons, other businesses that have seen demand boosted as a result include retailers such as warehouse club operator Costco (sales up by 9% in California in its Q1) and drugstore chain Longs (front-end comparable sales up by 2.5% in November).

    Stater has remarked that it could permanently retain around 5% of the business it has picked up during the Southern California troubles. Jack Brown told the company’s bondholders that 50 of Stater's 157 stores were unaffected as they do not directly compete with Kroger, Albertsons or Safeway; 50 units were generating an extra USD25,000 to USD40,000 per week, and 57 were seeing unspecified "significant increases." There is every chance that shoppers hitherto unfamiliar with Stater’s compelling mix of impressive fresh food merchandising and keen no-frills pricing will like what they find, and that the chain will recruit a large number of new regular consumers who will continue to shop the stores once the strikes have been resolved.

    While 2003 has been a strong, if slightly fortuitous, display from Stater Bros., 2004 might be slightly trickier. The major grocers could be back on track if the unions and retailers somehow swallow their pride and reach a compromise and a long shadow is already being cast over the Californian grocery sector by the imminent arrival of the first Wal-Mart Supercenters in 2004, with 40 such units planned over the next few years. This threat, of course, is at the heart of the current industrial action, with the three grocery chains attempting to slash labour costs in order to make their cost bases more competitive ahead of Wal-Mart’s assault.

    Stater Bros. has already sketched out some of its strategy to fend off the world’s largest retailer, hoping to rely on features such as staffed butchers counters, high standards of merchandising and customer service and the more convenient navigability of its relatively small stores to differentiate it from the more impersonal, sterile and cavernous approach of the Supercenters. And in Jack Brown, Stater Bros. has a confident and bullish hand on the tiller: "We've been head-to-head with other stores that have targeted us before. We're still here, and they're not." Given the pedigree of the chain’s performance and the quality of its stores, his confidence does not seem misplaced.
    KC's View:

    Published on: January 8, 2004

    Published reports say that some 750 unionized employees at a Sainsbury warehouse in the UK walked out on strike last night, potentially affecting the supply of produce to the company's stores in northern England.

    The strike - the second such walkout in the last few weeks - is over compensation levels, which the union says is below that at other chains.
    KC's View:

    Published on: January 8, 2004

    The San Jose Mercury News reports that Kmart plans to close four of its California units by Match 1 - two in San Jose, one in Santa Clara, and the fourth in Colma. Going-out-of-business sales already have begun at the stores.

    There are unconfirmed reports that Kohl's plans to take over the four leases.
    KC's View:

    Published on: January 8, 2004

    The Contra Costa Times reports that supervisors in Alameda County have voted unanimously to prevent stores larger than 100,000 square feet from dedicating 10 percent of shelf space to nontaxable items, such as groceries, in the county's unincorporated areas.

    The vote came despite Wal-Mart's condemnation of the ordinance as "anti-competitive and anti-consumer." Wal-Mart was not mentioned by name in the legislation.

    The law takes effect in 30 days. Wal-Mart has said it may challenge the ruling in court, and also may push for a county-wide referendum on the issue.

    In nearby Contra Costa County, Wal-Mart gathered enough signatures to force a referendum on a similar decision by that county's supervisors. That vote is scheduled to take place on March 2.
    KC's View:
    There is no question that Wal-Mart will challenge this decision one way or another. It can't afford to let such a decision stand, because it sets up a precedent that offends its corporate culture down to its very core.

    Published on: January 8, 2004

    California-based Safeway Inc. has announced that it is changing its corporate structure so that its entire nine-member board of directors will face re-election annually.

    Currently, the company's board breaks the nine members into three categories, each of which serves for three years before facing re-election. Last year, company shareholders passed a nonbonding resolution urging Safeway to change its board policies, believing that the board had become too cozy with management to do its job effectively.

    Four of Safeway's nine board members have ties to Kohlberg Kravis Roberts (KKR), which led a leveraged buyout of the company in 1986; three are company "insiders," including company CEO Steve Burd and former CEO (and current San Francisco Giants CEO) Peter Magowan; and one board member has gotten personal loans from company management.

    In a statement, Burd said that "both the board and management of Safeway are committed to adhering to the highest corporate governance standards," he said.

    Safeway, of course, is under a lot of pressure on other fronts. Its Dominick's chain in Chicago is facing declining market share after an aborted attempt to sell the company revealed how much the division's value has diminished since the company bought it, there have been questions raised about the performance of other company divisions, and it has been dealing since October with a strike/lockout in Southern California that has illustrated the fragility of its relationship with organized labor. And, of course, there is mounting competition in a number of markets, especially from Wal-Mart.
    KC's View:
    In an era where corporate governance is under so much scrutiny - and so many companies are being proven to be corrupt at various levels - decisions like the one made by Safeway seem utterly sensible.

    The question is whether or not this is enough.

    Published on: January 8, 2004

    The Los Angeles Times has an interesting interview with Fred Franzia, CEO of the $250 million Bronco Wine Co., which manufactures Charles Shaw wine - better known as the Two-Buck Chuck wine that has been sold with great success by Trader Joe's for $1.99 a bottle.

    Franzia views Two-Buck Chuck as essentially democratizing the wine buying/drinking experience. "The consumer has to make the trial and error with his own palate and taste buds. Don't listen to some wine writer's rating system that is just numbers. Somebody might rate a wine at 94 points, but you as a consumer might not like it and then say, 'If I can't appreciate what somebody said was a 94, then I am not going to go buy wine.'

    "There is an old-fashioned way of finding wine that works. You try it, you taste it and, if you like it, buy it. If you don't like it, don't buy it. We feel very confident that if you taste our wines, you will buy our wines and continue to buy them."

    In one comment, Franzia notes that there is no reason why more retailers in California can't be selling inexpensive wine. "Some retailers are buying similar wine from us at about the same price, and they are selling it to their consumers at a higher markup. I am not going to name names.

    Charles Shaw has done wonders for our company. I think Trader Joe's has been an instrumental partner in this combination. They are willing to sell the consumer a product at such a fair price."
    KC's View:
    Boy, doesn’t that just point out the difference between mainstream retailers that often find themselves sucking wind in the face of formidable competition from non-traditional retailers such as Trader Joe's, Costco, and Wal-Mart.

    While the non-traditional retailers often look for ways to keep their margins down so as to pass on better values to the consumer, mainstream retailers often look for excuses to increase their margins…and then complain about a playing field that isn’t level.

    If they’re playing uphill, often they have only themselves to blame.

    Published on: January 8, 2004

    There are numerous reports that the first reported case of mad cow disease on American soil could create new momentum for County of Origin Labeling (COOL) legislation.

    The US Congress passed legislation in 2001 requiring such labeling to be in place by October 2004, but then last year included a provision in the $328 billion "omnibus spending bill" that delayed implementation for two years.

    The discovery of mad cow disease in Washington State in a Holstein that has been traced back to Canada - which itself discovered a single case of mad cow disease early in 2003 - seems to be complicating the matter. "The issue of mad cow disease has really shined a spotlight on this [labeling] issue," said COOL proponent Sen. Byron L. Dorgan (D-N.D.), chairman of the Senate Democratic Policy Committee. "It provides some real propellant as a major consumer issue that it did not have before." Senate Minority leader Tom Daschle of South Dakota has said that he will ask the Bush administration to call for more immediate implementation of COOL regulations.

    The problem this potentially creates for the Bush administration is twofold.

    First, it is an election year, and every decision potentially has implications for presidential politics. Not being aggressive on COOL could potentially be seen as having a downside for President Bush when he faces the voters in November, depending on how the democrats embrace the issue.

    Second, there are some reports that there could be some resistance to passing the $328 billion spending bill if the COOL delays remain in place. Daschle told The Washington Post that he is exploring the notion of "delaying passage of the spending bill to pursue a commitment from the administration to implement the labeling rules," and has gotten support from a number of his colleagues.

    If the spending bill is not passed on schedule, it complicates the funding for most federal agencies, which itself could have political implications.
    KC's View:
    Expect the lobbying machines on both sides of this issue to swing into high gear.

    The problem, we think, is that the COOL legislation as written requires far too much of retailers, who are the least able to handle these responsibilities. The job of maintaining records and providing information probably ought to be placed squarely on the backs of suppliers, which have the resources and are better positioned to deal with it.

    We're generally in favor of COOL regulations, because we think they are good for consumers. But the legislation as written is an imperfect response to a tough problem, and expecting anything close to a perfect solution probably is too much to ask for in a political environment.