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    Published on: January 13, 2004

    …will return.
    KC's View:

    Published on: January 13, 2004

    • Robert Mondavi Corp. announced that Michael Mondavi has stepped down as company chairman, and is being replaced by Ted Hall, described as a former McKinsey & Co. executive, Napa winery owner and entrepreneur who joined the Mondavi board a year ago.

      Michael Mondavi reportedly will focus on wine sales rather than corporate affairs, and will share the vice chairman's title with his brother, Tim Mondavi, the company's chief winemaker.

    KC's View:

    Published on: January 13, 2004

    • reports that online orders during the fourth quarter of 2003 were up 64 percent to 180 million from 110 million during the same quarter of 2002, and reached $18 billion, a 22 percent increase from 2002's fourth quarter online sales of $15 billion.

      In addition, BizRate reported that total consumer spending online for 2003 was $55.93 billion, a 25 percent over $44.94 billion in 2002.
    KC's View:

    Published on: January 13, 2004

    • AdWeek reports that when Coca-Cola launches Diet Coke with Lime nationally this month, it is expected to support the product introduction with an advertising campaign similar to that used for Diet Coke with Lemon when it was new.

      In 2001 and 2002, Coke reportedly spent a total of $7 million advertising Diet Coke with Lemon, though its ad support dropped to the $1 million range last year.

    • Beverage Digest is reporting that PepsiCo is "likely" to introduce several new dairy-based drinks in 2004 reported Friday.

      Pepsi reportedly has applied for three different trademarks on dairy beverages, and is looking to compete with Coca-Cola's new Swerve dairy product.

    KC's View:

    Published on: January 13, 2004

    Published reports say that analysts in the UK believe that when William Morrison Supermarkets finally closes on the acquisition of Safeway Plc later this year, it will incite a price war that will envelop all of the industry's major players, including Tesco, Sainsbury, and Wal-Mart's Asda Group.
    KC's View:

    Published on: January 13, 2004

    A&P-owned Farmer Jack confirmed yesterday that ten out of 13 Farmer Jack stores scheduled to close next month will be converted to deep discount Food Basics units.

    The company already operates 105 Food Basics format stores New York, New Jersey, Philadelphia, and Canada.
    KC's View:

    Published on: January 13, 2004

    Groupe Danone announced that it is has doubled its ownership of US dairy company Stonyfield Farm to 80 percent. Terms of the deal were not disclosed.

    Danone bought 40 percent of the company two years ago. The last remaining 20 percent of the company is owned by founding shareholders and company employees.

    Published reports say that Danone is using Stonyfield as way of expanding its knowledge and experience in the fast-expanding organic yogurt market.
    KC's View:

    Published on: January 13, 2004

    The Arizona Daily Star reports that the state's Board of Education is considering a test ban on soft drinks and junk food in four of Arizona's public elementary schools and four high schools, beginning next year.

    The initiative comes just a week after the American Academy of Pediatrics encouraged all of the nation's public schools to make such a move. The Board of Education is scheduled to vote on the plan on January 26.

    While nutritionists express support for the move, concerns already are being raised about how the schools will replace the revenue that the soft drink sales produce for them. Some districts receive hundreds of thousands of dollars for "pouring rights" and in commissions on vending machine sales, and are hard pressed to find replacement revenue sources.
    KC's View:
    One of the points made at yesterday's FMI Midwinter Executive Conference was that it is much easier to prevent children from becoming obese than it is to try and get the percentage of the US population that is either overweight or obese to drop its excess weight.

    If this is true, and it means that health care expenditures will be lessened because of healthier kids, there ought to be a way to help these schools with their funding issues.

    Many schools already are dramatically underfunded. If we're serious about education in this country, and serious about dealing with the obesity issue, then let's prove it.

    Published on: January 13, 2004

    The Associated Press reports that the US Food and Drug Administration (FDA) is considering taking legal action against states and cities that are engaging in the practice of "reimportation" - bringing inexpensive medications from Canada to the US.

    FDA Commissioner Mark B. McClellan said that the agency's "first preference is to try to work directly with the cities and states," but that he is "definitely not ruling out legal action, if necessary, to assure safety."

    States such as Massachusetts, Illinois, and New York, and cities such as Springfield, Mass., and Montgomery, Ala., have expressed interest in reimportation as a way of closing their budget gaps. The FDA, however, maintains the safety of reimported drugs cannot be assured and remains against the law.
    KC's View:
    One thing is for sure. There will be no legal action taken anywhere until after the November elections.

    No sense in riling up the electorate.

    Published on: January 13, 2004

    Safeway has announced that it will close a dozen underperforming Dominick's stores by mid-March. Four are in the city, and eight are in nearby suburbs.

    The announcement was made by Dominick's president Randall Onstead, who said it represented "a difficult but necessary step toward a better Dominick's for Chicagoland."

    The company said that it hoped to offer many of the closing stores' employees jobs at other stores. "We are concerned for the well being of our employees, and we're taking every reasonable step we can to provide them continued employment within Dominick's," Onstead said.

    The move was expected. Once Safeway decided not to sell Dominick's after a yearlong effort was aborted, it was common knowledge that it would start shuttering stores as a way of cutting costs.
    KC's View:

    Published on: January 13, 2004

    The New York Times reports this morning that Wal-Mart did an internal audit three years ago that revealed "extensive violations of child-labor laws and state regulations requiring time for breaks and meals."

    The audit looked at employee records at 128 stores in identifying the violations.

    While confirming the existence of the internal audit, Wal-Mart told the NYT that its conclusions were "meaningless."

    "Our view is that the audit really means nothing when you understand Wal-Mart's timekeeping system," Mona Williams, Wal-Mart's vice president for communications, told the NYT. She said that what appeared to be violations could simply be the failure to clock in and clock out.

    However, the issue of clocking in and out is one that has reared its head in the form of lawsuits against Wal-Mart, as some employees have charged that they were pressured to work off the clock. Attorneys for the plaintiffs told the NYT that the existence of the audit helps to prove their case.

    According to the NYT, it obtained the audit from a "longtime Wal-Mart critic," and that the retailer has persuaded several courts to seal the audit since it was completed and turned over to lawyers who accused it of making employees work off the clock.
    KC's View:
    Based on his complaint at the National Retail Federation (NRF) conference that Wal-Mart is being unfairly picked on by the media, CEO Lee Scott will no doubt find this to be yet another example of the company's victimization.

    It's hard to understand, though, how a retailer can conduct an audit like this and then seemingly ignore it because it doesn't like the conclusions.

    Published on: January 13, 2004

    SCOTTSDALE, Arizona -- There was a simple truth that was expressed somewhere in the middle of the Food Marketing Institute (FMI) Midwinter Executive Conference.

    Like so many simple truths, it was self-evident. And like so many simple truths, fidelity to its basic nature is easier said than done.

    So here is the simple truth, as revealed at FMI Midwinter 2004:

    "It's the customer, stupid."

    Okay, that's not exactly how they put it. The speakers and sessions on day one of the two-day conference used language more elegant and refined, if less direct.

    "We have to begin collectively thinking about how consumers are really changing," said Tim Hammonds, president/CEO of FMI, noting that the industry has gotten good at cutting costs, employing technology, pursuing efficiency. "But we don't talk anymore about strategic initiatives for the consumer," he said.

    Hammonds was leading into a presentation of new research from the Coca-Cola Research Council, looking at consumer lifestyles and how they drive shopping experiences. The conclusion of this research, aid Bill McEwan, president/CEO of Sobey's, is that food retailers generally execute plans that conform to their own needs, "not shopper wants, needs, means, and ways." McEwan said, "Consumers have their own agendas, but more often than not they do not conform with ours."

    He added, "We talk about conventional stores, but consumer see mediocrity." And when retailers put in place so-called loyalty programs to tap into what consumers are thinking and doing, they are really just "compensation for fundamentally flawed execution." And for food retailers to succeed in a time of cutthroat competition, they must find a way to truly understand the consumer's actions and motivations…and to develop strategic initiatives that address them.

    In other words, it's the customer, stupid.

    This was a theme that was woven, more or less, through the presentations and discussions of the day.

    In a speech about the mapping of the human genome and how this is a new language that must be understood in order to navigate the modern world, made by Juan Enriquez, senior research fellow and director of the Harvard Business School Life Sciences Project, the emphasis was about customer needs. In a world where the genome is understood, the genetic makeup of things can be adjusted…in order to create foods that offer life-bettering qualities.

    A presentation about technology and privacy issues by Jonah Seiger, visiting fellow at the Institute for Politics, Democracy and the Internet, it was all about being attuned to consumer preferences in a world where everybody can know everything about everyone.

    A series of presentations about the nation's obesity issue - made by the likes of aerobics guru Dr. Kenneth Cooper, diet expert Dr. Dean Ornish, and Susan Finn, chair of the American council for Fitness and Nutrition - really was all about helping the consumer live a happier, healthier, more fulfilling life.

    And a presentation about ethical business behavior by Marianne Jennings, a professor of legal and ethical studies at Arizona State University, essentially was about creating a business environment that embraces truth and honesty - values that would engender customer trust.

    It's the customer, stupid.

    FMI senior vice president Michael Sansolo told the audience that the Coca-Cola Research Council study is designed to transcend traditional demographic views of consumers, to look at "state of mind occasions for shopping," occasions that can be both overlapping and divergent. These "need states" include:

      • The "Keeper," who is responsible for caring for the family.
      • The "Banker," who must shop within a budget.
      • The "Quartermaster," responsible for efficient replenishment.
      • The "Hunter," always is search of a bargain.
      • The "Desperate" shopper, looking for food out of some urgent need.
      • The "Courier," who needs "grab and go" food.
      • The "Reluctant" shopper, just trying to get through the day.
      • The "Seeker," looking for discovery.
      • The "Hungry" Shopper, seeking immediate gratification and consumption.

    it is critical, according to Kevin Davis, president/chairman/CEO of Bristol Farms, for a retailer to choose his or her spots…to accept the notion that you can't be everything to everyone. It can be done through format selection, he said, in the way that Tesco has done in the UK; or it can be done through canny product selection that is focused rather than exhaustive.

    These issues must be addressed, said Hammonds, because we are living in a world where more and more, people don't seem to need to visit the supermarket each week. And why? Because, according to the Coke Research Council's research, shoppers increasingly say that supermarket employees are hard to find, that they want new and interesting products, and that the shopping experience simply isn't interesting or rewarding.

    It's the customer, stupid. That's the simple truth.

    Other notes from FMI Midwinter…

    • Jennings' ethics presentation was reminiscent of Abraham Lincoln's comment that "when I do good, I feel good. When I do bad, I feel bad. That's my religion."

      The crux of Jennings' thesis was that people need to spend more time asking if they "should" do something, as opposed to whether they "could" do something. "Could," Jennings said, is the question that leads to companies like Enron and Ahold making decisions that ultimately land them in legal and ethical hot water. "Should" leads to the creation of standards, and standards must be absolute and universal, not relative and shifting.

      And in many ways, Jennings suggested, it comes down to the age-old concept of "do unto others as you would have others do unto you."

    • One of the more arresting moments of the day was when John Banzhaf, III, professor of public interest law at George Washington University Law School, spoke to the group about the obesity-related lawsuits that he and other attorneys have been filing around the country.

      Most remarkable - and perhaps most disquieting - about Banzhaf's demeanor was the fact there seemed to be no ambiguity about his position, no room for the moral dilemma. Banzhaf remembered that there were those who questioned the wisdom of the tobacco lawsuits that began being filed a number of years ago, those who called the lawyers who filed those suits crazy; now, he said, there's another word used to describe those lawyers: "multimillionaires." And for this, he wasn't even a bit apologetic.

      Essentially, Banzhaf's message was a warning - that he is coming to get companies that don't live up to their responsibility to eliminate products that cause obesity, and label those that do. Studies show, he said, that there is increasing opinion that companies should be held responsible for the nation's obesity crisis, that "sellers may be found liable even if they are not culpable." And if it helps plaintiffs get results, he said, lawyers will think nothing of using children to gain sympathy and courtroom victories.

    • Finally, FMI used the first day of the Midwinter Conference to present its annual awards.

      • Randy Hutton of Winn-Dixie received the Glen P. Woodward Jr. Public Affairs Award.

      •The William H. Albers Award to supplier representatives who made a significant contribution to improving industry relationships went to a class of five retiring executives: Minute Maid's Robert Holbritter, Procter & Gamble's Michael L. Maurer; Unilever's F.A. "Buddy" Miller and Mel Williams; and Philip Morris's Michael Irish.

      But perhaps the most remarkable moment of the day came when Danny Wegman accepted the Sidney R. Rabb Award, and spoke to the stresses that competition can put on relationships. He remembered that when competing with Ahold's Tops Markets in western New York, his own sense of competition led him to practically stop speaking to Ahold's Bob Tobin. Wegman was moved to tears when recalling this, and he said that the relationship has been repaired, and his own commitment to industry sharing, even among partners, has been redoubled.

    KC's View:
    We agree that a renewed on customers is an absolute essential if the food industry is to remain relevant.

    But the issue is whether and what actions will follow.

    It takes more than good intentions to pursue a customer-oriented strategy that may not be aligned with the priorities of operational efficiency. For many in the food industry, this is a counter-intuitive approach.

    "Should" is a word of one syllable…but it can be difficult to pronounce, and even more difficult to put into action.