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    Published on: February 13, 2004

    The Arizona Republic reported yesterday that there is new support in the state senate for a bill that would virtually put an end to the granting of tax breaks to big box retailers.

    "If passed, cities that grant tax breaks would lose as a penalty the same amount they gave away from the tax revenues they share with the state," the paper reports.

    While Wal-Mart is the best known of the retailers that would be affected, there are other entities involved, including Ikea and assorted auto malls.
    KC's View:
    Yikes!

    It was just yesterday that we wrote:

    We used to believe that communities should feel free to take such actions, but we're beginning to think that it may not be the smartest approach. Wal-Mart will litigate its way around the restrictions, pour money into campaigns that will supersede the laws, or will just open 99,000 square foot stores to which the restrictions don't apply.

    It just wastes time and money most of these municipalities don't have.

    So here's what these communities ought to do: triple or quadruple the tax rate for all such stores so that the increased tax revenue can support the new stresses put on the local infrastructure, pay teachers better money, put more computers in the classrooms, hire more cops.

    There are too many communities out there that do exactly the opposite - offer tax breaks to the world's richest and most successful company as way of getting them to come to town. And sure, they may generate more sales taxes…but the time has come to really take advantage of Wal-Mart's (and other similar company's) desire for world domination.


    We think this is a very good idea. And as you'll see in the Your Views section below, there is some support for it among members of the MNB community…as well as among some members of the Arizona state senate.

    Published on: February 13, 2004

    The Chicago Sun-Times reports that, in an unusual move to put a cap on the influence wielded by Wal-Mart in the toy business, manufacturers in that arena have decided to reduce shipments to the Arkansas-based retail giant. In addition, a number of manufacturers are looking to introduce products exclusively at Wal-Mart's competitors, including Toys R Us.

    The manufacturers believe that such a move is critical to reduce the rampant discounting done by Wal-Mart, which owns 21 percent of toy sales in the US, and that affects the overall profitability of the toy manufacturing biz. At the same time, the manufacturers seem to feel that it is in their own interests to shore up the operations of toy retailers that compete with Wal-Mart.

    Two such companies - FAO Schwarz and KB Toys - have filed for bankruptcy protection in recent months.

    However, manufacturers do have to be careful. They can't risk alienating Wal-Mart, and are prevented by antitrust laws from setting prices with retailers.
    KC's View:
    We think that more companies ought to take stands like this. It is on their own self-interest to do so, to not let too much power rest with the Nation of Wal-Mart.

    Published on: February 13, 2004

    The Detroit Free Press reports this morning that Kmart is conducting a nationwide store-by-store review that will result in an unspecified number of layoffs, adjusting store staffing levels in what company spokesman Jack Ferry said was a "normal review of our business."

    In some cases, according to the report, full-time employees will be reduced to part-time status - which would help Kmart deal with a 13.5 drop in same-store sales during the recent holiday season.

    Kmart, which emerged from bankruptcy protection last May, currently employs 155,800 workers at 1,500 stores and 2,200 at its Troy headquarters, according to Ferry.
    KC's View:
    All together now…

    Turn out the lights,
    The party's over…

    Published on: February 13, 2004

    The Associated Press reports that as the U.S. Animal Identification Plan gets phased in, it will mean that by this summer all cattle in West Virginia will get data-coded ear tags that will make it easier to track animals exposed to foreign diseases such as mad cow.

    The plan will be fully implemented in 2006, and will track all livestock, from place of birth to slaughterhouse.

    "By July 2005, all cattle, sheep, hogs and goats would receive tags that can be electronically scanned," the AP reports. "A year later, the tags will be placed on turkeys, chickens, horses, certain farm fish and other livestock."
    KC's View:

    Published on: February 13, 2004

    Wal-Mart's Sam's Club division announced that it has launched a partnership with NLG, a travel agency, to provide low-cost travel services. The service is available both online or via phone.

    "In keeping with our value statement and every day low cost philosophy, this enhancement to our on-line travel offerings is yet another benefit of having a Sam's Club membership," said Duane Futch, Wal-Mart's director of global travel, in a prepared statement.
    KC's View:

    Published on: February 13, 2004

    As the acquisition of the UK's fourth-ranked supermarket chain, Safeway Plc, by number five Morrison Supermarkets nears closing, market share figures show that there continues to be some slight shifting among that country's food retailers.

    In the quarter ending February 1, market leader Tesco increased its market share from 26.9 percent to 27.2 percent. Wal-Mart's Asda Group, which occupies the number two position, edged up from 17 percent to 17.1 percent. Sainsbury, which last year fell into the third position, also grew just a touch - from 16.4 percent to 16.5 percent.

    Morrison's (6.5 percent) and Safeway (8.8 percent) have a combined 15.3 percent market share - with analysts believing that the combined companies will be better able to compete with the three bigger companies.
    KC's View:

    Published on: February 13, 2004

    A US Securities and Exchange Commission (SEC) suit against two former Kmart executives - charging that they violated accounting rules at the chain before it went bankrupt - has been dismissed by a federal judge.

    The case against Joseph A. Hofmeister and Enio A. Montini Jr. collapsed when testimony suggested that the mistakes may actually have been clerical errors by an underling rather than any sort of criminal conspiracy.
    KC's View:

    Published on: February 13, 2004


    • Safeway Inc. reported a fourth-quarter loss of $696 million, which, while considerable and reflecting the costs of the Southern California strike, was less than a $1.05 billion loss recorded during the same period a year ago.

      Sales for the quarter totaled $11 billion, a three percent improvement from $10.7 billion in the prior year.

      The latest quarter included an extra week, which helped sales and profits.

      In related new, Safeway CEO Steve Burd said yesterday that he hoped to fill the company’s vacant CFO position by the end of March. The position has been vacant since the end of December, when Vasant Prabhu left to become CFO of Starwood Hotels and Resorts Worldwide.

      At the same time, BusinessWeek reports that the four-month-old Southern California supermarket strike could eventually be the downfall for Safeway CEO Steve Burd.

      Burd led the charge against the unions, which "has enraged employees, prompting Wall Street concerns that morale woes could persist long past the dispute's resolution."

      Safeway's board reportedly "fully supports" Burd and hi actions.


    • CVS Corp. reported that net income in the fourth quarter ended Jan. 3 rose to $263.4 million, from $200.1 million in the year-earlier period. Net sales for the quarter rose 17.5 percent to a record $7.45 billion, while same-store sales increased 7.4 percent in the quarter.


    • Dean Foods Co. reported fourth quarter net income of $86.5 million, compared with $63.1 million during the same period a year ago. Sales for the quarter climbed to $2.51 billion from $2.24 billion.

    KC's View:

    Published on: February 13, 2004

    Plenty of email about the Ahold decision to unload its Bi-Lo and Bruno's divisions.

    MNB user David J. Livingston wrote:

    Obviously the move to unload Bruno's and Bi Lo does not surprise anyone. This is going to be a blow the various consultants who have milked Ahold for years doing work Ahold should have been able to do for themselves. Ahold has developed a reputation of over analyzing everything and by the time they are ready to make a decision, too much time has passed and they have to analyze the project all over again.

    Another member of the MNB community wrote:

    What is Ahold selling? There is no more value left at Bi Lo or Bruno’s any more than there was when Penn Traffic finally decided to exit the scene with Big Bear in Columbus. It will also be interesting to see if Ahold gets real about valuation in order to get some of the debt paid down. There are some major reductions to the book value of Ahold coming if they are serious about a divestiture. Ahold paid 5 times EBITDA for Bruno’s in 2001, or almost $370 million.

    MNB user Michael A. Casciano suggested:

    I can say, with a reasonable sense of surety, that when the boys at Stop and Shop strike, there will be further sales plans, including Tops and Giant. Moberg doesn’t care about the brands, just results.

    MNB user Marty Gillen wrote:

    I'm surprised you did not bring up Wal-Mart in your comments on the sale of these once great chains. It is clear to me that Ahold is throwing in the towel and giving up on competing against the Wal-Mart Supercenter juggernaut in Bi-lo/Bruno's primary trading areas. The accounting scandal certainly is a contributing factor.

    Another member of the MNB community chimed in:

    We were a vendor for one of the Ahold operating companies for several years, generating about $10,000,000 yearly sales. We had an excellent relationship, produced an outstanding product and offered superb quality and service. At the insistence of Ahold corporate to centralize all operations, the purchasing for the product produced by us was awarded to a larger vendor, under the guise of an effort to reduce costs, supposedly benefiting Ahold by creating "economies of scale". What actually transpired was a change to an inferior product at a significantly higher cost by millions of dollars more per year. It does not seem to bother Ahold that they are paying more and getting less. Ahold has turned a deaf ear to our offers to help them save the millions of dollars that would help them in their current financial crunch. We don't understand the strategy.

    Is it known if this has this occurred with any other vendor?


    Not by us. But if there's anyone else out there who knows anything…

    MNB user Joe Hutchinson wrote:

    As someone who knows and respects Bill Grize and, newly promoted Marc Smith, I know their focus will be upon the rebuilding what was once a great start to Ahold's plan to be a major player in the U.S. market. In my opinion the US Food Service purchase was the root of all their current troubles--it made no sense then and even less now, and the divestiture of Bi-Lo and Bruno's is a good move for all involved

    The Ahold objective is achievable and I wish them well.





    We asked yesterday if there is anyone who makes Burger King a first choice when thinking about fast food…and one person came forth to say:

    Burger King is my first choice, but due to its limited kingdom, rarely the first encountered. After all, isn't that what fast food is about--eating now?

    MNB user Bob McMath had some thoughts on the subject:

    Far be it for me to claim I am a fast food restaurant expert, but I wonder if all the turmoil in recent years has not been the major culprit in the gradual downturn in Burger King? McDonald's had a founder (or one who took over early) and had a dream he built on. So did Wendy's! I can only recall Burger King as the product of a big corporation (more recently several different ones) and cannot recall who started it or any dream anyone had except to get in on the fast food "Trend Wagon."

    I know from personal experience in visiting many Burger King restaurants all over my travels (including London and Hawaii) that my recollection is near chaos if there were more than a handful of people waiting to order or obtain their orders. I can recall any number of times when I considered the individual restaurants so badly managed that I just would not consider going back to that particular one, even if it was the most convenient to where I was at the time. I remember waiting about 12 minutes in one restaurant that I stopped at before I could get my order, and there were four or five people on the other side of the counter and only three other people on my side trying to order or get their orders! I also recall thinking that one of the best ways to "smarten up" the chain would be to give better training to the management.

    Incidentally, while we always liked the local Pizza Hut in Ithaca on the hill, we have stopped going to them in our travels as a result of seeing a store manager (clearly identified) in another city chasing one of the pretty female staff around the restaurant with a carving knife which went on for more than one spin around the restaurant! It was reasonably late in the evening, and my oldest son and I were the only patrons, at the time.

    We know getting good staff for retail serving/sales is a problem in most retail stores, but one hopes the management has enough sense and training and knows how to run a decent restaurant following guidelines of common sense as well as rules laid down by the originator of the operation who had the original vision!





    Regarding Meijer's layoff plans, one MNB user wrote:

    One would think that Meijer would be teaming up with vendors now, more than ever, as they need their support to compete and keep growing profitably. Instead, they have become devoid of any relationships and ignore any past track records (the ones that assisted in building their company), refusing to entertain any needed vendor-business climate changes. Simply put, if they continue their ruthless, unprofessional, and self-serving style with the vendor community, I am sure the vendors will go with the #1 competitor that actually moves the cases and treats them as business professionals. Meijer is losing what set them apart to begin with. Their plans are to become a "me too"! If they become a "me too", they will be a poor one!

    It has been our impression, from a number of sources, that cooperation and partnering with vendors is very much a high priority for Meijer. Rome wasn't built in a day…but we've seen evidence that Meijer is working hard in this area.




    Response to yesterday's story about Wal-Mart filing two lawsuits, with the California State Superior Court and the Federal Court, challenging the Turlock City Council's adoption of an ordinance that will prohibit retailers with total sales floor area in excess of 100,000 square feet from devoting more than 5 percent of the sales floor area to the sale of non taxable merchandise, such as groceries and prescription drugs.

    One member of the MNB community wrote:

    My guess is that if you examined the council members of Turlock you will find business owners who have much to lose with the opening of a Wal-Mart supercenter. 20 years ago, when Wal-Mart was not into food, you would generally find a Wal-Mart store in close proximity (if not right across the street) to K-Mart. K-Mart didn't get it...and look where they are now. Today many grocery accounts don't get it either. A few years back, Henderson, NV tried to dictate terms to a new Wal-Mart supercenter. Wal-Mart went after the city and won. Today, it is difficult to find a parking place in the Wal-Mart lot, it is so busy.

    The people vote the best way they know how...with their pocketbooks. If the grocery chains don't soon wake up to what is happening, then many of them (like Basha's) will end up becoming dinosaurs, like K-Mart. True, Wal-Mart is non-union and they may pay less than union stores. On the other hand, their benefits are better than most, their employees don't have to pay union dues, plus they don't seem to lack applicants for employment. Their prices are lower because they look at suppliers as partners (who have to jump through a lot of hoops just to get in front of the buyer)...take a look at Wal-Mart's new vendor application some time...you can find in online. Traditional grocery accounts look at suppliers as profit sources with high slotting and a ton of ad money. Wal-Mart? They simply match all the ads for a particular week...no questions asked.

    It's time for the grocery industry to do some out-of-box thinking. Some will make it...many will not. Irregardless, the grocery picture is rapidly changing because of Wal-Mart.


    We suggested in our commentary yesterday that instead of banning big box retailers, communities ought to "triple or quadruple the tax rate for all such stores so that the increased tax revenue can support the new stresses put on the local infrastructure, pay teachers better money, put more computers in the classrooms, hire more cops.

    "There are too many communities out there that do exactly the opposite - offer tax breaks to the world's richest and most successful company as way of getting them to come to town. And sure, they may generate more sales taxes…but the time has come to really take advantage of Wal-Mart's (and other similar companies') desire for world domination."

    This prompted some responses:

    MNB user Denise Remark wrote:

    Oh Kevin, you're brilliantly cunning! It's perfect and could be applied to every municipality in the US that has a Wal-Mart or any other type of supercenter! Have you ever thought about running for, say, Governor of California?

    Actually, there may be an opening in the Connecticut governor's mansion a lot sooner…maybe we should go after that one.

    MNB user David Malsom wrote:

    I totally agree! If Wal-Mart wants to come into an area----MAKE 'EM PAY!!


    And MNB user John Welsh had a one-word response:

    Amen.




    And finally, MNB user Rosemary (Balistrieri) Fifield made a contribution that built on a headline that we used yesterday. The story was about the pro-carb summit taking place in Rome; the headline was When low carb hits your eye like a big pizza pie, that's annoying… And she wrote (and you can sing):

      When low carb hits your eye like a big pizza pie, that's annoying

      Crustless pizza with cheese in a soup bowl puh-lease, that's annoying

      Bells will ring, ting-a-ling-a-ling, ting-a-ling-a-ling as we sing "Feed me pasta!"

      No more meat, just good cheese, on a heap of gnocchi, Meatballs? "Basta!"

      When your pasta fazool has no pasta, you fool, that's annoying

      Garlic bread with no bread plays a game with your head that's too much

      Let me tell you, paisan, all the sense now is gone from the diet

      Scuza me, but you see, for Italians like me, that's annoying, annoying, ANNOYING!



    NOW, THAT'S BRINGING SOMETHING TO THE TABLE!!!!!

    As her reward, Rosemary gets an MNB t-shirt.
    KC's View:

    Published on: February 13, 2004

    Had a wonderful red wine last night, a 2001 Red Diamond Cabernet Sauvignon from Washington State - it was just incredibly smooth, easy-to-drink, and went great with a plate of spaghetti topped with Margaritaville Island Lime Shrimp (which, if you haven't had it, is a great safety net to have in the freezer, and is delightfully spicy and perfect with pasta or rice.

    If you’re interested in getting a bottle or two, and your local wine merchant doesn't have it, try our guy:

    http://nicholasrobertsltd.com

    We have another gastronomic recommendation for you…a little something we stumbled on recently, but that was just amazing.

    There's a little company called Southern Ray's that makes a wonderful line of barbecue sauces and marinades - just great. We've used the sauces on a wide variety of ribs and meats, and love them - but our favorite has to be when we put the company’s Fat Free - Apple & Wine Marinade in a large pan, and then put in a bunch of Aidell's Chicken and Apple sausages. Cooked them on low for about an hour…the smell was delightful, the taste was fantastic.

    We should note that none of these companies are sponsors of MNB…we just happen to think they make terrific products that taste great…and worthy of your support. (Besides, we're all looking for products and recipes that'll differentiate our companies. It’s our pleasure to do what we can.)

    You can find out more at:

    http://southernrays.com

    http://www.aidells.com

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