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    Published on: April 2, 2004

    The Washington Post reports that the California Walnut Commission will be allowed by the US Food and Drug Administration (FDA) to put a label on its products that suggests that walnuts can help fight heart disease. By making this allowance, the FDA is, for the first time, permitting a health claim that is based on inconclusive scientific testing that looks promising.

    The new label approved for whole and chopped walnuts will read: "Supportive but not conclusive research shows that eating 1.5 oz. of walnuts per day, as part of a low saturated fat and low cholesterol diet, and not resulting in increased caloric intake, may reduce the risk of coronary heart disease."

    In its letter to the commission authorizing the new label language, the FDA said that "After reviewing the scientific evidence in your petition, FDA concludes that there is very limited and preliminary scientific evidence supporting the relationship between consumption of walnuts" and reducing coronary heart disease.

    Similar claims being made about other nuts are being reviewed by FDA for possible action.

    Lester M. Crawford, acting FDA commissioner, told the Post that the "qualified" health claims will allow consumers to learn about possible health and nutrition benefits from foods as the science unfolds. The decision to allow such unsubstantiated claims has been supported by the food industry, though opposed by some consumer groups.
    KC's View:
    We're not sure that allowing unsubstantiated claims is something that is good for the food industry in the long term, and may in fact be the kind of short-term decision that often comes back to bite retailers and manufacturers.

    At least the label claim isn't as vague as what the walnut folks wanted: "Diets including walnuts can reduce the risk of heart disease."

    But if recommendations are being made before all the science is in, doesn’t the industry run the risk of being proven wrong and having demonstrated to consumers that it will make erroneous claims in the pursuit of short-term sales boosts?

    That's not to say that the scientific review process is perfect. It probably could be more efficient and effective. But the potential for problems here is striking.

    Qualified information isn’t necessary quality information.

    Published on: April 2, 2004

    Kroger Co. says that it has offered wage increases and improved health care plans to its some 11,000 workers across the Houston area in an effort to complete contract negotiations before the current pact expires this weekend.

    The United Food and Commercial Workers Union (UFCW) has not yet approved or voted on the offer, according to reports.

    Kroger did not disclose the details or financial terms of its offer.
    KC's View:
    Hard to imagine that they're going to want to repeat the Southern California fiasco in Houston. Look for an agreement, and then both sides will move on.

    Published on: April 2, 2004

    Guest column by Jack Whelan of The Hartman Group

    In the great Biblical battle between David and Goliath, all the smart money was on Goliath. The little guys, as a rule, don't beat the big guys, because usually they're playing on the terms the big guy defines. That's a sure formula for a losing strategy. Because one thing is for sure - you can't beat the Goliaths of the world playing their game. The gods have to be smiling on you, but you've got to have the guts to buck the conventional wisdom and the knowledge of how to do it.

    Wal-Mart is the Goliath on the national retail scene right now, and if it keeps marching unimpeded, soon it will be an international Goliath as well. According to the conventional wisdom, it has everything going for it. It's a well-oiled machine with tons of cash, a commanding distribution system and a ruthless formula for market domination that anyone in its way is powerless to defend against.

    It's understandable that Wal-Mart's success commands respect. The Wal-Mart game is the perception of price and convenience - it's one-stop shopping where you believe you're going to find most of what you need at "everyday low prices." That's a good formula, but it's a formula Wal-Mart owns because nobody does it better. If any retailer wants to imitate the formula, fine, so long as Wal-Mart isn't on their playing field. As soon as it comes into town, you can't win if you're going to play by the Wal-Mart rules. It's a formula of utility.

    But if Wal-Mart scores high on the utility index, I'd bet its score on the emotional index is about as low as you can go. People go there because it's practical, not because they love to go there, in spite of what their ads may try to show. It's about as soulless a place as you can find on the national retail scene. Wal-Mart's attempts to overcome this limitation by providing "retailtainment" along the lines of X-men scavenger hunts speaks for itself. White men can't jump, and Wal-Mart can't dance. Ain't gonna happen, and there's no need for the Wal-Mart people to worry about it. They've got a formula that works, and they just look silly when they try to be something they're not.

    So, here at The Hartman Group we have been wondering if price and convenience is really what is the most important factor for customers in the long run. We think not. We're not saying it's unimportant, but we're questioning whether it's the most important. And we question whether a lot of people go to Wal-Mart for price and convenience (and for everything they need!) by default because something better isn't being offered to them. Is it possible that a new game with new rules can be developed and that, as Goliaths gave way to Davids, Wal-Mart's days are numbered as well?

    You know the old Joni Mitchell song about paving paradise and putting up a parking lot. The theme was about not really knowing what you have until you've lost it. Well in the usual way of thinking about it, there's kind of an analogy to the Wal-Mart situation. You know, Wal-Mart equals parking lot; small neighbor-friendly stores equals paradise. But the thing is that most of those small stores in town centers were pretty dreary, not very well managed, and not all that neighbor-friendly. The idea that somehow we've lost paradise when that Wal-Mart comes into town is largely a nostalgic mythologizing of a paradisal past that mostly didn't exist.

    Sure, there were exceptions, but they only prove the rule. Most small-town America stores were as mediocre and soulless in the '50s and '60s as anything you could accuse Wal-Mart of being today. Worse, even. They were just Wal-Marts on a smaller scale with a lot less merchandise for a lot higher prices, more often than not staffed by grumpy, not very knowledgeable, not very helpful, poorly trained and poorly educated personnel.

    When the chains started coming in to the malls that started popping up everywhere, it just wasn't price, convenience and variety that was at the heart of their success, it was also a more interesting, higher-quality shopping experience than you'd find in the dreary stores downtown. The chains ensured a quality standard that you could depend on. You go into a McDonald's, you know what you're going to get; you go into the greasy spoon downtown, well, you're taking your chances. People were disloyal to the small downtown stores because there wasn't much there to command their loyalty to begin with.

    Recently I bought a dog, and at first I was committed to buy all my pet supplies at my neighborhood pet store. But after a while I gave up on it because the store was a disorganized mess; the owner was depressive or preoccupied with an animal rights crusade she was on; her merchandise was expensive, and she seemed continuously annoyed to have to deal with my routine or insignificant needs. I'm as attracted to your quirky eccentric as much as the next guy, but the bottom line is that as much as I wanted to love her, she spurned me, so I started going to one of the big-box, national pet store chains. I found the people there helpful, fun, and a lot easier to talk with. And the prices were way lower and the variety and ease of finding what I needed were far superior. It was an easy choice to keep going there instead of shopping local. All the same, I wish those people in the big box were the ones staffing my neighborhood store, because I'd much prefer to shop in my neighborhood.

    What's the point? I think people want something they don't get at the big chains, but when they go to their local or neighborhood stores they don't find it there. If they did find it, the megastores would be in big trouble. So is there a market opportunity here? For sure, but it starts with local stores offering the kind of value that you don't get at the big boxes. It shouldn't be that hard, but it's amazing how rare it is to find. Once you do find it, you fall in love, and that's what keeps you coming back, even if it means paying higher prices. Because ultimately what people want is value, and value means more than getting something at the lowest price. It's about what matters to them. As Wal-Mart continues to focus on value to save their customers money, those customers are beginning to focus on the value of "values." Their values, not the values Wal-Mart has prescribed.

    Customers want to be in love, and if they don't find it, they'll settle for price and convenience. We didn't pave over paradise in the '50s and '60s; some smart business people recognized a need, and they developed a very effective way to meet it. Wal-Mart is the logical consequence of a trend that began then, and it will continue to dominate the retail world until customers are offered something better. What is that better? That's something we'll be exploring in future columns. There are some David's out there taking on the Goliaths, and we believe that in the long run, they'll be changing the rules of the game. You gotta love the underdog, but that underdog has to show it can win the game if it's going to have any staying power, that includes having the knowledge as well as demonstrating the guts to do. How to do it is the trick, but it's one worth thinking hard about.

    For more information about products and services offered by The Hartman Group, go to:
    KC's View:

    Published on: April 2, 2004

    USA Today reports on how, two years before government regulations kick in requiring the labeling of trans fats in foods, several manufacturers are moving to get rid of what is believed to be one of the deadliest ingredients in American diets.

    Pepperidge Farm, for example, is moving to a trans-fat-free Goldfish recipe this summer. Coming shortly are Triscuits and reduced-fat Oreos from Kraft that are both free of trans fats. And these come on the heels of Frito-Lay's introduction of trans-fat-free snacks such as Cheetos, Tostitos and Doritos.
    KC's View:
    These companies are to be applauded for moving quickly in the right direction. It is in their self-interest to do so, but that doesn’t diminish the fact that they are doing the right thing for the American consumer as well as their shareholders.

    Published on: April 2, 2004

    The Wall Street Journal reports that it appears that JC Penney is close to finally unloading its Eckerd drug store chain in a pair of deals that would sell the southern US stores to CVS and the northeastern stores to Canadian retailer Jean Coutu.

    The total price for Eckerd would be about $4.4 billion (US), or about 75 percent more than JC Penney bought the company for back in 1996.

    Negotiations are characterized as being the "latter stages."
    KC's View:

    Published on: April 2, 2004

    The United Kingdom Consumers’ Association has released a report charging that while major cereal manufacturers such as Nestlé and Kellogg try and market cereals as being "healthy," 85 percent of these products contain a lot of sugar as defined by the UK's Food Standards Agency, nine percent contain a lot of saturated fat, and 40 percent contain a lot of salt.

    Coming in for specific criticism were children's cereals, a third of which were described as having too much sugar and two thirds as having too much salt.

    Nick Stace, director of communications at the Consumers' Association, said, "Breakfast cereals have a healthy image, yet our research shows that big brand manufacturers are lacing their cereals with such high levels of sugar and salt that it is no wonder that we have a public health crisis on our hands."

    The association called for better, more accurate labeling as a method of communicating the products' true nutritional value.
    KC's View:

    Published on: April 2, 2004

    The German publication LebensmittelZeitung reports that now that Wal-Mart has begun to release financial information about its German operations, it is becoming clearer exactly how challenging its operations in that country have become.

    The report says that Wal-Mart has released sales figures on four of its 92 stores there, showing that last year those units alone lost the equivalent of $32 million (US) on sales of $404 million (US). According to the paper, Wal-Mart attributes the losses to "more intensive staffing and a 'higher level of service,' lower prices, more nonfood offers than competitors, 'expectedly big problems' with the implementation of Wal-Mart’s distribution system, 'exceptionally high investment' in the rebadging of stores, difficulties regarding the adaptation of the assortment and logistics systems."
    KC's View:
    In other words, even Wal-Mart can't hit home runs all the time.

    The thing that Wal-Mart has that a lot of other companies don't have is time and bench strength. It can devote the necessary resources to turning the German situation around, however long it takes.

    And we suspect that it will.

    Published on: April 2, 2004

    • Procter & Gamble announces that it will sell its Sunny Delight and Punica brands to private equity firm J.W. Childs Associates. Terms of the deal were not disclosed.

      The move allows P&G to bail out of a juice drinks business that has generally been a disappointment for the company.

    • The other day, MNB had a story about plans for a gay television network, with commentary about whether a "gay supermarket" might be next. (A suggestion that wasn't universally appreciated by the MNB community, by the way.)

      Now comes word that a company called Scarborough Research, which is a joint venture of Arbitron Inc. and VNU, is forming a strategic alliance with OpusComm Group to provide comprehensive gay/lesbian consumer research services.

      The goal will be to conduct a regular study that "measures the demographics, purchasing behaviors, lifestyles and media usage of gay/lesbian consumers. The G/L Census offers significant insights in consumer categories such as automotive, childcare, computer equipment, electronics, entertainment, financial, food and beverage, home and garden, pets, sports and fitness and travel as they relate to the gay/lesbian community."

    KC's View:

    Published on: April 2, 2004

    We got well over a hundred emails yesterday in response to our little April Fool's Day joke that ran as the first story on MNB…and only one person thought it was in bad taste and humorless. The rest of you seemed to like the gag…

    If you missed it, go to:

    The only complaint voiced was that we might actually be giving Wal-Mart ideas…or that we actually were being more prescient than funny.

    Time will tell. But thanks (to most of you) for getting the joke.
    KC's View:

    Published on: April 2, 2004

    Ireland is now the perfect country.

    We've visited here seven or eight times, and even lived here for a summer back in the mid-seventies. (Some people had the "summer of love." We had "the summer of Guinness.") And the only thing we've never liked was the fact that the pubs were so damned smoky. That's tough to take if you love pubs but are allergic to tobacco…

    But this week, Ireland has implemented a ban on smoking in pubs and restaurants…which means that this is now a perfect country. It is a decision that is not without its detractors, but people largely seem to think it is a good idea…even some smokers, who say that they're going to use the motivation to try and quit.

    Another ongoing revolution in Ireland has been the amazing improvement in the restaurants and food available here. While there may have been some justifiable criticism of the cuisine in the past, the food here just keeps getting better and better.

    We're in Dublin moderating the CIES "Food Business in Society" conference (which we'll have some thoughts about next week). And last night, PepsiCo - which is the primary sponsor of the meeting - took us all out to dinner at Chapter One, a wonderful restaurant on the north side of Parnell Square that emphasizes organic and seasonal produce. It was just a grand meal - we had an amazing lasagne made of crab, shellfish and fennel, and then a main course of "Aberdeen angus fillet of beef, button mushrooms, a chestnut and smoked bacon dumpling, spinach, béarnaise sauce and cocotte potato. The wine was fabulous - a 2001 Crozes Hermitage "Les Jalets" Jaboulet (which, while we may have trouble pronouncing, we had no trouble drinking). And dessert was a warm blueberry pudding with sauce anglaise.


    This is tough duty here. We hope you all appreciate how hard we're working to stay informed about the major issues affecting the food business.

    Work, work, work…
    KC's View: