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    Published on: April 29, 2004

    Earlier this week, FMI CEO Tim Hammonds told MNB that one of the goals at the Food Marketing Institute is to “give the floor a new look every year by rotating spotlight categories in and out coupled with special pavilions on the floor targeted at each year's hot topics. This year, our pavilions are the new electronic product code and healthy living (diet and health).”

    Because the descriptions we’ve been reading about the new Healthy Living Pavilion struck us as particularly intriguing, we thought that we would turn to Jim Wisner of the Wisner Marketing Group, who has been working with FMI on the exhibition and education aspects of the pavilion, to get a heads-up on what to look for.

    MNB: What’s the general philosophy/strategy behind the Healthy Living Pavilion?

    Jim Wisner: From a consumer standpoint there really is no more significant a set of issues than health, nutrition, and wellness. The reasons are all very evident: An aging population, the impact of managed care, new products and technologies, and the explosion of information that helps us understand how to better manage our lives.

    For the supermarket industry, there is no bigger opportunity. The emergence of “self-care is healthcare” involves food, drug, OTC and personal care; it is only within the supermarket environment that the consumer can act on all of these different product needs. The point of the Healthy Living Pavilion is both to focus retailer attention around these issues and to provide some of the means by which they can begin to build programs around their own stores. This is a huge opportunity for the supermarket industry.

    MNB: It sounds like you are defining “healthy” in the broadest possible way—for some people it is a weight loss issue, for others it is being more nutritionally aware, for still others there is learning about foods that are relevant to a specific medical condition. It’d be our perception that this breadth of approach - and the granularity of understanding - actually reflects a sophistication that a lot of mainstream retailers don’t demonstrate in their stores. For them, health food is health food, and that’s as complicated as it gets. Would you agree? And if so, how do you get retailers to take a more comprehensive approach to a complicated category?

    Jim Wisner: “Healthy” truly does take on different degrees of meaning for each individual. For some, it involves managing health conditions; for others, it is simply viewing prevention as the key to a happy and healthy existence.

    Organic foods add a lifestyle dimension and new viewpoint to the equation. There are also the different health needs of different groups of people to consider—men, women, elderly, children, and others. Recognizing the breadth of this topic, each day the Healthy Living Pavilion will feature an expert panel focusing on a different area of what “Healthy” means to the consumer in a supermarket environment. On Sunday it will be pharmacy, Monday is food and nutrition, and Tuesday will look at special needs of individual consumers.

    There is no question that many retailers have not yet risen to the occasion as quickly as their consumers have come looking for solutions. The good news is that many are now beginning to take a more comprehensive approach to health that involves the entire store. I think the fact that Sunday at the Show has been designated as “Pharmacy Synergy Day” underscores that issue. “Health” and “Healthy” covers an incredibly broad range of topics. I think the industry is now beginning to fully appreciate that this is one of those great occasions where the emerging needs of our customers are fully aligned with some very profitable opportunities.

    The fact that this is a complicated issue only creates greater opportunity for increased differentiation from retailer to retailer. There is not just one right answer to how you approach marketing to the health needs of your consumers.

    Each retailer can carve out its own niche.

    MNB: Explain the “Chef’s Corner” and “Fun Walk” concepts—they seem to be a little unusual for FMI.

    Jim Wisner: The Chef’s Corner is first and last about food, and this is the food industry. “Good For You” should taste good, too. What’s the point of eating healthfully if you can’t enjoy it?

    The Fun Walks serve several purposes: First, they are a point of commitment. The GMDC/FMI Whole Health study several years ago identified being “a wellness-centered organization” as one of the keys to success. That begins with being health focused in your own life. Second, exercise is certainly a vital component of staying healthy. It is probably the lack of exercise that has most contributed to the obesity epidemic that we now face in this country. The third reason for the Fun Walks is to help the attendees acquire a quick overview of the Show and locate those exhibitors who may have the products or programs that can help them build health-focused promotions. They will be called out by the Fun Walk guide. We are going to have some fun with this, too. There will be prizes, you’ll get a button for completing the walk, and we suspect we will have a few celebrity walkers, too. This is an especially great activity for first time Show attendees.

    MNB: Virtually every retailer who comes into the Healthy Living Pavilion will be in the position of needing action steps that they can take home to headquarters and sell to higher-ups. In your mind, what should these retailers be thinking about doing to build sales in this category?

    Jim Wisner: At the end of the day, the whole point of the Healthy Living Pavilion is that the retailers in attendance will be far better equipped to build sales around Health and Wellness themes. To do that, there are really four things that must occur.

    • First is an understanding of the issues. The scope of activities provided in the Healthy Living Pavilion will most certainly touch on most of them.

    • Second is just knowing what’s available. In the Pavilion you will be able to pick up self-guided tour sheets that are organized around a variety of different topics—low-carb, diabetes, healthy snacks, and natural/organic, just to name a few. These guides are designed to help Show attendees use their time efficiently to identify and meet with all those companies that have something to offer for their most important issues.

    • Third is to begin providing consumers with information. In the most recent FMI Shopping for Health survey, 81% of the shoppers thought it was very, or somewhat, important that their supermarket carry health and nutrition information.

      However, only 35% felt that their store did an excellent or good job of doing this. This was the single biggest opportunity gap measured in the FMI survey. Consumers are confused about what to buy, and information can most certainly lead to sales.

    • Fourth is a commitment to DO something. Everyone talks about this topic, everyone knows it is important, but as of yet only a handful of retailers are approaching it aggressively. In your interview with Tim Hammonds the other day he indicated that the focus was on targeting growth as the new priority. Focusing on this most important of consumer topics is certainly a path for growth.

    For more about FMI 2004, go to:
    KC's View:
    It so happens that as we were putting this piece together, FMI announced that Health and Human Services Secretary Tommy G. Thompson will formally open the Healthy Living Pavilion at FMI on Sunday. He’ll also be sharing the stage during the annual “FMI Speaks” presentation on Sunday morning.

    So this is a big deal. And a smart move.

    Published on: April 29, 2004

    The News & Observer in North Carolina reports that Harris Teeter is once again accepting Internet coupons that have been printed at home by consumers.

    The company banned such coupons last summer when there was a rash of counterfeit coupons hitting the marketplace, which some people were using to get free products and exorbitant discounts.

    Steven Boal, chief executive of Coupons Inc., said that while Harris Teeter was one of the first chains to stop taking the e-coupons, it also is one of the first to start taking them again.

    The paper writes, “The move follows an agreement in which food manufacturers and coupon distributors agreed to keep the most attractive targets off the Web - coupons for free products or whopping discounts.”
    KC's View:
    The ban on Internet coupons had to be temporary. The technology is too powerful and too pervasive.

    Published on: April 29, 2004

    The Conference Board's reports that its consumer confidence index reached 92.9 this month, up from last month’s 88.5.

    In addition, home sales and job growth also were reported to be on rise, adding to the picture of a US economy that is increasingly rosy as the presidential election approaches.
    KC's View:
    The New York Times has an interesting column by Tom Friedman today in which he writes that the current environment is exactly the opposite of what had been hoped for by the John Kerry campaign, which has certainly been counting on a stable Iraq and a reeling economy. Instead, we’ve got an improving economy and an Iraq in turmoil.

    Which probably just means that the next six months of campaigning is going to be a nightmare for everybody.

    Published on: April 29, 2004

    The BBC reports that UK retailer Tesco will introduce what it is calling a “Trim Trolley,” which is actually harder for customers to push.

    The goal is to create resistance that will give customers a workout as they shop, and allows them to raise the level of resistance for a tougher workout. A monitor shows both heart rate and the number of calories burned – which, during an average shopping trip, would be as much as 160 calories, according to the company.
    KC's View:
    Now, if they could just add an alarm feature that sets off a primal scream if the shopper puts ice cream, pie, or cake into the cart – now that would be technology that works.

    Published on: April 29, 2004

    Wine Spectator reports on the unexpected success being enjoyed by the Niebaum-Coppola Winery’s newest production – champagne in a can.

    That’s right.

    The wine is the sparkling Blanc de Blancs wine called Sofia, made by the Napa Valley winery owned by famed film director Francis Ford Coppola (The Godfather). It is named after another filmmaker – his daughter, Sofia Coppola, who wrote and directed Lost In Translation last year, and won a Best Original Screenplay Oscar for her efforts.

    Niebaum-Coppola has made a Sofia sparkling wine for some time, but this is the first time it has been available in this form. The winery says it is aimed at the Sex and the City crowd, and the small, pink, 6.3-ounce can was designed to be less intimidating and more user-friendly to potential sparkling wine drinkers.
    KC's View:
    Coppola actually launched this product earlier this year as an Oscar giveaway, and it turned out to have surprising appeal.

    We happen to think the cans might have more appeal than the winemakers think. We’ve always been a big fan of Sofia (both the filmmaker and the sparkling wine), and we happen to have a bunch of the cans in our refrigerator, chilled and waiting for an excuse.

    And trust us, we’re not part of the “Sex and the City” crowd.

    Published on: April 29, 2004

    • Supervalu is aggressively looking for new Save-A-Lot franchisees to join the chain of limited assortment, price-driven supermarkets. The company will have a booth at the FMI Show next week, and sent out an email to attendees yesterday pitching Save-A-Lot as the “nation's leading extreme value grocery chain,” as the “5th largest chain under a single banner, serving 4 million shoppers each week,” as an “efficient, turnkey business model for retailers” requiring “less start-up capital than conventional stores.”

    • Starbucks CEO Orin Smith said yesterday that steadily increasing dairy prices could force the company to raise prices on its coffee drinks for the first time in four years.

    • UK c-store chain Londis has agreed to a takeover offer from Irish firm Musgrave that is the equivalent of $106 million.

    KC's View:

    Published on: April 29, 2004

    Global notes & commentary from…

    Mexico’s three largest domestic retailers, Soriana, Comercial Mexicana (CCM) and Gigante, have announced their annual results for 2003. The largest of them, Monterrey-based Soriana, has reported consolidated net sales of USD3,306 million for 2003, representing an increase of 7.1% on the 2002 figure. Net profit grew 1% to USD150 million. CCM has posted net sales of USD3,236 million, 4.9% up from 2002, whereas net profit increased 25.9% to USD96 million. Lastly, Gigante has reported net sales of USD2,880 million, 3.2% down on last year's showing.

    The latest results posted by the Mexican retailers range from modest to disappointing, both in terms of sales and market share growth. Despite their commitment to strengthen their position in the market against archrival Walmex (Wal-Mart’s Mexican operation), Soriana increased its share a meager 0.1% during 2003, whereas both CCM and Gigante actually lost market share, 0.1% and 0.4% respectively.

    Although all retailers have had to operate within a slowly growing market, it did not stop Wal-Mart from posting a staggering 16.7% increase in sales last year. The American company’s financial muscle and its capability to source globally at cheaper prices are continuously strengthening its position in Mexico. In fact, Wal-Mart’s market share, which increased a remarkable 1.3% during 2003, is now higher than the three Mexican retailers put together.

    Last year, in a bid to stave off this relentless assault, the three retailers announced the creation of Sinergia de Autoservicios, a joint buying and operational alliance as a means of cutting costs and boosting profits. This was seen by the industry as probably the only way to effectively respond to Wal-Mart’s threat, apart from a potentially difficult merger of the three retailers. However, in March this year, Mexico’s antitrust authority blocked the alliance and rejected the creation of Sinergia. This has left the companies in a delicate position, although the retailers have 90 days to appeal against the decision.

    In terms of growth, out of the three retailers, Soriana is the most aggressive. The retailer is diversifying and expanding into new formats, namely City Club for warehouse clubs and Mercado Soriana for superstores. It is now the second largest retailer in the country, having trailed CCM three years ago. Soriana plans to open 25 new stores this year, the highest number of openings in the company’s history.

    With regard to CCM, the company has embarked on a strategic plan to become more competitive. The retailer, which last year acquired the hypermarket and shopping centre operations of French operator Auchan, is pursuing a flexible strategy for organic growth, prioritizing the expansion of the Bodega, Mega and Costco (joint venture) formats. CCM is also closing non-profitable stores and selling non-strategic assets. All this has helped to improve profitability, as shown by the remarkable 25.9% increase is net profit during 2003. This year, CCM plans to invest USD180 million in the opening of 17 new stores and restaurants, a move that the retailer predicts will boost overall sales by between 6% and 7%.

    Lastly, Gigante plans to invest around USD95 million in Mexico this year with the opening of mainly non-food outlets. This investment comes on the back of a poor 2003, with competitive pressure taking its toll on the retailer. However, it is successfully expanding into California, where it caters for the large Hispanic community. It operates eight stores there at the moment, and is looking to open a further 12 superstores by the end of 2008.

    In summary, although the three retailers are making an effort to become more competitive and grow, the conjunction of a slow growing market and the might of Wal-Mart has proved difficult to beat, especially for Gigante. Nevertheless, things may turn out more positively should the buying group Sinergia get the go ahead, coupled with an expanding economy, which is forecast to pick up this year and grow by 3.5%, and their aggressive expansion plans. However, with Wal-Mart expected to invest around USD650 million in the opening of 77 new stores up to mid-2005, the competitive situation is unlikely to ease in the foreseeable future for the Mexican triad.
    KC's View:

    Published on: April 29, 2004

    • Wm. Wrigley Jr. Co. reported first-quarter profits of $111 million, up 14 percent from $97 million during the same period a year ago. Worldwide sales for the period reached $812 million, up $140 million from the first period a year ago.

    KC's View:

    Published on: April 29, 2004

    Regarding our comment that a new Wegmans store near Dulles Airport in Washington, DC, is one of the best five supermarkets in the world, MNB user Patricia J. Spanganberg wrote:

    Wegmans isn't one of the top five grocery stores I've ever been it - it is NUMBER ONE!!! There is nothing like it anywhere because the company really cares about its personnel and their customers. I don't think Safeway can complete with that because Wegmans doesn't have to answer to shareholders.

    There was an exchange yesterday about the use of promotional dollars, and we commented that Wal-Mart has an advantage because it doesn’t take them. MNB user Bobby Thompson wrote:

    You said in today's communication that you disagree with me on the shift of promotional dollars into Wal-Mart because they do not ask for Promotional Dollars, just the lowest price.

    How do you think the major companies get them the lowest price? They do not change their list prices. Instead, they shift the promotional trade dollar "mix" into an area of "funding" for Wal-Mart. Usually it’s a fund that's similar to a BDF fund that P&G utilizes ($$/Case) that can be used at Wal-Mart's discretion. The one thing that you forgot to mention was diverting, which grocers made famous over the years. Ironically, Wal-Mart is in that game as well.

    In your defense though, I do believe that the grocery chain deserves what they are getting currently. The old days of free labor on store sets, slotting, golf tournaments, traditional weekly circulars, lack of vision, etc. has put them into a never ending downward spiral that will never end, especially with their stubbornness.

    We got a number of other emails about slotting and promotion allowance investigations. One MNB user wrote:

    Glad to see the articles on the high cost of slotting. The sooner the industry decides to make their profit on the "sell", the better their odds are for survival.

    Most new products are now going to WMT first because it is an easier entry to the market.

    And another MNB user chimed in:

    Two leading retail operations showing growth (Wal-Mart and Tesco) do not take slotting payments. As others have said, these companies are focused on merchandising. As for the companies accepting slotting allowances, how many are showing real growth (i.e., in same store sales)?

    Regarding the decision by McDonald’s to end its test allowing shoppers to use Speedpass to pay for their burgers and fries, MNB user Paul Schlossberg wrote:

    The test of toll tag transponders was worth the effort, even if it failed. Eliminating the transfer of cash/coins saves time in consumer transactions. Cash management and control is an issue some of these initiatives. Not having to handle and count cash would simplify back of the house operations and allow managers to be more focused on customers. We are many years away from being a cashless society.

    That makes the real issues speed of service and faster customer turnover in a set period of time. It's also about how much more people will spend when using a card...between 30-60% more on cards (versus cash) in fast food according to an article we read in R&I (in 2001 I believe). A few facts might show the almost perpetual activity by fast food chains to speed up service. For example:

    Credit card acceptance is now rolling out broadly in fast food restaurants.

    In 1975 McDonald‚s had no something like 90% do.

    Drive-thru windows are being added in convenience stores and coffee chains. Nearby, in Plano, TX, are examples at 7-Eleven and Starbucks with drive-thru service.

    Drive-thru volume has been 80% of fast food growth in the past five years. You might have noticed that in many new locations the in-store seating area is smaller, since so much volume is done at the drive-thru). There is a big capital investment savings in building smaller restaurants.

    McDonald‚s generates +1% unit sales for every 6 seconds "saved" at drive-thru.

    McDonald's is testing self-service ordering kiosks.

    McDonald's is also testing handheld order entry systems (an employee engages customers before they get to the counter). In tests this has cut the service cycle to three minutes.

    Burger King generates +$15,000 in annual sales for a location for each second saved at drive-thru.

    Wendy’s serves a customer in 85 - 90 seconds for a drive-thru transaction and it drops to mid-70’s with credit cards.

    We wish that every retail operation had the same sensitivity to save time for shoppers as the fast food operators. They understand the value of saving time and how much that is appreciated by their customers. Convenience stores are also focused on speed of service. That might be as important as saving money. Supermarkets could get a lot better in this dimension. Why promote low prices? Instead promote how easy you made the shopping experience. Please keep me off the "race track" and minimize my time in the aisles.

    In a story yesterday, we wrote that nutritional issues have forced a number of companies to offer new menu options… To which one MNB user responded:

    Interesting how you say "forced," because that's what it exactly is. These companies, I believe, do not legitimately care about the health of their customers . . . except of course for the executives and marketing folks who are paid to pretend to care.

    These "Atkins-and-South Beach-esque" attempts to change menu offerings are nothing more than an effort by these fast food chains and food manufacturers to make more money by capitalizing on trends. Yes, I said trends. Atkins will eventually be known as a former diet trend, as will South Beach. What would the equivalent of low carb bread (an actual product) for its counterpart -- low protein meat? How ridiculous would that sound?

    By the way, I just saw an ad for a multi-vitamin that is "carb friendly," in the way that it includes more (or is it less?) biotin and certain other essential nutrients LEFT OUT by not eating a normal amount of carbohydrates, grains, etc. This is really clever, because it capitalizes on the trend, while at the same time, pointing out how ridiculous the trend is by saying what people are missing in Atkins-like diets. Stop the insanity!

    Finally, we don’t want to make too much of this because it smacks of being too self-involved, but we got a number of emails yesterday reacting our apology for inadvertently letting a Spanish profanity written by an MNB user onto the site. (We don’t speak Spanish, didn’t know what the word meant, and it never occurred to us that a member of the MNB community would be using vulgarity.)

    The emails ran the gamut. Many of you told us not to beat ourselves up too much, that it was an honest mistake. (True.)

    Some of you thought it showed an appalling lack of quality control. (Also true.)

    One MNB user noted that the word could also mean “fool,” and that his Hispanic wife called him that all the time. (Can’t help you on that one.)

    MNB user Barb Ebert sent us an email that warmed our heart:

    Just a quick note to say that I really enjoy reading your work. What appeals to me the most is the way you write to the is as though we are having a conversation. You express views and opinions without "yelling" in the reader's face. It is real and human. This "apology" note continues that tradition and reminds everyone -- we're all human and make mistakes. For what it is worth, this reader appreciates you taking the time to recognize the error.


    MNB user Greg Overloop, however, raised another issue:

    Why do you hold yourself above Hispanic profanity when you use the word, "hell" in the same day's editorial?. Is it because the word is no longer profanity? Who decided that a word that once was profanity, no longer is? What would you do if your 4 or 5 year old child used the word in school, at home, at church, etc.? If it’s no longer profanity, no child would have to go to the principle's office. If the word once was profanity an now isn't why would any profane word in print be offensive? I find your "line drawing" hypocritical.

    Maybe. It’s a good point.

    We suppose that standards have relaxed somewhat, and that words that used to be considered unacceptable are now less offensive to many people…though clearly not everyone.

    Without going into a George Carlin routine here (and we have to admit to being tempted), we suppose that “damn” and “hell” are words that we use for emphasis…sparingly, but, we hope, effectively. We’re sorry if that offends some people, but we are trying to be conversational and a little irreverent here. Those are, in our mind, different words than the scatological utterance used in the offending email…but we acknowledge that different people draw the line in different places. We try to be sensitive to people’s sensitivities…but we’re also not sure that people want us to write using the same standards that we would apply to a four or five year old child. We’re all adults here, and we think that the conversation should reflect that.

    At the end of the day, this is all a work in progress. And we’re sort of making up the rules as we go along. (We thought that was part of our charm…)

    Maybe we should have a glass of wine and talk about it…
    KC's View:

    Published on: April 29, 2004

    As you know, we’ll be attending and providing MNB’s unique coverage of the Food Marketing Institute (FMI) Show in Chicago from May 2-4 this year…and on Sunday, May 2, we’ve decided that we’re going to be hanging out at the bar at one of our favorite Chicago bistros, Bin 36, from 6-7:30 p.m. If any members of the MNB community would like to stop by, say hello, and chat for a bit…well, the first couple of bottles of wine will be on us. (After that, you’re on your own…)

    It’ll be a great opportunity for all of us to put faces and voices with the names and words that appear on MNB, plus an excuse to drink good wine. (Not that we need an excuse…)

    Bin 36 is located at 339 North Dearborn at Marina City in downtown Chicago.

    See you there. Slainte!
    KC's View: