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    Published on: May 10, 2004

    The New York Times reports on the emergence of new food shopping options on the island of Manhattan, where companies like Whole Foods and Trader Joe’s are opening stores, looking for opportunities, and creating stores that are unusually large and unusually diverse, especially by New York standards.

    The most notable entrant: Whole Foods, which “recently opened its flagship 58,000-square-foot store in the basement of the Time Warner Center and is building a trilevel 50,000-square foot store on 14th Street facing Union Square.”

    At the same time, chains such as Pathmark, D’Agostino’s, Gristedes, and A&P’s Food Emporium all are either upgrading their games or counting on solid locations and a lack of space in many neighborhoods as insulating them from the oncoming competition.

    There’s also online competition from companies such as FreshDirect.com…all of which adds up to an enormously expanding palette of food choices for Manhattanites.

    Ironically, the Philadelphia Inquirer reports that representatives of the state of Pennsylvania, the city of Philadelphia, and a number of supermarket developers have joined in a $100 million plan to bring grocery retailing and healthy food to underserved areas throughout the state.

    Ten supermarkets could be opened in Philadelphia in the next five years under the plan. In addition to providing more shopping alternatives and healthier food choices, the plan also is seen as a way of creating jobs in communities that desperately need them.
    KC's View:
    It’s only about 100 miles from Manhattan to Philly…but obviously, distances are measured in more than just miles.

    We recently were walking through Columbus Circle on a Friday evening while on the way to the theater, and noticed droves of people lining up to get into the new Whole Foods there. So, we joined them…and it was a remarkable retailing experience. It was enormous…and enormously captivating. Rows upon rows of fresh food…foodservice offerings for every cultural interest…and employees who seemed completely engaged with the crowds of consumers.

    The monster in the room that nobody really is talking about, of course, is Wal-Mart.

    How come Wal-Mart isn’t being lured to Philadelphia and environs to open food stores and superstores? (See our next story below…)

    And will Wal-Mart decide that it wants a piece of the Manhattan food market?

    To be continued…

    Published on: May 10, 2004

    The Palm Beach Post offers a fascinating insight into the way communities deal with Wal-Mart. The place is a distribution center that the company is opening in Fort Pierce, Florida – a $50 million facility where there are expected to be a total of 1,200 jobs, for which there already are more than 4,000 applicants.

    St; Lucie County officials, according to the paper, have agreed “to give Wal-Mart $1,000 for each new job it brings to the community, up to a maximum $1 million.” In addition, the county reportedly is spending $8.2 million on road improvements, while Wal-Mart is contributing about $1.1 million in development fees for roads and services.

    Of course, if Wal-Mart creates enough jobs and gets $1 million from the county, its total contribution to development of the public services that the distribution center will need could end up being as small as $100,000.

    The Post also notes that when County Administrator Doug Anderson was selling the notion of spending all this public money and providing incentives to Wal-Mart, he said that not only would there be 1,200 new jobs, but that workers there would earn $15 an hour.

    Now, however, Wal-Mart is saying that “some employees at the Wal-Mart distribution center won't be making the $15 an hour St. Lucie County officials once touted nor the county's $13.48-an-hour average wage,” The starting wage “for the lowest-paid employees will be $11.75 an hour, while mechanics and other maintenance workers will start at $15.60 an hour,” the paper reports. “After a series of 50-cents-an-hour raises, the lower wage employees can be making $14.75 and $15.60 after 2 1/2 years at the center. They also can earn a 75-cents-an-hour bonus if they meet certain performance standards, Wal-Mart officials said.”
    KC's View:
    You have to hand it to Wal-Mart. The folks there probably could sell refrigerators to Eskimos, snowshoes to Tahitians, and the Brooklyn Bridge to anyone with a big enough checkbook.

    The question that has to be asked, however, is why communities are offering the corporation that has more money than any other company in then world all these financial incentives to set up shop within their borders. It just doesn’t make any kind of sense.

    The next question, of course, that legitimately can be raised is whether these communities are offering similar incentives to other corporations, and especially to companies that already have a presence there. It’s dubious. And that doesn’t make any kind of sense, either.

    Published on: May 10, 2004

    The Los Angeles Times reports that “there are a growing number of places around Los Angeles -- from sushi bars in the San Fernando Valley to Zipper, the modernist general store on fashionable 3rd Street in West Hollywood” that are asking customers to not use their cell phones while shopping.

    The feeling seems to be even though cell phones have become ubiquitous, they also enable a kind of legitimized rudeness as people pay more attention to the people with whom they are conversing on the phone as opposed to the people around them.

    The LAT writes, “There are people numb with rage at how acceptable cell phone use in public spaces has become – how many people talk and order, talk and shop, talk and drive. The world has become a virtual living room, the cell phone eliminating the immutable reality of a physical environment.”

    And not everyone is happy about it. Which is why at the Manhattan Bagel store in Santa Monica, California, there is a sign that says: "In order to serve you properly, we cannot take your order while on a cell phone.”
    KC's View:
    Whatever happened to “the customer is always right”?

    We find cell phone ubiquity to be as annoying as anyone, though we have to admit to an unhealthy reliance on ours. (Hey, it’s just the reality of being the Content Guy.) But if we’re the customer, isn’t it our right to use one while shopping?

    Customers give retailers the privilege of taking care of them. Since when do retailers set the terms by which they are willing to serve customers? (Other than “no shirt, no shoes, no service.”) Betcha Wal-Mart is happy to serve people who are talking on their cell phones.

    Published on: May 10, 2004

    The Washington Post reported over the weekend on the emergence of so-called “fun wines” in the US marketplace; “fun wines” are described by one vintner as “fun, lifestyle-driven wines for consumers who need a great wine for social situations but are less concerned with the more traditional values commonly seen in other wine brands.”

    Doug Rogers, senior v.p. of marketing for Southcorp, Australia's largest winemaker and producer of premium wines, says that an example of one of these “fun wines” is Little Penguin, which he describes as “easy-to-drink and have an eye catching label, which we believe will appeal to those who are not necessarily interested in the legacy of a winery or a vineyard's terroir but want to pick up something fun to enjoy at parties or get-togethers.”

    Other, similar examples: McGuigan Simeon Wines is bringing out a wine called Crocodile Rock, named after the Elton John song, and Gallo will introduce Red Bicyclette, made from French wine. Considered to be the pioneer in this category is Australia’s Yellow Tail wine label, which was only introduced in 2001 and now has a 35 percent market share of the sales of all Australian wines sold in the United States.
    KC's View:
    Well, why not? Maybe if they market wine like beer, it’ll create more interest in wine, greater knowledge and sophistication among wine drinkers, and build interest in better wines that will expand the nourish the category.

    Which would be great.

    Published on: May 10, 2004

    The impact of the low-carb diet craze, as typified by the Atkins and South Beat diets, was put in vivid relief last week when Krispy Kreme Doughnuts announced that it is lowering its profit projections by 10 percent for 2004, saying that consumers’ concerns about carbohydrates were affecting how many doughnuts they are willing to buy and consume.

    “The popularity of low-carb diets has captured the consumer's attention,” said Scott Livengood, the company’s CEO. “It’s impossible to predict if low-carb is a passing fad or will have a lasting impact. For several months, there has been increasing consumer interest in low-carbohydrate diets, which has adversely impacted several flour-based food categories, including bread, cereal and pasta.”

    Livengood said that the low-carb craze hadn’t affected the Krispy Kreme boom until recently, but that momentum for that approach to weight loss seemed to be building.
    KC's View:
    We think that it seems myopic to view the low-carb craze as the reason for a sales shortfall at Krispy Kreme. The fact is that the doughnut isn’t just bad for you if you’re on Atkins or South Beach – there’s no diet that we know of that lists Krispy Kremes on the “allowed” list.

    Maybe what’s really happening is that while low carb diets get all the press, what’s really happening is that people in general may be getting more health conscious…even if for short period of time marked by a lack of willpower.

    That said, we think that Krispy Kremes will, for a long time, be on the indulgence list for Americans. This drop in expectations is probably more a blip than anything else.

    Published on: May 10, 2004

    USA Today reports this morning on the steps that Boston Market – owned by McDonald’s – is taking to re-energize its business:

    • Testing home delivery, which could be available from as many as two-thirds of the company’s stores within the next 18 months.


    • Opening full service delis inside supermarkets.


    • Trying out locations inside McDonald’s units.


    • And testing “so many new dinner items that the menu could eventually look more like Applebee's than Boston Market.”



    While new management installed by McDonald’s is being aggressive, analysts note that it won’t an easy turnaround – the company is seen by many as cold, sterile and unappealing. More than 200 locations have been closed over the past couple of years.
    KC's View:
    We would be a classic case of a consumer who, having been to a Boston Market exactly once, would be hard-pressed to ever go back. The food was mediocre, the service awful, and ambience non-existent.

    We wish McDonald’s would put its muscle behind Chipotle, which strikes us as a concept with a lot higher upside.

    Published on: May 10, 2004

    Luc Vandevelde, who engineered the turnaround at Marks & Spencer but lately has been attacked for having too many outside commitments that led to a recent company decline in market share, has told the company he plans to step down.

    The company reportedly has begun to look for a successor, with CEO Roger Holmes considered a likely replacement in the chairman’s role. Outside candidates such as Archie Norman, former chairman of Asda, also have been mentioned. No timetable or deadline has been set, at least not publicly.

    Vandevelde’s decision comes after a weekend during which Robert Talbut of ISIS Asset Management, considered to be an influential shareholder of Marks & Spencer, has said that the retailer would be "better off" without chairman Luc Vandevelde.

    Talbut also urged the company to replace Vandevelde with a professional retailer, not a professional manager.
    KC's View:
    Holmes may be considered a likely candidate, but so was Steve Heyer at Coke.

    Published on: May 10, 2004

    In this month’s edition of Facts, Figures and the Future, a joint publication of the Food Marketing Institute (FMI), ACNielsen, and Phil Lempert, America’s Supermarket Guru offers his own perspective of the just-completed FMI Show in Chicago.

    “Walking up and down the miles of exhibits it was clear that there is a convergence taking place,” Lempert writes. “Retailers, brands and shoppers are all coming together to focus on a healthier way to eat. The indications have been there, many of which we have reported in F3 for over a year, and the time is right for what I am calling ‘America's Nutritional Correction.’ More products are revising their ingredients, limiting sugars and removing trans fats.

    “One of my most valued meetings at the FMI this year was with Eric Hentges, Ph.D., the Executive Director for the USDA's Center for Nutrition Policy & Promotion, and the man responsible for the new Food Guide Pyramid and revisions for the Dietary Guidelines (RDAs). Hentges leaves little doubt in my mind that not only will these be ready for publication in January 2005, but that they will also be the tools our industry needs to help re-educate our fellow Americans to better understand which foods we should be eating.”

    Also on view in this month’s F3:

    • An appraisal of the low carb trend. “In the latest ACNielsen Homescan Panel Dietary Awareness Survey,” F3 reports, 17 percent of Households report that someone in the household is currently on a Low Carb Diet. However, more telling is that 19 percent report that someone in the household ‘tried and quit’ such a diet regimen, raising the question of whether this is the end of what has become the fastest growing on-shelf diet products phenomenon in recent history.”


    • A look at the Pet Food category and the households that buy pet products from US supermarkets.


    • F3 reports that “as store size remains relatively constant, retailers will have to de-list products or categories that don't perform well to make room for new innovations; adding further challenges to existing brands to keep up with consumer tastes and to evolve as their shoppers do, or be banished from the shelves. A perfect example is how many food brands are now removing trans fats from their ingredient listing, far sooner that the 2006 Federal Labeling requirement to list the content of this fat. The conventional wisdom is that few consumers will knowingly want to purchase any product that contains this ingredient. Rather than having current users seek out new brands, most manufacturers are re-engineering their product recipes instead of introducing a "trans fat free" brand extension - a trend which may well broaden to all food categories, as the costs of new product introductions skyrocket.”


    For more insights about these and other stories, go to:

    http://FactsFiguresFuture.com/
    KC's View:

    Published on: May 10, 2004


    • A British man has been arrested by authorities and charged with extortion and tampering with consumer products. The man, David Ian Dickinson, allegedly tried to extort Kroger Co.'s Ralphs supermarket chain. Saying that he would put tampered baby food and other products on store shelves unless he received $180,000.


    • The California Public Employees' Retirement System (Calpers) is being criticized by some analysts for its campaigns to oust board members at companies that they have judged to be unaccountable for their management decisions.

      One such company – Safeway and its CEO, Steve Burd, which Calpers and others have criticized for having lost shareholder value while pursuing a strategy that has put it at odds with labor.

      Some analysts, however, are suggesting that Calpers’ efforts are “scattershot,” “out of touch” and “irrelevant,” especially because the system is “too cozy” with organized labor.”

    KC's View:

    Published on: May 10, 2004

    Providing clear evidence that some pollsters have too much time on their hands, a British organization has released a survey saying that the best “booze-related” scene in movies is the moment in “jaws” when Richard Dreyfuss, Robert Shaw and Roy Scheider sit on the Orca and trade tales while drinking apricot brandy. (It’s right before the shark attacks the boat…)
    KC's View:
    We’d probably agree…the scene is funny and resonates in a lot of different ways…mostly when Robert Shaw’s Quint tells his story of being on the USS Indianapolis when it was hit and sunk by enemy fire….a scene that makes us shudder when we just think about it.,.

    Japanese submarine slammed two torpedoes into our side, Chief. We was comin' back from the island of Tinian t'Leyte, we'd just delivered the bomb. The Hiroshima bomb. Eleven hundred men went into the water. Vessel went down in twelve minutes. Didn't see the first shark for about a half hour. Tiger. Thirteen footer. You know how you know that in the water, Chief? You can tell by lookin' from the dorsal to the tail.

    What we didn't know, was that our bomb mission was so secret, no distress signal had been sent. They didn't even list us overdue for a week. Very first light, Chief, sharks come cruisin', so we formed ourselves into tight groups. It was sorta like you see in the calendars, you know the squares in the old calendars like the Battle o' Waterloo and the idea was the shark come to the nearest man, that man he starts poundin' and hollerin' and sometimes that shark he go away... but sometimes he wouldn't go away. Sometimes that shark looks right at ya. Right into your eyes. And the thing about a shark is he's got lifeless eyes. Black eyes. Like a doll's eyes. When he comes at ya, he doesn't even seem to be livin'... 'til he bites ya, and those black eyes roll over white and then... ah then you hear that terrible high-pitched screamin'. The ocean turns red, and despite all your poundin' and your hollerin' those sharks come in and... they rip you to pieces.

    You know by the end of that first dawn, lost a hundred men. I don't know how many sharks, maybe a thousand. I do know how many men, they averaged, six an hour. Thursday mornin', Chief, I bumped into a friend of mine, Herbie Robinson from Cleveland. Baseball player. Boson's mate. I thought he was asleep, Reached over to wake him up. He bobbed up, down in the water, he was like a kinda top. Upended. Well, he'd been bitten in half below the waist. Noon the fifth day a Lockheed Ventura swung in low and he spotted us, a young pilot, lot younger than Mr. Hooper here, anyway he spotted us and a few hours later a big ol' fat PBY come down and start to pick us up. You know that was the time I was most frightened? Waitin' for my turn. I'll never put on a lifejacket again.

    So, eleven hundred men went into the water. Three hundred and sixteen men come out, the sharks took the rest, June the twenty-ninth, nineteen forty five.


    Sorry we went on there…it’s a great scene.

    Besides…some of that shark attack stuff sort of sounds like retailing in America 2004.

    Read it again.

    Published on: May 10, 2004

    Hard to imagine a subject generating as much email as the obesity issue and how it should be approached both by industry and society. That’s probably because for many of us it is a personal issue in addition to a professional one, and that colors our reactions.

    Among the recent emails we’ve received…

    MNB user Dan Raftery wrote:

    Marketing and selling obesity antidotes is made more difficult by the pervasive denial that obesity is a disease and that the nation is not generally healthy.

    Agreed.

    Another MNB user wrote:

    A close friend completed the London Marathon last week in just under 4 hours. This is no mean feat for a first-time marathoner who, at 6 feet 3
    inches and 210 pounds, is hardly built for this kind of distance. According to the public health administration in the US, however, my friend is overweight. So, by the way, are Brad Pitt, Michael Jordan, and Mel Gibson. And as Paul Campos points out in his book "The Obesity Myth", Russell Crowe, George Clooney, and Sammy Sosa are all medically obese.

    Several points, all indisputable: (1) The body mass index is a blunt instrument when it comes to measuring the nation's comparative weight health; (2) Fitness and diet are the keys, not weight; (3) Dieting is medically pernicious, and yet this point still seems to elude our general consciousness as we embark on our low-carb, no-carb, low-cal, fat free (etc.) diets.

    The 'new take' on the subject is a welcome effort to re-focus attention on some of the important issues.


    And regarding the Illinois legislature’s moves to ban fast food lawsuits, MNB user Alan Binder wrote:

    Is a state's legislature constitutionally allowed to tinker with judicial matters? I do think that these frivolous lawsuits are a drain on public resources, but I can't imagine that's not for the courts to work out themselves.

    MNB user Joe Caniglia wrote:

    When is the American public going to take responsibility for their actions? Why don't they sue auto manufacturers for enabling their cars to exceed the speed limit on demand? Will they sue if the get a summons? Where will it end?

    And, responding to comments by an MNB user posted last week criticizing soft drink companies for their approach to obesity issues, another MNB user, Frederic Arnal, wrote:

    Welsh raises some good points. Having purveyors of the products that contribute to the problem collaborate to meet the problem can in itself be problematic. There is a real risk of giving their spin-doctors a platform to reposition themselves by association with legitimate studies. Snacks and soft drinks are, at best, pleasurable treats that should be used moderately. At worst, they are a major source of empty calories that displace truly nutritious foods. The only honest approach to fitting these products into a healthy lifestyle is to encourage less consumption. This, obviously, is at odds with the business goals of the snack and soda companies.

    No one took the cigarette and beer companies seriously in this regard until they began to point out the inherent risks of using (or abusing) their products and encouraging less or moderate use. Do you think we will ever see this approach in the food arena?





    In a commentary last week (and at other times), we’ve written about the corruption that slotting allowances foists upon the food industry, to which one MNB user responded:

    You nailed it with the slotting allowance problem but you missed one point – it leads to unrealistic high prices. There is no free lunch. A retailer cannot “screw” P&G or any other CPG company out of excess money and then put it in his pocket. The result will be high prices. The reason Stew Leonard “blows it out” is the price. I’ll bet they use the dead net cost concept and price accordingly.




    Regarding Food Lion’s decision to introduce Bloom, a new format, MNB user David Livingston wrote:

    I have to disagree with KC just a bit on his take on Food Lion. To me Delhaize is not making such drastic changes to its formats because it is some brilliant idea that has come from some great grocery minds. I see Delhaize as an injured animal trapped between a wall and a Wal-Mart and is panicking. Obviously they have lost brand recognition with their existing store names. But a rose is a rose....




    In response to our story last week about former Abco CEO Ed Hill taking over the reins at the Western Association of Food Chains (WAFC), one MNB user wrote:

    Anything Ed Hill is involved in only gets better. Safeway should on their knees begging him to be their CEO.

    Which leads us to some other emails we got about Safeway and its embattled CEO, Steve Burd.

    One MNB user wrote:

    Every week seems more Burd droppings are making a mess. Saying the stock is higher than when Burd took over a lifetime ago in 1993 does not sound like much of an accomplishment. Probably 99% of the public companies can say that. I think just about everybody wants Burd out of the company, even the people who claim to support him. I want to go on record as saying I want him out and I am not affiliated with organized labor. I rarely even support organized labor. But I have witnessed first hand the drops in market share and sophomoric marketing strategies resulting from Safeway shooting themselves in the foot. Know of any privately held successful regional chains that have a non-grocery guy running the company? Flying around in company plane and paying themselves zillion dollar salaries for losing money? That's no way to operate.

    Another MNB user wrote:

    Safeway needs a new leader and they need to lower their prices. In the N.W. they are the 'High Price Leader' and that is going to put the stock even lower when Wal-Mart comes with full guns to the West Coast. With the price of gas going sky high during Safeway's last quarter, if Safeway took out their fuel sales from their grocery sales, Safeway’s sales would have been even farther in the hole.




    We’ve written about the death watch that seems to be over Winn-Dixie these days…and a number of MNB users seemed to agree. Among them:

    One MNB user wrote:

    I have a contact whom I speak to fairly regularly at Winn-Dixie. He works at the director/V.P level.

    He told me himself he has to drive by 3 Publix stores to shop at a Winn Dixie, and that's in Jacksonville, FL. W.D.'s backyard! It sounds as if W.D. may be looking for a buyer to rescue it from Chapter 11, which I'm sure the family who owns the majority of W.D stock wouldn't want to happen. That family may also take the company private. Winn Dixie has lost its appeal to consumers as a place to shop. It failed to see changing trends and directions in retail store concepts/operations and now it winds up here. Shoppers I've spoken to in Florida rave about Publix or even Wal-Mart supercenters. I never hear mention of W.D. I think it’s only a matter of time.

    W.D. will have to sell still larger chunks of its operations or go private and get the Wall street folks off its back to have a chance financially, not to mention changing the shopping experience and image of its stores.


    Another MNB user offered:

    You are absolutely right about there being a death watch over Winn Dixie. Those of use who have a more intimate knowledge of their stores and their competitors know they have fallen so far behind we cannot vision them ever coming back. The stores look as though they are already operating in Chapter 11. Very similar to Kmart. Their remaining strongholds are coming under attack by Wal-Mart and Winn Dixie stands helplessly unarmed. With Publix, the management/employees/stockholders are all in sync while at Winn Dixie they are 3 different groups that have polarized in opposite directions.




    We wrote last week about concerns that the government is obfuscating the facts about the current state of mad cow disease in the US. To which MNB user responded:

    Ever since my first read about BSE (in the mid-90's) I have been an ardent proponent of conspiracy, not as theory, but as fact. By the by- obfuscate--what a wonderful word! Here's mine to describe the governments attitude: hubris.

    And another MNB user wrote:

    Obfuscating...great word to associate what is occurring. I'm sure if one follows the foggy trail it will lead to a strong beltway lobby.

    And yet another MNB user wrote:

    These thoughts are typical of this administration. They have an "if you're not with us, you're against America" attitude.

    Frightening.





    Finally, we continue to get emails from the wonderful folks who joined us for wine a week ago at FMI in Chicago…along with emails from people who, for one reason or another, could not. A typical note:

    It would also be fun if you could do it at other functions during the
    year…for those of us who are unable to attend FMI, but would love to meet/drink a glass of wine with you!


    (Can’t tell you how many emails we got like this one…)

    Maybe we’ll try this…next time we’re going to be in a city for any length of time, we’ll try and identify and place and time where we can all get together.

    It’d be cool.
    KC's View: