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    Published on: May 24, 2004


    • The New York Times reports this morning that “Wal-Mart Stores collected well over $1 billion in state and local government subsidies during its decades-long expansion from a regional discount chain to the world's largest retailer.”

      The report about Wal-Mart’s subsidies is based on research done by Good Jobs First, a group that compiled the report with financing from the United Food and Commercial Workers (UFCW).

      Good Jobs First goes to great pains to say it is not suggesting that Wal-Mart is doing anything illegal or improper, but does suggest that the level of public subsidies does create public policy issues that need to be examined. “The report argues that the low wages paid by Wal-Mart and the downward effect that has on wages at other retail operations, its negative effect on small businesses in the communities where it locates and its contribution to urban sprawl and traffic raise serious questions about the value of giving it sizable financial incentives to expand,” the NYT writes.

      Good Jobs First argues that public subsidies for giant retailers – which means not just Wal-Mart, but also chains such as Target, Kmart, Best Buy, Home Depot and the like - should be restricted to poor neighborhoods where residents have few or no choices.

      While Wal-Mart did not have a copy of the report, spokesman Mona Williams said that if the $1 billion figure is accurate, it is more than compensated for by the fact that “Wal-Mart has collected more than $52 billion in sales taxes, paid $4 billion in local property taxes, and paid $192 million in income and unemployment taxes to local governments.”


    • The Detroit News reports that organized labor has decided to employ a new strategy in its efforts to unionize employees who work for Wal-Mart, the world’s biggest retailer.

      According to the paper, the Teamsters, United Food and Commercial Workers, Service Employees International and Hotel and Restaurant Employees International have decided to launch an aggressive public relations campaign against the retailer in Michigan, trying to generate community concerns about the impact of the retailer on the economy, infrastructure, and pay scales.

      The News writes, “The unions’ move comes at a time when Wal-Mart is aggressively targeting Michigan for expansion. Wal-Mart already operates 68 stores in the state,” and the company has confirmed plans for three more…and many in s=the state believe as many as 20 could be on the drawing board for Michigan.

      Wal-Mart, for its part, says it is not anti-union, but rather pro-employee…and that it believes that unions bring nothing to the table in terms of the employer-employee relationship.


    • The Associated Press reports that Wal-Mart is preparing to file a lawsuit against Florida’s Manatee County to force the county Commission to allow it to build a supercenter there.

      The Commission had denied a proposal for the project on the basis of residents’ complaints that the supercenter would generate too much noise and traffic. Wal-Mart said it wanted to resolve the issue through mediation, but the local residents refused to participate in the process. So now Wal-Mart is going to court, suing for the right to build a supercenter.

      "It just became clear that there wasn't going to be participation, so you have to move on," Wal-Mart spokeswoman Daphne Moore said Friday, according to the AP.

    KC's View:
    “Moving on” clearly has a different meaning down in Bentonville than it does where we’re from.

    We would have figured that once both the county officials and local residents said they didn’t want a supercenter, “moving on” would have meant finding the community that actually did want one (and maybe is willing to subsidize it).

    But we guess that’s not always the case.

    Probably why we’re not running a $250 billion company getting $1 billion in tax subsidies.

    Published on: May 24, 2004

    Senators Tom Daschle (D-SD) and Tim Johnson (D-SD) last Friday introduced legislation to implement country-of-origin labeling (COOL) by the original September 30, 2004 deadline. At this time, COOL regulations are not to go into effect until September 2006, a delay that the food industry hoped would allow it time to modify the regulations or convince Congress to make them voluntary in nature.

    However, the new legislation introduced by Daschle and Johnson came as a direct response to last Thursday’s report that the US Department of Agriculture (USDA) allowed US meatpackers to import ground and processed meat from Canada from September 2003 to April 2004 – despite the fact that USDA was publicly saying that such imports had been banned because of the occurrence of bovine spongiform encephalitis (BSE), better known as mad cow disease, north of the border.

    According to a report by the Washington Post, “a total of 33 million pounds of Canadian processed beef flowed to American consumers under a series of undisclosed permits the USDA issued to the meatpackers.”

    The only reason these permits were revoked was because a federal judge in Montana ruled that the USDA had improperly allowed an announced expansion of Canadian beef imports. When USDA reversed its position, it never disclosed that it had issued earlier permits.

    The USDA and Bush Administration have been under pressure both from large US meatpackers and the Canadian beef industry to loosen restrictions on imports, which have hurt profits in both countries.

    The Post noted that even as the imports were being allowed and not being publicized, Agriculture Secretary Ann M. Veneman was saying “that she was extending an earlier ban on many types of Canadian beef,” and that “the risk that ground beef might contain the mad cow infection was too great to allow it in. She and her top deputies said ground beef imports would resume only after the agency completed a formal rulemaking process, with public debate.

    Veneman has denied that she knew anything about the imports, though USDA has not denied that they took place.

    "I'm extraordinarily concerned by the news that American consumers have been unknowingly exposed to Canadian beef products," said Daschle. "Today's news only underscores the need for mandatory country-of-origin labeling to ensure American consumers know where their food comes from. We simply must not allow large meatpackers and the Bush Administration to block consumer access to this basic information."

    Johnson added, "I am outraged to learn that American consumers were mislead by USDA. Allowing beef into the U.S. during the ban threatens to rock consumer confidence. It's time for answers from USDA."

    Both men, of course, are from a border state and have as constituents ranchers who are directly affected by the mad cow issue. Daschle is up for re-election this year, and also is working to defeat the re-election of President Bush.

    Upping the ante are reports from the UK over the weekend suggesting that thousands of residents there could have the pathogen that causes the human form of mad cow disease. These conclusions came after researchers studied stored appendix and tonsil samples and found evidence of the pathogen. The results contradict earlier beliefs that only a few UK residents were at risk.
    KC's View:
    At some point, you have to figure that someone has to be held responsible for the fact that illegal imports of Canadian ground beef have been taking place.

    The law seems to have been circumvented. Consumer trust has been abused. The public health has been put at risk. Doesn’t someone have to take responsibility? And doesn’t that someone have to be the captain of the USDA ship?

    We got a number of emails on Friday suggesting that USDA would find a way to make a couple of border guards responsible, firing them, maybe sending them to jail, and suggesting that they were acting alone without the knowledge of their superiors.

    Y’think?

    Published on: May 24, 2004

    The Boston Globe reported over the weekend on the ice cream wars currently brewing in Beantown, a city that many consider to be the capital of super-premium ice cream.

    It was in the Boston area that the concept of super-rich ice cream and mix-ins was pioneered by Steve’s; while that company was sold by the original owner more than a quarter-century ago, there still are units scattered around the city, and the original Steve – Steve Herell – has three new stores in Massachusetts. And, there is an ice cream parlor in Cambridge called Toscanini’s that is highly thought of.

    Into this mix come three national franchises – Cold Stone Creamery, Maggie Moos, and Marble Slab Creamery – all of which see Boston as a prime marketing target, and all of which are hoping to take advantage of the well-established taste of Bostonians for upscale ice cream.

    According to the Globe, Corky White, professor of culinary anthropology at Boston University and the teacher of a course titled Boston by Food, believes that while Bostonians are likely to be loyal to their local ice cream, the market is big enough for everyone.
    KC's View:
    This is an interesting story on several levels.

    For one thing, you have an increasingly crowded super-premium ice cream market at a time when people are supposedly obsessed with carbohydrates. This would seem to be yet another example of how both ends of the culinary spectrum can co-exist – people who watch their carbs much of the time are perfectly willing to indulge themselves at specific times and for specific special occasions. (Like, for example, sundown.)

    But we’re also intrigued by the “chain vs. local” scenario unfolding here. It’s about old vs. new, small vs. big…and these are the kinds of struggles that always capture our sense of the dramatic.

    We can remember going to the original Steve’s in Somerville, Mass., almost 30 years ago…and it was a remarkable experience precisely because it was original and innovative. And last weekend, we were strolling through Cambridge and noticed an enormous line outside Toscanini’s…we wanted to try some, but we didn’t have an hour to kill for an ice cream cone. (We’re dedicated, but there are limits even for us.)

    The question will be whether the new franchises will be perceived by Bostonians as replicating experience and product…or just being pale imitations.

    Published on: May 24, 2004

    Interesting piece from Dow Jones late last week on the fact that a major ingredient seems to have been overlooked by restaurants looking to make their offerings more nutritious.

    Salt.

    “Medical experts agree that Americans consume excessive quantities of sodium, which makes up 40% of table salt, or sodium chloride,” Dow Jones reports. However, “while high sodium intake has long been associated with hypertension, stroke and other health risks, there are few indications that either fast-food or casual-dining restaurants are making lower sodium levels a high priority.”

    In fact, studies have shown that when companies like Wendy’s roll out new menu offerings, often they contain more salt than the item they replaced.

    The reason that salt gets overlooked, according to experts, is that hypertension doesn’t have a physical manifestation; obesity is a big issue because bellies get larger.
    KC's View:
    We know there is a danger of turning the supermarket into a classroom, and of posting so many advisories/warnings that people simply get fed up, but it seems to us that it is the industry’s responsibility to at least provide the right kind of information to consumers.

    This may be a place where supermarkets actually can make some headway against restaurants; after all, in most cases, people have to add their own salt to the food purchased in the grocery store. And in foodservice, maybe it is time for retailers to be more conscious of this issue than in the past.

    Published on: May 24, 2004

    In an “Emerging Trends” piece last week, Forbes reported that “food service, apparel and other consumer companies are targeting mothers with a range of campaigns designed to appeal both to their sense of responsibility and their sense of nostalgia.”

    These moms are different than their predecessors in that they may be trying to juggle family and professional concerns in a way different than their moms. “The younger generation of mothers, many of them the latchkey offspring of over-committed super-moms, are returning to more traditional family modes,” according to the Forbes report. Successful marketers, the report suggests, will find ways to appeal to both priorities – providing moms with products that reflect both traditional values while meeting modern needs.
    KC's View:
    The only problem we have with this report is the suggestion that the last generation of moms – the baby boomers – somehow weren’t trying to balance these two sets of priorities. They were…and they continue to.

    Sometimes, marketing research people forget that almost every trend is cyclical. Wait long enough, and the only trends always come back.

    Published on: May 24, 2004


    • The Seattle Post Intelligencer reports that union and chain negotiators in the Pacific Northwest have agreed to continue talking, despite the fact that the contract covering 16,000 employees expired on May 2. Five more bargaining sessions have been scheduled for June, and either side has to give 72 hours notice if they want to break off negotiations.


    • McDonald’s announces today that it will testing automatic DVD kiosks at 105 stores in Denver, following up on what it called successful tests at stores in Washington, DC. The rental fee is $1 a day, and the DVDs can be returned to any McDonald’s.

      The selection will be restricted to “top 30” DVD titles. The goal is to drive more business to McDonald’s as opposed to become a major player in the DVD rental business, according to USA Today.


    • Walgreens announced the creation of a new health education program that it said would “help the nearly 4 million consumers the company serves daily sift through and find health services and discounts. As a result, the largest drugstore company in the U.S. is addressing the 84 percent of people ages 65+ who said the new Medicare discount cards are ‘too complicated to understand.’”

      The education campaign is designed to reach consumers where they seek information: in the stores, online and in the community.

    KC's View:

    Published on: May 24, 2004


    • William Morrison Supermarkets in the UK reported that sales for the first 15 weeks of the fiscal year were up 14.8 percent, with same-store sales up 8.9 percent. However, the company also reported that sales at Safeway Plc stores – just acquired by Morrison in the first quarter – continue to decline, down four percent between October 2003 and March 2004…suggesting that more work has to be done by Morrison to restore those units to respectability.

    KC's View:

    Published on: May 24, 2004

    As always, Wal-Mart continues to be a major topic of discussion among MNB users…especially responding to comments made last week by Joseph Hansen, international president of the United Food and Commercial Workers (UFCW), in which he observed that “the UFCW sees Wal-Mart as not just a problem for the UFCW. We see it as a problem for all the workers in America. Wal-Mart claims to be about low prices, but when you look hard at what the company is, it's low wages, no benefits, high turnover. It's turning our economy into a Wal-Mart economy. We're going to have a low-wage, no-benefit economy, and we're slowly but surely, and in some cases not so slow, we're being driven down toward the bottom. It's not good for our country.”

    One MNB user responded:

    There is a reason why Wal-Mart has such low prices. Eventually, what was brought up by the article will be a problem. I challenge the consumer to not be so near sighted as to forget about the ramifications of your buying decisions...

    The Typical Wal-Mart Shopper:

    “WOW! I saved $25 this week by shopping at Wal-Mart, what a great place to shop.”

    End of the year:

    “I hate our town, my property taxes went up again. NYS just increased the sales tax and gas costs me a fortune. I just don't understand why NYS needs so much money??? Now I pay an extra $1000 a year.”

    The next year:

    “What the hell?!!?? My husband just lost his job as manager of the local grocery store and now things are really bad. How could this happen??? He
    so hard for them.”

    Two years later:

    “Grandma's social security ran out and now she has to get a job at Wal-Mart and she is moving in with us. We need to put her under our insurance because Wal-Mart doesn't give benefits, but my husband had to take a significant pay cut and adding on grandma to his health insurance plan is really going to hurt us financially.”

    Three years later:

    “My husband's company that sells nice little knickknacks may be going out of business. Wal-Mart beat them down in price almost to the breaking point of the company. They had to lay off 50 employees and my husband took a pay cut.”

    The next day:

    “I can only afford Wal-Mart now because we have so little disposable income. I don't know what is going on in our community but taxes keep going up and everyone is out of a job. The crime rate has also gone up in our nice little neighborhood. How can that be???

    “It all started when I voted yes to have a Wal-Mart here so that I could save money...”


    We understand the strong feelings that go into emails like this one…though we’re not sure it is fair to suggest that Wal-Mart is the root of all evil…which often seems to be the subtext of the message.

    Of course, making comments like this one lead another MNB user to write:

    It's easy to sit in front of your computer and knock the unions and the chains while riding the Wal-Mart bandwagon. Everybody likes lower prices, right?

    Wrong. Not when lower prices come at the expense of American manufacturing jobs and workers making livable wages in which to support their families. How about quitting your day job and going to work at your local Wal-Mart and trying to support your family? Better get used to Top Ramen and learning how to use and put a drain on community social services for health care and related needs. Conversely, it is possible to work in a union job at a grocery chain and earn a livable wage and benefits in which to support a family. When I need a gallon of milk I am more than willing to pay
    the extra money to support livable wages for other families in my community that are supported by jobs with a chain grocer. I'm not saying these chains have a perfect model by any means. Grocer - Labor Union strikes and Corporate Office centralizations indicate that they are looking for opportunities that will allow them to closer resemble the Wal-Mart model of
    business. Instead of looking at what Wal-Mart and the grocery chains are doing wrong, let's look at someone who's doing things right. By "right," I am referring to my belief that they are making ethical business decisions that are right by themselves, right by their employees, and in the process right by their community. I prefer to do the majority of my shopping at Costco, a company that I admire for their stance on providing employees with livable wages and benefits in which to support a family. Costco provides these
    livable wages and benefits despite the heat that Wall Street puts on them to reduce wages and benefits in order to further increase profits for investors.
    Costco does not provide these livable wages and benefits because unions are pressuring them to do so, but rather because it is the "right" thing to do.
    Costco's CEO Jim Sinegal is monetarily underpaid by industry standards. Mr. Sinegal has refused further compensation so as to not further distance himself
    from the blue-collar employees that support day-to-day operations.

    At the end of the day I will stand with my opinion that the Wal-Mart model of business has a negative impact on communities and furthers class separation. Costco has a business model that not only Wal-Mart and
    the chains, but all of us can learn from. We all live, work and play in a community. We rely on each other for support to a degree: physically, mentally and financially. Looking to better ourselves at the expense of others is a form of greed that should have no place in our communities. How wonderful would it be if we all learned that when we take our communities into consideration, we are also taking ourselves into consideration to a degree?

    And by the way, I wouldn't recommend quitting your day job...


    This email fascinated us because it suggested that we were completely pro-Wal-Mart and anti everybody else…an opinion that our readership down in Bentonville probably would find amusing.

    So we shot this person back an email asking if it was his impression that we had consumed the Wal-Mart Kool Aid…and got the following response:

    It is my impression that you are pro "Wal-Mart model" of business, and that the rest of the industry and its workers could learn from the model. We all have our opinions, and I enjoy reading yours each morning.

    I'll reiterate - don't quit your day job 😉


    Well, we have no intention of quitting our day job. We could, of course, be fired…but only when the 10,000 or so people who get the MNB email each morning stop signing on.

    But that’s a different issue.

    We believe that Wal-Mart’s policy of making its money on the sell, and not the buy, is indeed the best way for a mass market retailer to do business, and it avoids the inherent corruption of slotting allowances and promotional fees, which are the “heroin” to which many food retailers are addicted.

    However, we are extremely concerned that Wal-Mart’s policies toward employees – meaning both salaries and benefits – could be having long-term negative effects on the economy. We worry that mass retailing on this scale is too homogenous in nature, and could reduce the level of diversity and choice available to consumers.

    But we don’t think Wal-Mart is the root of all evil. And we think that the retailers competing with Wal-Mart have to stop thinking like victims.

    Another MNB user wrote:

    Why is it that Wal-Mart can hire enough people to support their current stores and significant growth with "low wages" and no union, while the supermarket industry complains of difficulty in hiring qualified help even though they pay "high wages" and have union shops?

    Do you think it is the way the people are treated?


    There was a legitimate question raised by an MNB user about the unions’ attitude toward Wal-Mart:

    Why not look up what the union chiefs make in salary versus what their members make? Maybe they don't want to give up the good life. It is not the same disparity between the top of the corporate pyramid and the those on the bottom. But the union bigwigs make many times what their members do. Is this rant about self-preservation too?

    No argument.




    On the subject of reimportation of Canadian medicines into the US, one MNB user wrote:

    Had a long conversation last night with some Canadian friends of ours who have some friends that started up a very successful chain of pharmacies that have quickly grown into the millions due to sales to the US. On one hand they are very happy and have a cash cow. However the concern about reimportation from the Canadian perspective that we were informed was that Canada is only entitled to ___ quantities of the drugs Pfizer is producing. If the Americans buy up all the drugs from them, their concern is there won't be any for the Canadian population themselves when they need them...a perspective on the topic I hadn't heard.

    MNB user Andrew Casey added:

    It is really just about economics. Drug prices are lower in Canada for exactly one reason - government price controls. One of the corollaries of price controls is always limited supply. Pharmaceutical companies are willing to deal with those controls in the relatively small Canadian market but are unwilling do so in the much larger U.S. market. The impact on the bottom line for these publicly traded firms would simply be too great.

    So it isn't even surprising that the Canadian government is considering cracking down. If they don't, they risk losing their ability to control their drug costs or at the very least, finding their own supply of popular drugs unacceptably limited. While they may be sympathetic to our problems with drug costs, they are unlikely to be willing to help us fix it.

    What is really happening here is that U.S. consumers are subsidizing Canadian drug costs. Rather than making all this noise and wasting effort on the importation issue, what we should be doing is working with the Canadian government to move them closer to a free market scenario.





    There was news last week that Safeway’s president/chairman/CEO, Steve Burd, was reelected to the company’s board of directors with 83 percent of the shareholders’ vote, surviving an attempt by dissident shareholders to force him to relinquish at least some of his power.

    MNB user Mark Heckman responded:

    Kevin, the news of Mr. Burd's vote of confidence appears to be a function of two things: Safeway already taken some action to ameliorate the stated concerns by the dissident shareholders, and secondly, that there was likely no plan to move forward without Burd at the helm and this made some shareholders nervous about changing leadership at this time.

    But Safeway is by no means "out of the woods" when it comes to dealing with its chronic problems. Even if the labor issue is settled, there are more new SuperCenters coming to Safeway markets, while its acquisitions over that last 5 years are now showing signs of the indifference to market specific issues.

    This "homogenized" approach of morphing the acquired chain into a Safeway clone, quickly negated the key points of distinction those acquired chains had worked so hard to develop. We know the rest of the story.

    Unless the negative sales trends and lost market share in these acquired markets is reversed, the next confidence vote may yield a very different result.





    Finally, we had a piece last week about the Yankees no longer selling Cracker Jack at Yankee Stadium, which led one MNB user to write something that we wish we’d written:

    The move away from Cracker Jacks has caused the Yankees to revise the words to “Take Me Out To The Ballgame.”

    "Buy me some peanuts and Crunch & Munch.....just who's on Steroids is anyone’s hunch…”


    Good line.
    KC's View: