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    Published on: September 16, 2004

    Fascinating piece in the Democrat and Chronicle about what appears to be simmering discontent with the Rochester region on the part of Wegmans Food Markets, enough so that chairman/CEO Robert Wegman recently said that the company was considering focusing on expansion plans elsewhere in the Northeast and Mid-Atlantic regions.

    What appears to be fueling Wegman’s annoyance is the resistance in certain areas to rezoning parcels of land that would allow the company to build new stores. “Our treatment in those areas is so much different than our treatment in Rochester that if you had a choice, you would say, ‘Why struggle the way we have to in Rochester to get the zoning or the opportunity to replace a store or even sometimes to enlarge a store?’” Wegman told the newspaper.

    Wegmans is a major force in the area, though the area has become less important to the company as it has grown. The Democrat and Chronicle reports that Wegmans is a major employer in the region, with some 5,600 full-time and more than 9,200 part-time workers there. “Although Wegmans does about 70 percent of the area's grocery business, that represents less than one-third of the chain's total sales of $3.3 billion, even though 25 of its 66 grocery stores are in the Rochester market,” the paper reports.

    The furor seems to have different constituencies choosing up sides, with business leaders calling Wegmans a “job engine” that is critically important to the area’s economy and image, and with some community leaders resisting zoning changes that they feel will impact their neighborhoods adversely.

    In some ways, it is the same battle that giant retailers such as Wal-Mart face, though Wegmans isn’t being accused of putting smaller retailers out of business, which is one of the usual charges leveled at Wal-Mart.
    KC's View:
    This is a tough one.

    Wegmans isn’t just one of the best food retailers in the country, it happens to be one of the best retailers overall. Its stores are state-of-the-art, Wegmans always has had a “raise the bar” approach, as opposed to a ”lowest common denominator” strategy – and for those reasons, we’d love to have one coming to our community.

    And yet, community resistance must be taken seriously. Wegmans isn’t threatening to leave its hometown, just to focus its development plans where it is wanted…which seems like an appropriate response to us. (As opposed to, say, trying to bully neighborhoods into accepting the company.)

    So now the ball is in the court of community leaders. They need to decide what’s better for their neighborhoods – a Wegmans on the corner, or a Wegmans in Connecticut, Delaware, or Pennsylvania.

    Published on: September 16, 2004

    The US Senate Appropriations Committee voted yesterday 16-13 to dump a change to federal overtime rules that has been put into place by the Bush administration, echoing a similar move made last week by the House of Representatives.

    However, the rebuke to the White House and Department of Labor was attached to a spending bill that now must be negotiated in a conference committee made up of both Senators and Congressmen, and over which the White House will have a measure of control; expectations are that any language that reverses Administration policy will be deleted.

    The regulations are laid out in a complicated 154-page document and say that workers who earn less than $23,660 annually will become automatically eligible for overtime pay, a boost from the current threshold of $8,060, which was established in the 1970s.

    However, salaried workers who fall between $23,660 and $100,000 a year might lose overtime based on a duties test, which describes the tasks that determine whether a worker can, for example, be classified as a professional ineligible for overtime. Those making more than $100,000 will lose their overtime rights unless they do not regularly perform professional, administrative or executive duties.

    Organized labor believes that ultimately the number of people who qualify for overtime pay will be significantly reduced, a conclusion shared, generally speaking, by the Democratic Party. Business – and the Bush administration – maintains that this is not the case, and that relatively few people will feel the impact in the form of reduced pay.
    KC's View:
    The question is whether this is meaningful, substantive debate about public policy, or just political posturing as both sides try to shore up support from their base constituencies.

    We’d bet on the latter.

    Published on: September 16, 2004

    Following up on yesterday’s announcement that Robert Mondavi Corp. has put the company’s landmark winery and its high-end wine brands, including its stake in the Opus One in France and Ornellaia in Tuscany, Italy, up for sale, company vice chairman Michael Mondavi resigned from the company amid speculation that other members of the family would try to buy back the pieces of the company being sold off.

    Mondavi is the son of company founder Robert Mondavi.

    Mondavi Corp. reportedly plans to retain its low-end properties, including the Woodbridge brand, that account for more than three-quarters of company revenue.
    KC's View:
    The more we think about this story, the sadder it makes us.

    Here you have a company that was built pretty much from scratch by an American entrepreneur, and that virtually invented an American industry. Over time the company experiences ups and downs, and finally the entrepreneur loses control of its management, the company goes public, and the crown jewels – the pieces of the company that reflect the founder’s original dreams and innovation – get sold off because they aren’t appropriate for a public company to own.

    Is the Mondavi family blameless? Probably not; after all, they wanted the company to go public.

    But this is a uniquely American story, and the final chapter may indeed be a sad one. And that’s too bad.

    Someone wrote us yesterday, accusing us of being an elitist writing about an elitist company in our piece about Mondavi. We would disagree on a variety of levels…but most of all because this seems to us to be a uniquely American business story.

    Published on: September 16, 2004

    Gap Inc. announced that it will launch a new chain during the second half of next year, aimed at the almost 40 million women in the US over 35 years of age.

    "We'll start with 10 stores and see where it goes," CEO Paul Pressler told the Wall Street Journal. "When we think about growth strategies, we are looking for opportunities that are going to meaningfully add to our growth, given the size of our company."

    In addition to the chain that bears its name, Gap also runs Banana Republic and Old Navy. A name for the new chain has not been revealed.
    KC's View:
    How about “Ample”?

    Get it? “Gap.” “Ample.”

    Ah, forget it. It was an “over 35” joke, and now we’re probably in trouble with Mrs. Content Guy (who is just barely 35+…)

    Actually we bring this story up not just to make weak jokes, but because it raises an interesting point about the lack of segmentation that is seen in food retailing. So many supermarkets are aimed at a broad demographic, with retailers thinking they can be all things to all people. But moves such as the one being made by Gap suggest to us that maybe there are opportunities not being exploited by food retailers…that more demographically targeted stores could have a role in revitalizing the business model.

    Just a thought.

    Published on: September 16, 2004

    The 2004 edition of Mintel's European Retail Rankings suggests that the UK’s Tesco – the second ranked food chain in Europe – is closing in on Carrefour’s lead position there.

    Carrefour is the second-ranked food retailer in the world, behind Wal-Mart, and Tesco is fourth worldwide.

    Interestingly, the Wall Street Journal reports this morning that Carrefour seems to be concerned with its competition from both Tesco and Wal-Mart, and that the company is embarking on a broad price cutting strategy in order to drive up its volume and compete more effectively.
    KC's View:

    Published on: September 16, 2004

    Style doyenne Martha Stewart said yesterday that she has decided to surrender to authorities now and start serving her prison sentence rather than wait until after her appeal is heard.

    She was convicted this summer for lying about a stock transaction and sentenced to five months in prison and five months of house arrest.

    Steward said she wanted "to put this nightmare behind me, both personally and professionally." She said she hoped to serve her time at a minimum-security facility in Danbury, Conn., close to her home in Westport. She would serve her house arrest at an estate in Bedford, NY.

    However, Stewart said that she “will appeal the verdict and continue to fight to clear my name. I believe in the fairness of the judicial system and remain confident that I will ultimately prevail.”

    After her July sentencing, Stewart told ABC News that she would have no problem doing the time. "I could do it. I'm a really good camper. ... There are many, many good people who have gone to prison. Look at Nelson Mandela.”

    Yesterday, she told a press conference that while going to prison now would force her to miss the holiday season as well as her pet dogs, cats, canaries and chickens, it would allow her to get out of prison in time to plant a spring vegetable garden.
    KC's View:
    Forget prison. We think that the judge would have done everyone a favor just by ordering Martha to shut up.

    Published on: September 16, 2004

    • Wal-Mart has decided to back off its plan to build Colorado’s first Neighborhood Market, saying it wants to focus more exclusively on its superstore plans for the state.

      The company had planned to build a 39,000 square foot Neighborhood Market in the Highlands Garden Village in the Denver area. But, more than 6,000 signatures have been gathered on a petition looking to stop the development.

      Highlands Garden Village is described as “a mixed-use development consisting of environmentally responsible ("green") single-family houses, townhouses, market rate and affordable senior and multifamily apartments, cohousing, office and retail spaces, set within a pedestrian friendly fabric of parks and walkways. The proximity of different uses encourages people to walk; the location near downtown and on bus lines improves travel convenience at reduced cost.

      “The environmental and social qualities of the plan begin with its urban infill location. Its place-making master plan, broad mix of uses, "green" public realm, and "green" buildings provide a model for the re-use of vacated urban sites including declining malls, brownfields and other infill sites.”

    KC's View:
    We applaud Wal-Mart’s backing away from where it is not wanted.

    Published on: September 16, 2004

    The Food Marketing Institute (FMI) urged Congress to investigate “skyrocketing” electronic transaction fees and the lack of controls on those fees in testimony filed Wednesday with the House Subcommittee on Financial Institutions and Consumer Credit. Among the reasons cited in the testimony by John J. Motley, III, FMI senior vice president of government and public affairs:

    • There have been 11 credit/debit fee increases in the past 12 months with still more expected this year.
    • PIN debit fees are up 267 percent since 1999.
    • Card association (VISA/MasterCard) operating rules prohibit merchants from notifying consumers about the fees paid, including those that are a percentage of the transaction amount. Consumers have no knowledge of these hidden fees and thus cannot modify behavior.
    • Card associations collected $29.2 billion in 2003 from electronic transaction fees.

    According to a 2003 report by the TowerGroup cited by FMI, food retailers handle over half of all electronic credit and debit card payment transactions. “At the same time,” Motley said, “the cost of accepting these cards has been skyrocketing, often exceeding the 1 percent net profit margin of the typical grocery store.”

    Motley encouraged Congress to consider international efforts to control escalating electronic payment fees: “Several countries, including the United Kingdom, Australia and Israel, and the European Union have initiated caps on fees, changes in operating rules, antitrust/fair trade investigations, regulation of the allowed components of fees, studies and legislation.

    “With fees that are higher than any of these international competitors, U.S. merchants and U.S. consumers are at a competitive disadvantage unless similar actions are considered in this country.”

    FMI noted that the marketplace offers no incentives for financial institutions to reduce such fees. “The current interchange fee model is inverted from normal competitive market models — more volume means more cost,” according to the testimony. “Volume cannot be used to lower costs, [and] merchant fees are invisible to consumers.”
    KC's View:

    Published on: September 16, 2004

    •, the NY-based online grocer, announced that it will begin serving corporate clients and offering catering services.

      “We spent our first several years perfecting the business model which is based on supplying very fresh items at very competitive rates,” said John Boris, the company’s marketing vice president. “Now we are expanding.”

      FreshDirect currently has annual sales of about $125 million and serves customers out of a 300,000 square foot warehouse in Long Island City, NY.

    KC's View:

    Published on: September 16, 2004

    Cracker Barrel Old Country Stores reportedly will begin providing nutritional information to customers, but only when they make a specific request.

    "The future will be a broader interest in nutrition and diet," said CEO Michael Woodhouse. "Our plans to respond to this at Cracker Barrel include making nutrition available to our guests on request and we expect to start doing that."
    KC's View:
    What the company didn’t say was that the nutritional information will be provided to guests engraved on a cube of lard.

    Published on: September 16, 2004

    Following in the footsteps of United Airlines’ deal with Starbucks, Caribou Coffee Co. has signed an agreement with Virginia-based Independence Air to offer an exclusive new Caribou blend that will, according to the company, give coffee brewed in airplanes the same taste as a cup brewed on the ground.

    Caribou is the second-largest coffee house chain in the country, with 281 stores around the country.
    KC's View:
    However they brew it, we hope that they leave out the ingredient that makes you have to use the lavatory as soon as the “fasten seat belts” light goes on.

    Published on: September 16, 2004

    • 7-Eleven Inc. reported that total August sales rose 7.2 percent to $1.09 billion from $1.02 billion last year. Total merchandise sales for August were up 2.6 percent, while same-store merchandise sales rose 2.1 percent during the month. Gasoline sales rose 17.4 percent in August to $373.4 million from $318 million in the prior-year period.

    • Global warehouse club chain PriceSmart announced that for the month of August 2004, net sales increased 0.2 percent to $49.9 million from $49.8 million a year earlier. For the year ended August 31, 2004, net sales decreased 7.8 percent to $595.2 million from $645.5 million last year.

      For the five weeks ended September 5, 2004, comparable warehouse sales for warehouse clubs open at least 12 full months increased 6.7 percent compared to the same five-week period last year. For the fifty-three weeks ended September 5, 2004, comparable warehouse sales for clubs open at least 12 full months decreased 4.3 percent.

    KC's View:

    Published on: September 16, 2004

    On the subject of Japan’s new case of mad cow disease, MNB user Erica Shafer wrote:

    On the Supermarket Guru website yesterday there was a story about mad cow and Japan. Japan tests every ONE of its 1.3 million cows that are slaughtered and has come up with its third cow this year. The U.S. slaughters 36 million cows a year and next year expects to test 40,000 cows for the disease. Based on Japan's results, the chances are that 1 in roughly every 43,000 cows are infected with the disease. If the U.S. had the same infection rate as Japan. It would stand to reason that they only found 1 cow this year if they were indeed only testing around 40,000 cows.

    Furthermore, assuming the disease rate was the same as in Japan, with over 36 million cows being slaughtered this year in the U.S., we should actually have close to 837 cows that are infected and in our food chain. That is a very large number, almost enough to stop me from eating beef (at least until they come out with some sort of certification saying that this cow, or mixture of cows for ground beef, has been tested to be free from the disease). If the U.S. has a better system than Japan for ensuring that the cows are just as safe, despite the fewer tests they perform, I would love to hear about it.

    Kudos to for making an excellent point, and to Erica for doing the math in way that seems to make a lot of sense.

    We got a number of emails responding to yesterday’s report and analysis of an interview with JetBlue CEO David Neeleman.

    One MNB user wrote:

    That is how companies should be run, no need for unions and employees are
    happy because the employer actually cares. Imagine that. I have respected
    them for some time now.

    And MNB user Jonathan Lukens wrote:

    I've been a JetBlue management fan for some time, having been a study of progressive management, Level 5 leadership (Meg Whitman, Neeleman) etc. and running an upstart myself.

    It was actually Sam Walton who first coined, "If you're not serving the customer, or supporting those who do, we don't need you"...

    On the union side, I think Jet Blue is heading in one direction, and Wal-Mart another...

    We had a piece yesterday about proposed government oversight of RFID technologies. One MNB user responded:

    As a consumer, I welcome some reasonable amount of government involvement in shaping the RFID future. I feel that, in a world free of restrictions, the P&G's and Wal-Marts of the world would have cameras and microphones in my car, in my bedroom, in my bathroom; maybe a Home Depot camera hidden in my garage, etc. Marketing people will stop at nothing in the pursuit of consumer information, unless there are rules that stop them. RFID promises many benefits for manufacturing, logistical, retail and other concerns, but I've yet to hear the real benefits for consumers explained. The only one ever mentioned is the idea of pushing your shopping cart through an archway and having everything automatically debited from your checking account without someone scanning the items individually. That doesn't seem so great if we also get the invasion of privacy that RFID could bring.

    And MNB user Michael Bernstein chimed in:

    I am of two minds when it comes to government intervention because, like you stated, it tends to retard the situation, not enhance it, but in the case of RFID, I'm thinking that some formal protocol needs to be developed to ensure that the potential "big brother" scenarios raised by critics does not materialize. I feel the potential efficiencies that are inherent with such a system must be balanced by the legitimate privacy issues that have been raised. Ground rules must be established, either voluntary or by government mandate, in order to ensure that no one is able to take advantage.

    All you have to do is look at the situation facing Albertson's and its (alleged) use of its shopper's Rx records and other personal data for marketing promotions to see the potential impact RFID could have on us consumers and our privacy.

    Lastly, just wanted to give you, as the kids say, "props" on your great site and lively debate. Keep up the good work!


    On the subject of Toys R Us’s troubles, MNB user Mark McSwain wrote:

    My 5-year-old son could tell you why Toys R Us is about to tank. They don't sell toys anymore. Over the past few years I have watched as toys have been replaced by clothing, DVDs, Electronics, candy and finally, groceries. Toys R Us has so scaled back the variety in the lines of toys that they carry, that I can find everything they carry at Wal-Mart or Target. I heard you speak recently where you said that Wal-Mart has not passion for the food that they sell. I think the same could be said about toys. If Toys R Us would get back into the business of selling toys, they might beat the odds.

    Interesting perspective.

    We have to be honest, we try to avoid Toys R Us at all costs, preferring to just order from and skip the hassle.

    We got a lot of email about our story relating how the Army & Air Force Exchange Service (AAFES) has opened Iraq’s first Subway restaurant – joining three Burger Kings and two Pizza Huts in that nation. AAFES plans to open more than 50 name brand fast food facilities over the course of the next twelve months as part of Operation Iraqi Freedom.

    MNB user Phillip W Censky wrote:

    I could be wrong, but the westernization of Iraq seems a little premature, given that less and less of Baghdad is safe for our troops or Iraqi police. Will these burger flippers be receiving hazard pay? While the presence of American fast food chains may be a symbol of progress to some folks, to others it's a polarizing lightning rod.

    Another MNB user wrote:

    Incredible! How do they expect us to believe that they truly have a plan to "help" the Iraqi people with news like this! Talk about a lack of respect for Iraq's cultural values. No wonder Iraqi's are afraid of the American influence – they get saddled with some of the worst aspects of our culture while the benefits are just a glimmer of hope years into the future. What a mess.

    To be fair, we think the fast food joints are being set up primarily for the US forces that are in Iraq. But the criticism that the very existence of these businesses adds to the notion that the US doesn’t “get” the intricacies of the culture in Iraq seems like a legitimate one.

    Another MNB user wrote:

    Some people don’t care for us because they have a right and/or wrong view that we as a country tend to Americanize area’s that they believe should stay true to native custom or culture. This view is considered to be strongest in the area of the world where Iraqi’s reside, and also with people in Southeast Asia. With that said, we move forward anyway. We take the cultural imperialist view that we should ignore the majority view and cultural norms, and open our crap fast food to each and every one of their arteries?

    Will this movement of QSR in Iraq solve the problems we have over there? Soon will we see: “Thin & Stuffed Crust pizza now number 1 and 2 of favorite meals displacing staples like Masgouf and Hamad,” in the WSJ or “Whoppers bring peace to Iraq,” seen via the NY Times front page. Finally, will Iraqi’s have to listen to Jared from Subway as well, or will they be spared? It’s the very least we could do.

    But not everyone thought the fast food invasion was inappropriate:

    Some people may not like fast food and they feel that it has destroyed the health of our kids. At the same time, fast food is what these young people eat and it seems that this "little piece of home" might be something that connects them to their regular life. With all of the other threats that they have to endure on a day-to-day basis, let's give them this one vice.

    Finally, we got a whole bunch of email about various France-related stories that we’ve run this week…one that spoke enthusiastically about the French food shopping experience, and another that wrote about the plight of French winemakers.

    On the former issue, MNB user Joan Toth wrote:

    One of my favorite "grocery shopping" experiences was at a farmer's market in a small village near Beaujolais during the first few weeks of the Mad Cow outbreak a few years ago....

    The local farmers had snapshots of the cattle - prior to butchering – showing the shopper that, presumably, Bossie was a young, healthy specimen, well taken care of in the French countryside, with no suspect feed in its diet.

    On that same trip, we wandered into a little wine cooperative where the locals were gathered to sell their specialties - newly released Beaujolais Nouveau, sausages (with samples being grilled over grape leaves leftover from the crush), local duck confit, jams, breads, cheeses, all the local specialties.

    What a great way to live.

    Am I alone in being embarrassed that our grocery experiences in the U.S. offer endless endcaps of processed boxes of food?

    No. You’re not alone.

    At one point yesterday we commented about how much hostility remains towards the French, noting that we’d run an essay about Parisian food stores, and received a few nasty emails about the French.

    We wrote: We would suggest to the folks sending us these largely unprintable emails that they should take a good look at the Content Guy’s last name to see if they are going to find a sympathetic ear; while we are primarily Irish American, there is a bit of French and Alsatian blood coursing through our veins. We like to think of ourselves as both Gaelic and Gallic…which probably explains why we have so much gall…not to mention our taste for beer and wine.

    One MNB user responded:

    No unprintable comments here, but no mystery on the "amazing hostility" either. You might want to read Bill Gertz's new book or look into the U.N. Oil for Food program and how scandal ridden it was. The French make it easy to dislike them in the best of times. Are you amazed at their general attitudes about everything and everyone else?

    Bottom line the French not only didn't support the U.S. when they should have - they actively worked against us in technology and arms. Many people look at the recent and current deaths of American soldiers being at the very least enabled/assisted by the very country we shed blood for on the beaches of Normandy. When They needed us.

    If it's hard to understand that hostility then maybe geo politics is a subject to stay away from. Sympathetic ear? I could care less what MNB thinks or feels about this subject. Frankly, I'm amazed, that you're amazed. Seems as if the sympathy is needed (and being asked for) for the poor French winemakers. The blood lines of your editors and writers have nothing to do with the subject at hand, nor does it offer any comic relief. Stick to the retail business. Was this unprintable?

    Obviously not. In fact, it was a good deal more civil than some of the other email we got.

    Here’s the thing. We recognize that there are two ways to approach this issue, and if people choose not to drink French wine because they disagree with the French government’s political positions, that’s fine. We’re only saying that we choose to distinguish between vintners and politicians…in fact, we know some French folks who don’t think much of their government’s decisions, either.

    As for bloodlines not being comic relief, maybe you haven’t been paying attention. Here at MNB, almost everything is fodder for jokes. Passion and debate are no reason to lose a sense of humor.

    MNB user Mike Eyerly also had a thought on the bloodlines issue:

    You’re supposed to be an American first. But hey! It's all about the selfish American in today's age.

    Rebuke noted. Point taken, even though we were kidding around. But we’re not sure what exactly was ‘selfish” about our comment and approach…

    And another MNB user offered:

    So its OK with you the insurgents in Iraq have new French weapons, allegedly?

    No, it very definitely would not be OK, though the most important word in that sentence may be “allegedly.” If true, this would be something about which we would not have a sense of humor.

    But again, we are trying very hard to distinguish between gun merchants and vintners. Maybe that’s a distinction that is both impossible and inappropriate in 2004…but we don’t think so.
    KC's View: