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    Published on: September 28, 2004

    The St. Petersburg Times has an interesting profile of Laura Johnson, described as the “frontline flavormeister” at Publix Super Markets, responsible for developing private label products for the retailer that will allow it to maintain a competitive advantage in the face of heightened competition. Johnson, the paper writes, “has finely tuned taste buds that have played a big role in launching millions of dollars worth of ice creams, cultured yogurts, frozen yogurts and even tea, lemonade and soda pop.”

    One of the keys in Publix’s private label strategy is covering all sides of the spectrum, according to the Times. That means that Johnson has created both premium-quality gourmet ice creams as well as “ a line of reduced-carbohydrate ice cream for diabetics, the Atkins/South Beach diet crowd and others among the nation's estimated 70-million carb counters.”

    The paper notes that it isn’t just a matter of creating new products that generate new sales. “Publix uses ice cream, and the many fancy flavors, as a key signal to consumers that it celebrates quality foods and has all the latest goodies for foodies.”

    Publix isn’t just using new products to grow, by the way. The Tennessean reports that having purchased seven Albertsons units in the Nashville market as a way of quickly establishing a presence there, Publix now is planning to build at least four new units in the suburbs of the city.
    KC's View:
    For us, it isn’t just about products. Ore even location. It’s about attitude…and understanding that you have to invest in creating differential advantages. Too many retailers spend their time focusing on the competition rather than the customer, playing defense instead of offense.

    Published on: September 28, 2004

    The Fort Worth Star-Telegram reports that the Coca-Cola Co. is trying to shut down the market for the more expensive Mexican version of its flagship brand, which is made with real sugar rather than corn sweetener and which has developed a growing fan base among U.S. cola connoisseurs.

    Making the job a little more difficult is the fact that some mainstream supermarkets – including Kroger in Houston, HEB’s Central Market in Fort Worth, and Safeway in Denver – sell the Mexican version, which is sourced from offer a national wholesaler, Gourmet Award Foods.
    KC's View:
    If you’d told us a decade ago that we’d be writing stories about shutting down drug supplies from Canada and Coke from Mexico, we suspect we would have had a very different vision of these topics.

    Published on: September 28, 2004 reports on an interview with Tesco CEO Sir Terry Leahy, who notes that the company had its most troubled times when it “lost sight of the customer” and was trying too hard to emulate Sainsbury,” but has managed to transcend those troubles to become a global player that is competitive with Wal-Mart.

    “It was a tremendous lesson not to become overly obsessed with following and benchmarking,” Leahy says. “The irony was that when we stopped trying to be like a Sainsburys, we started to deliver. The cautionary tale for Tesco is that there have been other great number ones in this industry. It’s a great industry but you are judged every day. Consumers do have a choice and they will punish you if you don’t measure up.”
    KC's View:
    Good object lesson. Too many retailers define themselves by how they measure up to Wal-Mart, instead of defining themselves by what they do well and how they achieve excellence in their efforts to be relevant to consumers.

    In a lot of cases, that’s because they feel – quite rightly – that Wal-Mart’s strategy is the clearest example of strategy achieved. But it becomes a problem when retailers allow Wal-Mart to define the rules of everybody’s game…which is no way to compete and differentiate yourself.

    Published on: September 28, 2004

    • Bloomberg reports that the Quebec Labour Relations Board has ordered Wal-Mart to stop trying to prevent a unionization drive at one of its Montreal-area stores.

      The board certified a union local after a majority of employees at the Wal-Mart signed membership cards. It is now up to the union to organize the store’s employees, an effort that the union says Wal-Mart has been resisting.

    • The discovery process in the gender discrimination suit against Wal-Mart has been stopped by a federal judge, who said that it could not resume until an Appellate Court rules on whether or not the case can be given class action status.

      The original case was filed by several women, and was then granted class action status that would include 1.6 million women as plaintiffs. Wal-Mart, which is accused of not paying women as much as men in comparable jobs and of holding back promotions from female employees, is appealing that decision, saying that all compensation and promotion decisions are made at store level, and therefore a class action suit is inappropriate.

    KC's View:

    Published on: September 28, 2004

    The Memphis Business Journal reports that Target Corp. “has identified the top 50 metro markets in the country and is in an aggressive growth phase to saturate those top markets,” places where” the typical education and income demographics are higher.”

    The goal isn’t necessarily to be downtown, but rather on the suburban edge of major metro areas. Target has identified seven such locations in the Memphis area alone, and is moving ahead on such plans throughout the country. The company reportedly will put off smaller markets at least until 2010.

    According to the Journal, “the median age of a Target customer is 45 with a $57,000 median household income. 90% of customers are female, 39% have children at home and 44% have completed college.”
    KC's View:

    Published on: September 28, 2004

    McDonald’s and Triarc Corp. (parent of Arby’s) may both be interesting in acquiring Krispy Kreme Doughnuts Inc., according to a report by a stock analyst.

    Neither of the alleged pursuers commented on the suggestion, and Krispy Kreme officials also were mum on the possibility.

    The theory seems to be that companies like McDonald’s always is interested in building its volume, and might be intrigued by acquiring an existing brand, as opposed to trying to build something from scratch like Chipotle. Krispy Kreme may be at its most affordable these days, because of the negative impact of the low-carb craze and a sense that it has over-expanded in too short a time.

    McDonald’s already is testing the sale of Krispy Kreme doughnuts in selected Canadian locations.
    KC's View:

    Published on: September 28, 2004

    • Marsh Supermarkets announced that it will open a third Arthur’s Fresh Market, this one in Indianapolis. The company already has one of the fresh foods-oriented stores operating in Syracuse, Indiana, and has another one on the drawing board for New Palestine, Indiana.

    • The Wall Street Journal this morning reports that Starbucks Corp. will raise beverage prices between three and five percent a cup – or an average of 11 cents a cup - on Oct. 6. The increases are the first imposed by the company since 2000, and are said to be due to the rising cost of milk and other commodities.
    • Canada’s Sobey’s reportedly will shutter its retail support center on Prince Edward Island, and use its facility in New Brunswick to service both New Brunswick and PEI. The move will affect almost 60 employees, who will be offered jobs elsewhere in the company.

    KC's View:

    Published on: September 28, 2004

    • Internet Retailer reports that even as Fresh Direct, the New York City-based e-grocer, looks to expand into catering and B2B services, it also is considering expanding into other markets, and is looking to create a Starbucks-style business model that will allow for such dramatic growth.

      In New York, Fresh Direct says that it has annual sales of about $125 million and about 200,000 customers.

    KC's View:

    Published on: September 28, 2004

    • Walgreen Co. announced that net earnings for the fourth quarter were up 18.1 percent to $327.2 million, versus last year's $277.1 million. Sales rose 14.3 percent to $9.4 billion for the fourth quarter.

      For the just completed fiscal year, net earnings increased 15.7 percent to $1.360 billion, compared to last year's $1.176 billion. Sales rose 15.4 percent to $37.5 billion for the year.

      Same-store sales were up 9.7 percent for the quarter and up 10.9 percent for the year.

    KC's View:

    Published on: September 28, 2004

    Yesterday, we hosted a conference call meeting of the first MNB Share Group, discussing the issues of obesity and nutrition and what retailers can do to turn these challenges into opportunities.

    More than 50 people applied to be a part of the session, which was scheduled to run between 30 and 45 minutes and ended up going for an hour and ten minutes; we limited the number of people involved to a manageable dozen folks, many of them from some of the best retailers in the nation.

    For the moment, at least, we’re going to respect the confidentiality of the session; but the really good news is that we actually developed some action steps to start working on. And that process begins today.

    We hope to have more sessions devoted to this subject, and to others; the success of this group leads us to believe that the MNB community actually extends beyond the Internet, and we want to encourage the connection that we have to each other.

    And finally, we need to once again thank Eric Gault and Heaven’s Bistro pizza – the official frozen pizza of MNB World Headquarters - for making the share group session possible.

    As we mentioned to the share group yesterday, we hope you’ll all make an effort to try Heaven’s Bistro, because it is companies like this one that help to make MNB and this share group possible.
    KC's View:

    Published on: September 28, 2004

    We had a piece yesterday about the prices, selection and strategies that seem to distinguish Costco from its competitors…and we were dismissive of the investment community that keeps insisting that the retailer should raise its margins and pay its employees less as a way of maximizing profits.

    One MNB user responded:

    I would guess that most retailers think that the "investment class" is over paid?

    Overpaid. Self-important. And over-caffeinated. (Though there are probably more than a few people who would say that about us...)

    And another member of the MNB community offered:

    Amen, amen, amen! Your comments regarding the investors' views of Costco's operating practices was right on the button.

    When "bean counters" run your business you usually end up counting beans. There is still a lot to be said for "stacking it high and selling it cheap" ... just pay attention to the details.

    Of course, nobody is perfect…as illustrated by this next email:

    Ironic, Kevin, seeing this article today as I just finished writing Costco a letter complaining about seemingly lack of training with some of their staff. Costco's buying remains their strength, but staffing, at least in my area of Southern California, is not a reflection of Costco's reputation.

    Customer service is still important -- even at club stores! It's so hard to build a reputation, and so easy to lose it.


    The thing about Costco is, our experience has been that its management will take your complaint seriously and try to do something about it.

    You can’t say that about every retailer out there…

    We wrote yesterday about a story in the New York Times reporting “that the US Food and Drug Administration (FDA) is delaying action on a proposal that would restrict the ingredients allowed in animal feed, which was originally made after the identification of a single case of mad cow disease in the Pacific Northwest late last year.”

    The NYT noted that some critics see this as part of a broader pattern. The paper writes, “Industry lobbyists and their critics say that the re-election of President Bush would probably lead to the adoption of some regulations favorable to industry and the rejection or watering down of others that industry considers objectionable. Consumer groups, environmental organizations and food safety experts, meanwhile, say that delays could lead to significantly weaker rules that could increase prices on some products, reduce safety and relax environmental protections.” And everyone agrees that politically, second-term presidents can do things that first term presidents cannot.

    Our comment was simply that these moves seem to be attributable to politics, not science…and we remain concerned that another – and, we think, inevitable - case of mad cow disease could have an enormously negative impact.

    Our view was not a universal one. One MNB user wrote:

    Your views on Mad Cow (and Fast Food lawsuits) indicate a lack of common sense. Are you listening to the press and/or gullibly adopting everything/anything that “science” brings to us, or are you looking at the facts? Over the past twenty years, at least, the press seems bent on stirring up public frenzy, with little thought of the end result -- or the public or personal costs involved.

    I have worked for two European-based companies and am very aware of Europe's attitudes toward Mad Cow, US beef, etc. However, let's take a look at the facts and do a little responsible cost/risk analysis.

    Human Risk. Supposedly, 150-180 people in Europe have died from the human form of Mad Cow disease -- since the 1980s (about 20 years). 150 people is not an insignificant number, especially if you are one of them, and if the deaths are preventable. However, this could by no means be considered an epidemic. How many people in the U.S. have suffered from this illness?

    Prevention. This disease is only transferred, apparently, by consuming tissue from the central nervous system. Obviously, more is being learned about this malady. However, if in 20 years, this is the conclusion, why don't we focus on ways of avoiding products derived from this tissue -- rather than inciting fear of beef consumption altogether.

    Costs. How much does testing cost Europe and Japan? Have their measures improved the situation? These are all questions to be considered and researched.

    The real risk here is not whether or not our food supply is safe. The real risk is what public and global opinion will do with this situation - -and how much we will allow the press's lack of common sense deprive us of our own wits...

    Hey, we have an open mind about all this, and are willing to be educated.

    We would agree that there had not been an epidemic of mad cow disease, and that all the testing in the world hasn’t solved the problem in Japan and Europe. We also agree that the US food supply is, in general, safe.

    Our concern is simple – and we don’t think it is fear-mongering. We simply think that if there’s another case of mad cow disease in the US, phrases like “cost-investment analysis” won’t mean much to consumers. All they will do is reduce their meat consumption and wonder why the government and industry didn’t do more testing.

    MNB user Al Kober wrote:

    It is the NY Times. Are they trying to be the next CBS?

    We suspect that this will be the standard response to stories that people don’t agree with – to suggest that the journalism is suspect and built on unsupported facts. You can disagree with the people who are skeptical of US mad cow testing, but to suggest that there isn’t such skepticism and that the Bush administration (like any administration, Republican or Democrat) isn’t concerned about the politics of regulation…well, that strikes us as naïve.

    Finally, a response from within Wal-Mart to our observation that a full-time employee at the company responsible for supporting a family of five could, in fact, be paid beneath the poverty level:

    I have worked for Wal-Mart for 11 years. In the store where I worked the longest, nine years, I can't think of a single married associate who was the sole source of a family of five, or anywhere near that large.

    I know several female associates who were the divorced mothers of one or two and several single females; but not a single one who supported a family of five on their earnings.

    I think that, more than likely, this statistic being used as a guideline probably came from the day when the work force was primarily made up of male employees. For years retail was the only job open for women.

    While I'm not about to say this is the norm for all Wal-Mart female associates, I'd be willing to bet that it's closer to fact than your…repeated use of this "family of five" figure.

    But how else would a figure that's close in size to what's paid in retailing in general…be constantly thrown out as "BAD" about Wal-Mart?

    Actually, we don’t disagree with you.

    We would, however, observe that Wal-Mart’s business model is in part workable because many of its employees do have other sources of income and benefits. We also think that there’s a big difference between the poverty line and living comfortably.

    Not that Wal-Mart, or any other retailer, is responsible for making sure all of its employees live comfortably.

    But there may be a reason that Wal-Mart has employee turnover of 46 percent, and retailing in general has 65 percent turnover. That doesn’t strike us as optimal performance – under any circumstances.
    KC's View:

    Published on: September 28, 2004

    In Monday Night Football action, the Bill Parcells-led Dallas Cowboys defeated the Joe Gibbs-coached Washington Redskins 21-18.
    KC's View: