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    Published on: November 2, 2004

    The Atlanta Journal-Constitution had an interesting piece the other day about the differing strategies being employed by the Coca-Cola Co. and PepsiCo in the ongoing soft drink wars.

    Pepsi, for its part, is big on short-lived products that can create an immediate buzz and then be pulled off the market in favor of yet another product that it is hoped will have the same impact. Take, for example, Pepsi’s recent introduction of grape-flavored Mountain Dew Pitch Black, themed to take advantage of pre-Halloween interest. But now that Halloween has passed, Pepsi has pulled it off the market…and replaced it with Pepsi Holiday Spice, a cola with a tinge of spice flavor.

    It doesn’t always work, of course – witness Pepsi Blue. (Which you can’t, because it’s gone.)

    Coke, on the other hand, is trying to take a longer-range view of product development…though this can result in a “too many eggs in one basket” problem. That’s what Coke found itself dealing with in the case of C2, its new mid-calorie soft drink, which hasn’t been as successful as hoped. Now, Coke is in the position of retooling its marketing approach to C2, lowering prices and coming up with new packaging to boost sales.

    The problem, as the Journal-Constitution reports, is that Coke has to do a bit of damage control because it has more invested in C2 than Pepsi has in its mid-calorie soda, PepsiEdge. Pepsi simply had other drinks on which it could concentrate, which takes pressure off the company.
    KC's View:
    This sort of reminds us of what a University of California at Berkeley professor says is the difference between two kinds of retailing – a chess-style approach, which plans several moves ahead and in which all moves are linked, and a poker-style approach, it which you make a series of bets and collect on the ones that pay off and get over the ones that don’t.

    The argument, and it seems legitimate, is that in 2004 and beyond, you have to abandon old-world marketing strategies and take a fresh approach.

    Here’s the thing, though. As much as you can expect packaged goods companies to change their marketing stripes, retailers have to do the same thing. The same-old, same-old approach simply has to evolve in new directions.

    Published on: November 2, 2004

    The Associated Press reports that a number of corporate CEOs – including Steve Jobs of Apple Computers Inc., Michael Eisner from Walt Disney Co., John Mackey of Whole Foods Market Inc., Norm Mason of Cat Communications International, and Bill Ford of Ford Motor Co. – are enabling the creation of cafeterias that offer vegan and vegetarian meals, often for free. Non-veggie meals also are available, but a greater number of vegetarian options are available than is traditionally the case.

    In some cases, the executives are simply trying to offer employees a greater number of options so they can eat healthier cuisine. But in others – such as Mason of Cat Communications – the move is actually part of a coordinated campaign to convert employees to a meatless lifestyle.

    "I try to combine as much preaching with living by example," Mason told the AP. "That's why the cafeteria is free. Nobody's forced to eat in the cafeteria. They can go somewhere else. If they want to spend their money, that is their right.

    "But I hope through example, they would say, 'Hey, this is pretty good stuff.'"
    KC's View:
    Last week, it was college students who wanted vegan meals. Now it is CEOs.

    See a pattern?

    Published on: November 2, 2004

    Reuters Business Insights has published a new study, entitled "New Profit Opportunities in Health and Nutrition to 2009," suggesting that while low-carb foods have proven to be a highly profitable category, by 2009 the market will be dominated by that low-fat, cholesterol-reducing and diabetic-friendly products.

    Also expected to be a hot category in coming years: functional foods and packaged, branded, prepared fruit snacks.

    The overall goal as these trends develop seems to be to cater to both the younger population and aging baby boomers, both of which need a healthier, more nutritious cuisine.
    KC's View:

    Published on: November 2, 2004


    • Last week, we reported on how Target was promoting a low price image in the Minneapolis-St. Paul market, an approach that analysts said would only be appropriate until Wal-Mart started opening supercenters there.

      Well, Wal-Mart must be watching television…because the Business Journal of Minneapolis/St. Paul reports that the company has now announced that it is adding a grocery store to an existing discount store there, making it the first 210,000 Wal-Mart Supercenter in the Twin Cities.


    • The United Food and Commercial Workers (UFCW) has applied to the provincial labor board in British Columbia to represent employees at a number of Wal-Mart tire centers. The next step will be for the labor board to hold a certification vote.

      Canada is providing Wal-Mart with some well-documented labor headaches, as it already is facing a certified union at one of its Quebec stores, and union movements in a number of other areas of the country.


    • Wal-Mart’s Asda Group in the UK announced that it plans to hire 2,000 employees for its 270 stores, using them to keep every one of the company’s 7,000 checkouts open on weekends before the Christmas holidays.


    • PlanetRetail.net reports that Jeff McAllister, COO of Wal-Mart’s Japanese business, has said that while the company expects flat sales there in 2005, the company will use the time position itself for eventual expansion.


    • Wal-Mart announced the opening of its 40th outlet in China, a store in Wuhan, the capital city of Hubei province in central China. And it has said that it plans to open at least 10 more stores there next year.


    • To this point, Wal-Mart has operated 39 stores in 19 major Chinese cities, and employed more than 20,000 people there.
    KC's View:

    Published on: November 2, 2004


    • Costco has opened its second Costco Home store, this one in Arizona. The first such unit opened two years ago in Kirkland, Washington, though it is still officially classified by the company as a “concept store” without firm plans for a national rollout.


    • Ahold has announced that Chilean retailer Cencosud has acquired 84.75 percent of Disco, its Argentine unit, with the balance of the unit expected to be transferred once legal questions are resolved there. Ahold is making the equivalent of $315 million (US).


    • France’s Carrefour and Germany’s Metro have both announced expansion plans for China in 2005. Carrefour reportedly will open 15 stores over the next year, on top of the 53 units it currently operates there. And Metro will expand its fleet by more than 50 percent; it currently operates 21 units in China.


    • Published reports say that Cuba has signed contracts that will allow it to obtain $150 million worth of US farm products, including $10 million of U.S. wheat and meat products, and $300,000 of American dairy cattle.


    • It has been well documented how Amazon.com and Toys R Us are involved in competing lawsuits, with Toys R Us charging that Alazon abrogated its contractual agreement to allow only the toy retailer to sell toys and games on its site, and with Amazon also charging Toys R Us with breach of contract.

      Well, the lawsuits haven’t been settled…but that doesn’t seem to have stopped the two companies from keeping their eyes on the holiday season prize. We got an email yesterday from both Amazon and Toys R Us, informing us about a whole series of special offers – ranging from Game Boy to a Shrek stuffed animal, plus free shipping on all orders over $49.

    KC's View:

    Published on: November 2, 2004


    • Smart & Final Inc. reported third quarter net income of $12.0 million, an increase of $3.7 million or 44 percent over the prior year. Sales for the quarter were up 12 percent to $603.2 million, and same store sales also were up 12 percent.

    KC's View:

    Published on: November 2, 2004


    • BJ's Wholesale Club announced that Paul H. McDonough has joined the company as senior vice president of finance, a new position, reporting to BJ's chief financial officer, Frank Forward.


    • Unilever-owned Ben & Jerry’s has promoted the company’s marketing director Walt Freese as the new CEO, replacing Yves Couette at the end of the year.

    KC's View:

    Published on: November 2, 2004

    By Kevin Coupe

    In addition to writing MorningNewsBeat each day, Content Guy Kevin Coupe also contributes regular columns to a wide number of publications, including Chain Store Age. As a regular MorningNewsBeat feature, the folks at Chain Store Age have graciously agreed to let us reprint some of these columns.


    One of the traps that many supermarkets - in fact, many retailers - tend to fall into is what might be called the siren call of the Bentonville Behemoth.

    By this, I mean the desire to emulate the approach to the marketplace that has been perfected by Wal-Mart. This is a phenomenon that I addressed in last month's column - the danger that many retailers could collapse into irrelevance because they spend so much time trying to beat Wal-Mart at its own game that they don't develop a differentiated game plan of their own.

    Of course, in the food business, there are exceptions to the rule. Companies like Ukrop's, HEB, and Wegmans often are lauded for their ability to come at the business from a different direction, their capacity to surprise and delight the consumer. But one company that doesn't tend to get a lot of attention, and that is operating stores that are on a par with the best in the business, is Price Chopper, based in upstate New York.

    I recently had a chance to visit several of the company’s newest stores, which are part of the company’s expansion into Connecticut. One of them is in Bristol, located in the shadow of ESPN headquarters; the other is about a half-dozen miles away, in the town of Southington. These two stores double the company's store count in the Nutmeg State; there are another four on tap for the near future.

    These are hardly under-stored areas in which Price Chopper is opening supermarkets. There are a number of familiar food shopping entities nearby such as Shaw's, Stop & Shop, even Aldi. But that doesn’t seem to deter Neil Golub, Price Chopper's CEO, who has developed an aggressive and ambitious master plan for the 107-store, privately held chain.

    Price Chopper has an intriguing approach to creating a differential advantage for consumers. On the one hand, it has an outstanding perishables presentation, offering a veritable food hall to entice shoppers; when Price Chopper advertises that it is for "people who love food," it isn’t kidding. On the other, the company has an aggressive, promotion-oriented pricing strategy, challenging the competition with sharp, selective discounts.

    That's a strong one-two punch, and requires a kind of balancing act. But it works.

    During my visit to the new 95,000-sq.-ft. Price Chopper in Southington, Golub was very much the proud father. Patting his people on the back, both really and figuratively. Chatting up customers, asking if they were having a good time. Picking up the rare scrap of paper off the floor. Clad in a pinstriped suit and two-toned shirt and tie, Golub betrayed his merchant's roots at every turn.

    "What we want people to say when they walk in the store is 'wow,'" Golub says. He watches approvingly as a pair of teenaged girls walks by him, and one says into her cell phone, "I'm in the most amazing store." He smiles. Mission accomplished.

    "We've come a long way in the last five years, especially in our fresh food offering," Golub says. It was about five years ago, he says, that the company started examining itself and its position in the marketplace, both in terms of consumer trends and competitive pressures. "I think we've very carefully, slowly, taken small steps, but mastered the steps that we've taken in a way that we can handle."

    And a key was building fresh foods while remaining true to the chain's high-low pricing tradition. The best reason for this approach is that the big box stores use an EDLP pricing structure; focusing on specials allows price Chopper to differentiate itself. Plus, a high-low offering dovetails better with a strong fresh foods business.

    "The offer that we give certainly is a very strongly valued offer," Golub says. "We are still a promotional retailer. When you look at our advertising and our store, they support each other…we're tough on our pricing, we watch it very carefully. There are a lot of new competitors out there, and we, like every other retailer, have to deal with it, and are dealing with it in our pricing structure. Our promotional effort is very sold, very consistent, and it delivers what we want to deliver very regularly."

    The balancing act means that Price Chopper maintains three levels of private label: the Always Save value brand, the Price Chopper mainstream brand, and a premium Central Market brand that is growing in both SKUs and sales. It means that to counter-balance a doughnut counter that would put a Krispy Kreme to shame, there has to be a self-checkout lane that keeps the lines moving efficiently. For every extravagantly merchandised seafood and meat department, there has to be pack-'em-high-and-sell-'em-cheap endcaps. And even as people cook less and Price Chopper has plenty of so-called meal solutions in its fresh food departments, it also has a demonstration kitchen staffed by a full-time person who encourages people to sample the pleasures of cooking. Indeed, for every store that approaches 100,000 square feet, there also are smaller stores in the 45,000 square foot range that are customized for their markets.

    The balancing act seems to be working. While Price Chopper competes with a number of Wal-Mart Supercenters, it expects that number to grow substantially over the next few years. "But our experience is, with our good stores, after a period of time our sales come back and our profitability comes back. Over the long haul, when you have theater like this, we like to think of ourselves in a different class of business."

    One quick word about another Price Chopper advantage, one that stands out in a business where labor strife seems to be everywhere. About 55 percent of Price Chopper's privately held stock is owned by its non-union employees, which creates a sense of empowerment and engagement. "That in and of itself can become very significant," Golub says. "Last year alone, we had a 25 percent increase in our stock." That means that stock people, truck drivers, cashiers - all got to share in the company's growth.

    My sense of Price Chopper's achievement is that it succeeds because it engages in highest-common denominator marketing without being overtly upscale, as opposed to the lowest common denominator approach espoused by other retailers. Golub says that one of his goals is to avoid being perceived as a plain vanilla store" and that he wants the store to "exude charisma." That's unusual language from a supermarket CEO…but it seems appropriate for competing in a tough marketplace.

    Smart shopping can mean getting the best price. It also can mean getting the best products. Sometimes - and this is surprisingly rare - it means getting the best products for the best prices. This is the Price Chopper pitch.

    One of my personal barometers for supermarket excellence is when I walk into a store and wish that the company would open one near me. That's a test that Price Chopper easily passes, with a brio and selection that easily compare to some of the best in the business.

    Reprinted with permission Chain Store Age (3/2004). Copyright Lebhar-Friedman Inc., 425 Park Ave., NY, NY 10022.

    For further information about Chain Store Age, go to:

    http://www.chainstoreage.com/
    KC's View:

    Published on: November 2, 2004

    We got a number of emails responding to yesterday’s story about Minyard’s being sold to a Texas investment group.

    MNB user Thomas D. Murphy wrote:

    Minyard's was able to compete successfully for years with the traditional grocers, but when Wal-Mart entered and changed the rules, they could not adapt quickly enough. They struggled with poor investments and strategies in the technology arena, which minimized their adaptability...they just had nothing to leverage.

    This is a lesson for all of us...flexibility and adaptability of the infrastructure and business mindset are key to survival in the grocery industry! The days of "stack it high, price it low, watch it go" are ending!


    MNB user Marty Gillen wrote:

    You can kiss this chain good bye. Ron Johnson has had notable success in running Jitney Jungle and Del Champs into the ground and almost did the same to Farm Fresh in Norfolk.

    What a shame.


    Another member of the MNB community wrote:

    I agree - it is a shame to see a family leave the industry. I would imagine you'll begin to see an exodus of employees in the near future as Mr. Johnson and crew begin to "slice & dice" the business. Just hope he doesn't bring the same great ideas to Minyard's that he did to Jitney Jungle.

    And MNB user David J. Livingston wrote:

    A lot of people are going to miss Minyard's. They were a good company to work for, was very involved in the community, and was a good corporate citizen. However in both Dallas and Ft. Worth they had fallen to a distant 5th in market share behind Wal-Mart, Albertsons, Tom Thumb (Safeway), and Kroger. Chains right behind Minyard's like HEB, Fiesta, Super Target, and Save-a-Lot have been adding stores and gaining in market share. While Albertsons, Super Target and Tom Thumb are pretty much ineffectual competition, they don't make it any easier when trying to compete with heavy hitters such as Wal-Mart, Kroger, HEB, and Fiesta. Albertsons’ eventual exit from Texas will help a little, but they will most likely sell their best locations to the stronger operators. Given the short-term strategy history of the new owner's past supermarket experiences, I have to wonder what their real motive is in buying this chain?

    A question a lot of people are asking…




    Interesting response to our piece yesterday about how Wal-Mart, just a week after it decided not to sell Jon Stewart’s “America: The Book,” it sent back 3,500 copies of George Carlin’s “When Will Jesus Bring The Pork Chops?”, saying it had never order the best-selling satire to begin with. We commented that we can't help but feel that these sorts of moves represent a sanitized cultural mindset that does not encourage diversity of thought and debate.

    One MNB user responded:

    As you know I'm no fan of Wal-Mart, however, how can one say that a retailer’s choice not to sell a book is a bad thing? We are not talking about the publishing industry or the government banning a book but a retailer’s choice as to their product line. Within legal guidelines every retailer should have the ability to sell the products that best represent their business beliefs, values and those products which they believe their customer base will support.

    An idle observation worth more research on my part…

    Religious connotations are always tricky and could contribute to a retailer’s choice for or against the book. As a Christian I understand many differences in the Law (of Moses) and the teachings of the New Testament in regards to edible foods. To me the title suggest a general lack of respect for religion but would others feel that way? The food reference is not necessarily insulting but it seems many will be offended in that Jesus was a Jew and the title may alienate shoppers. (Whether one believes in Jesus as the Messiah it would be unlikely that Jesus would have found pork as anything other than unclean.) Perhaps the anti Semitic and anti-Christian views that are growing in Western Europe are making headway in the USA with small steps. I always thought that George Carlin was of Jewish decent so perhaps this is a very funny title and I need to lighten up? Just some observations to be curious about. Thanks for the continued great reporting and commentary.


    Two responses. One, we have said, and we believe, that Wal-Mart…and every other retailer…has every right to decide what to sell and what not to sell. That said, we think you can use such decisions to look into the heart and soul of a retailer and understand where it is coming from. Some will see such decisions as positive, and others will see them as negative. (And Wal-Mart, we’re sure, would say that the message it is sending is precisely the message it wants to send.)

    Second, while we haven’t read the book we have heard Carlin interviewed about it, and his point simply seemed to be that the words created a juxtaposition that he found funny. It’s irreverent, to be sure…but we think he delights in that.

    And, we continue to be criticized for some of our commentaries about Wal-Mart.

    One MNB user wrote:

    Until you can verify that Wal-Mart drags people in off the street - kicking and screaming - and forces them to work for or shop at their stores, your diatribes will continue to seem specious.

    Sometimes there aren’t a lot of choices for people. And are you suggesting that because Wal-Mart (or any other retailer, for that matter) doesn’t force people to work in its stores, a discussion of what its policies are is inappropriate?

    MNB user Bob Vereen wrote:

    I don't know if you regularly visit any Wal-Mart stores or not. I do get into them periodically, sometimes as an observer, sometimes as a customer.

    What has always intrigued me, when I read the negative Wal-Mart articles in the consumer press (and sometimes in MNB), is the contrast between what I read and the generally cheery attitude of Wal-Mart employees.

    It seems to me that, on average, the helpfulness and cheerfulness of
    Wal-Mart employees is far greater than that to be found among employees of their big-box competitors, Target and Kmart. If what management does is so bad, how come the employees seem so happy?


    Not to be argumentative, but we also get into a local Wal-Mart a couple of times a month, and we wouldn’t say that there is a surplus of good cheer among employees there. They aren’t any happier or more helpful than the folks who used to work at Caldor in the same location.

    Maybe it’s the building…

    Another MNB user had an interesting take on the company’s claim that it cannot verify some of the charges made against it in terms of health insurance issues:

    It seems hard to believe that a company that reportedly stores more terabytes of data than the Department of Defense would have a hard time figuring out a way to validate some of the numbers being reported on the health coverage issue. Maybe they should survey their current associates and ask: Do you use Medicaid, or Do you have insurance coverage? If they really cared about the associates, don't you think they would want to know?

    When writing about Wal-Mart’s efforts in China, we wrote (somewhat tongue in cheek): “When you think of the famous photograph of Tiananmen Square, do you picture Wal-Mart as being the tank, or the single individual holding up his hand in protest?” One MNB user responded:

    Oh, come on Kevin. You've made some low-end digs about Wal-Mart since I started reading your column but I believe this takes the prize.

    More than likely, for every small store owner with their hands up, there's thousands going past the people-greeter at their nearby Wal-Mart. The only non-business person with their hands up, more than likely, is carrying a union sign out front of a new nearby SC.

    You, of all the ones here, should demonstrate a little more of an open mind when it comes to writing about happenings in the retail side of the business.

    For every snide comment you make about the "Bentonville Monster" I could possibly recount a story I heard direct from shoppers apparently very happy that they could shop at Wal-Mart.

    I think you need to tone down these types of remarks about Wal-Mart, stick to reporting the news, before you find yourself writing only to and for "fellow travelers" who hate their guts.


    For the record, we’ve never called Wal-Mart the “Bentonville Monster.” Only the “Bentonville Behemoth”…and we can’t imagine who would argue with that.

    And we don’t hate Wal-Mart. We think that, as the world’s biggest companies, Wal-Mart can be legitimately questioned – about its size, its policies, its attitudes, its culture and its responsibilities. Wal-Mart is neither a perfect company, nor worthy of being demonized. And we would hope that MNB is just posing fair questions and creating an environment for legitimate discussion.




    We got several letters about last week’s story regarding Caribou Coffee having to close several stores because of an Internet “rumor” that it was funding terrorism – which could be traced back to a former partner at one of its owning companies who apparently was fired for having made pro-terrorist comments.

    MNB user Darren Moss wrote:

    I have seen this Caribou rumor in the past and tried in vain to research Caribou's ownership. I was curiously surprised that no information is listed about Caribou ownership on their website. By not denying it, the company's statement seems to confirm that 88% of its stock is controlled by a group of Arab investors. So the question really is how reputable are the activities of this Arab bank? We know they have had at least one previous associate that advocated terrorism, so one has to wonder about the general climate of such an organization… Who knows whether the ownership is reputable in this case, we certainly aren't seeing much proof from the company that they aren't funding terrorism.

    Two responses. One, how do you prove a negative – that the company isn’t funding terrorism? Second, does it mean nothing at all within the context of this discussion that the head of the company is Jewish?

    Another MNB user wrote:

    What happened to innocent until proven guilty? A group of individuals perpetuate a rumor, rile up consumers and hurt a business. The group of individuals that circulated the rumor should be prosecuted by Caribou. Finding them guilty would be Caribou's best defense.

    Forget finding them guilty. Just finding them would be as trick…




    We wrote yesterday about how the Chipotle restaurant chain is trying to train its people in the art of customer interaction, in the belief that a more engaged labor force will create a better dining experience.

    One MNB use responded:

    Chipotle has bigger problems than customer service. Mediocre food, not worthy of my peso! Better burrito options from chains such as Moe's/Baja Fresh or any of the local "Mexican" restaurants.

    Hmmm… We’ve never had a bad meal at Chipotle, but then again, we live in Connecticut, and good Mexican food is hard to find there.

    MNB user Kerri Holtzman had a different take:

    The folks at my local Chipotle seem to have picked up on this already. Noticing that my burrito preferences created a much smaller burrito than most people’s, they offered to charge me less for mine. How many other places would do that? I also appreciate how I always see them making sure people know that guacamole is extra, rather than surprising them with the $1.50 guacamole surcharge at the cash register. This customer service and willingness to customize is what keeps me coming back to Chipotle.




    Got the following email from an MNB user:

    Having spent almost 30 years in the industrial relations field I have to agree with your analysis that contracts negotiated between management and labor often appear to be stop gap measures. I think recent experiences tends to make it appear that this happens more than it really does.

    It is my experience that when the problem being faced by both parties is, in the final analysis, one which neither side has the power to solve, they start to look for short term solutions hoping that those who can solve the problem do so before the contract expires.

    In recent cases it has been the ever-escalating cost of health care insurance. It is a huge national problem that cannot be solved in southern California, Denver, San Francisco, or any other region. It is a national problem that needs a national solution.

    The way it sits now there is a battlefield littered with carnage from both management and labor from a fight neither can win. Sitting on the sidelines, and doing nothing, is the health care insurance industry that, no matter who wins the battle, always wins the war!

    Sooner or later both labor and management are going to stop the battle long enough to take a look around and both are going to see the health care insurance industry sitting smugly on the sidelines. When that happens both sides will come to the realization that they must join together on a national basis and demand a change from those who have the power to make change happen.
    KC's View:

    Published on: November 2, 2004

    In Monday Night Football action, the New York Jets lambasted the Miami Dolphins 41-14.
    KC's View: