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    Published on: February 1, 2005

    Technology breeds change. And change forces a technological response, which in turn breeds even more change. Is it any mystery that it is difficult to keep up with the complex, accelerating and unpredictable change that typifies the world in which we live?

    At the Food Marketing Institute (FMI) Marketechnics conference, scheduled to take place on February 13-15 in Washington, DC, Andrew Zolli – who describes himself as a “foresight strategist” – will offer a road map that will allow attendees to navigate this uncertain territory successfully, drawing together the connections between demographic, technological, geopolitical, and business trends, and putting them into plain English.

    To get a preview of the subjects that Zolli will address in just a couple of weeks at Marketechnics, MNB engaged him in an exclusive e-interview.

    MNB: You talk about “tectonic shifts in global demography.” It seems to us that just here in the US, some of these tectonic shifts are creating political, cultural and economic chasms (reflected, to some extent, in the blue state/red state maps we’ve all become familiar with), and differences in attitude and perspective become culture wars. From a business perspective, how does one deal with these changes and divisions? (Especially in a food industry where a prevailing strategy in such cases seems to be to wait until they go away.)

    Andrew Zolli: If we believe the truism that "demographics is destiny", then there is indeed a *great* deal of change coming to the United States, and the world at large. And you're right to point out that these changes will be expressed (and experienced) in political, economic, and cultural terms. Here's just a few examples: in the next decade or so, we will see our society split into an hourglass shape, with the largest number of older citizens in its history, and the largest number of younger people in its history (even bigger than the baby boom) at the same time. This is going to cause a schism in the way that all consumer products, including food, are marketed and sold, as these two enormous demographic segments buy goods in very different ways, and the brand 'meaning' and benefits they expect to derive from those goods are also very different.

    And it's not just an age split we have to look forward to, but the rise of a true multi-ethnic and international culture. Today, a majority (about 70%) of Americans are what demographers call indigenous "White/Non-Hispanics"; by mid-century, this number is going to dip under 50% for the first time, and we'll move to a society with no ethnic majority. By 2050, 1 in 4 Americans will be Hispanic, a smaller but equally significant number will be Asian, and up to 60% of the population will be foreign born. I personally believe that this new tapestry is a source of strength for the country; indeed our ability to assimilate immigrants has been a cornerstone of the historical strength of America.

    The 'culture wars' that you refer to derive from another important demographic trend, which is increased economic and cultural regionalism. (We tend to be more acutely aware of 'culture wars' in six calendar months on either side of major elections, because exciting them is key to both political parties' "get out the vote" efforts.) By and large, companies will deal with these as they always have, by putting larger 'universal' brand promises into regionally appropriate terms, although there is not 'magic bullet' simple answer.

    Beyond the culture wars, I believe that the larger implications of future demographic and economic change will come from segment-specific concerns. For example, with an inevitable curtailment of Medicaid benefits, aging boomers are likely to reinvent nutrition, and we're likely going to see a dramatically increased focus on the economic and health impact diet for this class of consumer. This is just one of dozens such implications.

    MNB: Many people who look at the retailing environment would define the overwhelming force of change as being Wal-Mart...but we suspect you might have a broader and better perspective on what the real forces of change might be affecting consumers and marketers. What would they be?

    Andrew Zolli: Eight percent of all consumer goods purchased in America are purchased in a Wal-Mart; in the coming decades, it may rise as high as 12%. Wal-Mart is commodification incarnate, and its not surprising that retailers and analysts would look to Wal-Mart as the great force of change. However, there are a number of equally important, but less visible forces. One is demographics, as we just discussed; another is the rise of disruptive new technologies, which will differentiate not only what functional benefits consumer goods deliver, but the way in which their brands are experienced and integrated. We're about to see a revolution in molecular science and biotechnology which will 'decommodify' many categories of commodity goods which have been classed as such for decades – wrinkle creams that actually get rid of wrinkles; compositionally targeted food products designed around the individual, etc. So, if you're terrified of competing with Wal-Mart on price (and who wouldn't be?) the good news is that many new products are coming which are intrinsically new, which aren't price-sensitive commodities.

    In addition to the benefits these goods deliver, there is a coming revolution in consumer packaging which will also allow manufacturers and retailers to tell their brand stories in new ways at the shelf and package level. I'll be talking about some of these in my speech, but here's a hint: RFID is just the beginning.

    MNB: What’s the most overrated influence on culture and business? How about the most underrated?

    Andrew Zolli: Consistency is the most overrated idea, bar none. When we invented the world of brand marketing, back in the late 19th century, we were in the midst of an industrial revolution, which achieved efficiencies by stamping out identical products over and over and over again. So it’s not surprising that we came to see consistency as a hallmark of good branding -- it was the big idea of its day. A hundred plus years later, and many of our concepts about branding haven't moved much -- we're still focused on doing the same thing over and over and over. But now, more than ever, we're awash in commodities, similar products, made for similar people using similar techniques and delivering similar benefits. And doing the same thing over and over again just adds to the noise.

    In our commodity soaked markets, consumers crave great and distinctive storytelling, and that gets my vote for the most underrated force in business. Great storytelling is a de-commodifier par excellence - it can take a parity product and elevate it above all of the other equivalent goods. But there's a challenge here: the skills that make people good presidents, good CEOs, aren't always the ones that make them great storytellers. Many leaders tend to think of this kind of storytelling as something 'soft' and irrelevant, when in fact, it's at the core of value-creation.

    MNB: Are technologies like the iPod and TiVo creating a generation of non-linear consumers that is able to pick what it wants when it wants it, without being exposed to traditional branding messages? If so, what does this mean for brand marketers?

    Andrew Zolli: We certainly are in the midst of a decades-long empowerment of individual consumers, and the rise of self-service-driven, a la-carte consumers, like the iPod and TiVo users, means one thing for brand marketing: there is tremendous opportunity, and necessity, for brands to become filters for the enormous number of choices consumers face. Look at what happens on Amazon.com -- the company thrives as a brand not because it offers the greatest selection of products on earth, but because its become an expert at helping me find my way through the mind-numbing variety. And when they can't connect me with the right item, they enable other consumers, who might be better at doing so, to help me along. Today, I cannot conceive of buying a book from any other retailer, online or offline, even though there are plenty out there who offer exactly the same products for less money.

    There's an equivalent opportunity in food marketing. Today, I confront 40,000+ items in my grocery store -- and I get nowhere near Amazon.com-like levels of help when I walk in the door. The first retailer, producer, or marketer who figures out how to do this cost effectively has me, and my self-directed, price-insensitive, high-margin brothers and sisters, for life.


    Andrew Zolli will speak at FMI Marketechnics on Monday, February 14, from 10:30-11:30 a.m.

    To find out more about Marketechnics and how you can still attend, go to:

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

    Published on: February 1, 2005

    Sources have provided MNB with a copy of the letter send by Ahold CEO Anders Moberg to all of the employees at Bi-Lo and Bruno’s, the divisions that finally were sold by the company yesterday.

    The text reads:

      The sale transaction between Ahold and Lone Star Funds has been completed, making BI-LO and Bruno’s an independent supermarket chain. As our business relationship with your company ends, I want to let you know how much we appreciate your hard work and dedicated effort over nearly 3 decades.

      BI-LO was the first U.S. acquisition for Ahold 28 years ago and Bruno’s, one of our most recent, in 2001. BI-LO operated 96 stores with annual sales of $400 million in 1977. Today, your combined companies have more than 450 stores with annual sales exceeding $5 billion. Both BI-LO and Bruno’s are brands that millions of customers admire and trust.

      On behalf of Ahold’s 200,000+ associates in 17 countries, I want to extend our best wishes to you as you move into the future. Even though you are no longer a part of Ahold, you will always represent an important time in our history.

      With our gratitude, we wish you every success.
    KC's View:
    We suspect that whatever the sincerity of the letter, there probably are some employees at Bi-Lo and Bruno’s who wonder exactly what it was that they did to cause the conglomerate to cut them loose.

    They should find some solace in the possibility that their independence could, in fact, make it easier for them to compete effectively…as long as the investment company that owns the two chains gives them the resources and support they need.

    Incidentally, Ahold said yesterday that there is significant interest in the remaining assets that it wants to sell, including the convenience stores owned and operated by its Tops division. People who work for those divisions should read the letter above…they’ll probably be getting one shortly.

    Published on: February 1, 2005

    Bloomberg reports that a federal judge has ruled that Albertsons, Safeway and Kroger’s Ralphs must disclose terms of the mutual-aid agreement that was designed to protect them during last year’s strike/lockout in Southern California.

    The judge set Friday as the deadline for disclosure.

    The chains argued that by disclosing the terms of the agreement, it could negatively affect them in their ability to negotiate with the unions in the future.

    What is known about the agreement is that it assured all three companies would feel the pain of the strike/lockout equally. And it is known that Kroger paid the other two companies $100 million in 2003 because it wasn’t hurt as badly by the labor strife.

    The judge, however, wrote that the "conceivable remaining secret" was how the shared amounts were calculated. He also said the chains had not explained how or why disclosure of this information would hurt them.

    The state of California has filed suit against the three chains, questioning the legality of the agreement.
    KC's View:

    Published on: February 1, 2005

    Yesterday, MNB reported on the case of Tukwila, Wash., Fire Lt. Philip Scott Lyons, who was facing attempted arson charges after someone tried to set his house on fire. The evidence against him, according to reports, included data from the local Safeway’s frequent shopper program, which showed that his family club card had been used to purchase fire starters.

    MNB noted that Lyons had been exonerated because “another person” had come forward and admitted setting the fire, and we raised the issue of whether so-called confidential shopper data should be used in such cases.

    Well, there’s a reason they call this stuff “news.” Because yesterday MNB was alerted to the fact that the “another person” was, in fact, Lyons’ wife…who presumably used the club card to buy the firestarters.
    KC's View:
    This is like finding out that it was Mrs. Richard Kimble, not the one-armed man, who was guilty…

    You’ll see in ‘Your Views” that we got a fair number of emails on this subject. Regardless of who set the fire, we think the basic subject is worth discussion: What are the parameters for when these lists can be legitimately accessed by institutions other than the retailer?

    This is not an insignificant issue. We’ve mentioned before that some retailers have told us that they are concerned that the Patriot Act requires them not only to hand over any frequent shopper data requested by the government, but also requires them not to tell anyone that the data has been disclosed.

    Published on: February 1, 2005

    The New York Times reports that a pair of new studies suggest that older women who have one alcoholic beverage a day – wine, beer, or hard liquor – seem to maintain sharper memory, verbal fluency and general mental skills later in life.

    “The reason that alcohol seems to have this beneficial effect is not entirely clear,” the NYT writes, “but it is probably connected to the significantly lower rates of cardiovascular disease among moderate drinkers, a phenomenon that has been known for some time.” Not only does moderate drinking seem to prevent heart attacks, “but also the small, subclinical strokes that cause vascular damage in the brain and lead to mental deterioration.”
    KC's View:
    That sound you hear in the background is Mrs. Content Guy shouting, “Yipppeee!”

    Published on: February 1, 2005

    The New York Times reports on how an age discrimination lawsuit has been filed against electronic retailer Best Buy. The litigation maintains that “almost two-thirds of recently terminated employees - 82 out of 126 – were at least 40 years old. The plaintiffs contend that this was out of proportion with the ages of Best Buy's work force over all, citing a newspaper interview in which the woman who leads the company's work-life programs said the average age of its 5,000 employees was 29.”

    The retailer says that the charges are baseless but has not addressed the specifics of the suit.

    “Age bias in employment is becoming a larger issue as the American work force grows older and companies come under greater pressure to be more efficient,” the NYT reports, noting that the rules may change if and when the US Supreme Court makes the definition of age discrimination clearer.

    While the court is expected to address the issue of age discrimination, it remains possible that it could allow employers to lay off the most highly paid employees in cost-cutting moves, which would be make it more likely that long-term…and therefore older…employees would be shown the door.
    KC's View:
    Having been beaten up this week pretty good because of our commentary about smoker discrimination, we’re a little nervous about an age discrimination analysis…but we think we’re on the side of the angels on this one.

    We think that a lot of food retailers actually have a healthy respect for the knowledge and work ethic that older employees bring to the table…and if they don’t, they should.

    Published on: February 1, 2005

    The Dallas Morning News reports that McDonald’s has not met its self-imposed deadline for reducing trans fats in the oil used to cook its French fries. The company says that the problem it has run into is that any change in oil changes the taste – something it is loathe to do.
    KC's View:

    Published on: February 1, 2005


    • The Observer in the UK reports on the apparently misplaced priorities that have negatively affected the French wine industry.

      “France would take at least half the spots in any oenophile's list of the 50 greatest wines,” the paper reports. “To drink something from Gérard Chave, Domaine Leflaive, Chateau Margaux, Chateau Cheval Blanc, Chateau d'Yquem or the Domaine de la Romanée-Conti can still be a transcendent experience.

      “Such wines represent a tiny proportion of what France produces, however. Demand for the top names may be as strong as ever, but the rest of the French wine industry is doing rather less well. In fact, it wouldn't be an exaggeration to say that French wine generally is mired in the merde.”

      While the rest of the world has focused on wines that are ever easier to drink and understand, France’s wine industry has continued to have an inflated sense of its own worth, believing that its products are vastly superior to everyone else’s. That simply isn’t true anymore, and the French wine business keeps losing the marketing battle…a pattern that it will have to reverse in order to revive an industry in decline.

    KC's View:
    The notion of being so entrenched in one way of doing business that you can’t see the necessity of fundamental change hardly seems like a uniquely French problem.

    Published on: February 1, 2005


    • Molson shareholders have overwhelmingly approved a $3.4 billion merger with the Adolph Coors Company. Coors shareholders are expected to vote on the plan today.


    • A panel of European scientists has confirmed that a case of bovine spongiform encephalopathy (BSE) has been found in a goat slaughtered in France in 2002.

      This is the first time that such a case has been identified, and the European Commission may require that testing be increased in order to determine whether this is an isolated case. The likelihood that this is a widespread problem, and that the food supply could be affected, has been judged to be small.

    KC's View:

    Published on: February 1, 2005


    • Published reports say that Wal-Mart’s Asda Group has made an unsolicited $940 million (US) bid for Littlewoods Stores in the UK, which has 180 stores selling clothing and household goods.

      This comes as the retailer spends $13.5 million US) to rollout jewelry, optical and photo centers throughout the chain.

    KC's View:

    Published on: February 1, 2005


    • Spartan Stores reports that its third quarter earnings reached $4.5 million, compared to a $4.1 million loss during the same period a year ago. Sales for the period were $624.5 million, down from $644.1 million in the same quarter a year ago. Same-store sales were down 1.2 percent.


    • Kellogg Co. reported fourth quarter earnings of $186.4 million, compared with $188 million during the same period a year earlier. Quarterly sales rose 12 percent, to $2.39 billion.

    KC's View:

    Published on: February 1, 2005

    Okay, let’s to it…here are some of the emails that we received yesterday about whether or not frequent shopper data should be accessed by law enforcement authorities.

    One MNB user wrote:

    I read your story with much interest on Safeway giving frequent shopper card information to authorities in Seattle. Your comments were that "in this case, the database clearly helped to finger the wrong guy. That is troubling." The troubling part in this whole story is that the AUTHORITIES (not Safeway) pegged the wrong. Your words seem to indicate that in some way Safeway was responsible for the error and that is just not true. I am not a legal expert but I would guess that Safeway did not voluntarily hand over the information and did so only after the authorities presented a subpoena for Safeway to provide the information. In no way shape or form should Safeway be held accountable if the guy was innocent…

    Also it should be noted that many privacy clauses are waived in the event to prove a crime (doctor-patient, spouses, attorney-client to name a few). Frequent shopper cards should not be held to any higher standard in the event if the data stored on them helps to prove a crime and the information is obtained legally via a subpoena.


    Another MNB user wrote:

    If these loyalty card purchase records can be subpoenaed by law enforcement agencies they probably also can be subpoenaed in a civil action as well. For example, a person whose loyalty card showed purchases of three bottles of wine and two cases of beer a week might have trouble winning a legal action asserting a drug he was taking caused liver damage.

    Yet another MNB user offered:

    There was a case here not too long ago in which an adult was charged with criminal endangerment & negligent homicide for supplying beer to a high school graduation party. One of the youths drove home from the party & rolled his vehicle, killing himself. One of the central pieces of evidence against the adult was Albertsons frequent shopper program showing a large purchase of beer the day before. I would think that as these stories become more widely broadcast, there would be a backlash against the programs. I, myself, don’t care for them as they don’t make me more loyal, and I hate carrying multiple cards wherever I go.

    MNB user Bill Hogan wrote:

    Customers are certainly aware that data is being collected. How different is this than the police getting information from credit card records?

    Are stores expected to provide a higher degree of security and privacy than credit cards?

    My question: Did the police need a subpoena?


    Another MNB user wrote:

    Would people with things they want to hide, e.g. purchasing equipment/ingredients to be used for illegal purposes, really sign up for a loyalty card? If so, and if they also believe supermarket protestations of confidentiality, then they are obviously stupid enough to deserve what they get.

    MNB user Scott Williams wrote:

    In response to the "Loyalty Program Gone Awry" it should be noted that any retailer accepting credit cards, debit cards or personal checks as a form of payment is very likely to retain in its databases the purchase transaction information for all of its customers using these forms of payment that link directly to the purchaser.

    Law enforcement agencies have accessed this information to trace the activities of individuals for decades before loyalty card programs existed.

    If the concern is about privacy, we as consumers have only one way of truly limiting the information about us... pay cash.

    Recognize that the convenience and benefits of using credit/debit cards and checks and participating in retailer customer loyalty programs for the vast majority of us honest and law abiding consumers is well worth the personal exposure.

    I have personally benefited from these programs by receiving coupons and offers directed specifically to me based on my purchase behavior. I have also been able to return products to large home improvement and mass merchandising retailers without a receipt as proof-of-purchase because my purchase transaction using the credit card was on file and retrieved at the time of the return.

    As is typical in these kinds of debates, there are two sides of the story. You have missed the other, more obvious side on this one.


    Another MNB user wrote:

    "Safeway does not sell or lease..." It says nothing about giving it away....

    For the record, we are not anti-frequent shopper programs.

    We actually believe strongly in the concept, though we would maintain that few retailers have used them correctly or effectively.

    But we believe the issue of privacy – which is one that a lot of consumers feel passionately about – is one that must be considered by the retailing community.
    KC's View: