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    Published on: February 11, 2005

    One day after Wal-Mart announced that it will close the Canadian store where workers had been certified by labor officials as a unionized bargaining unit, the Saskatchewan Court of Appeal ruled that the retailer could have two months to go to Canada’s Supreme Court to protest an earlier labor ruling that went against it.

    At the same time, the

    In that ruling, Saskatchewan's highest court said that Wal-Mart must turn over a number of documents to the province’s labor relations board, including one item reportedly titled "A Manager's Toolbox to Remaining Union Free."

    While Wal-Mart has two months to make its appeal, the CBC reports that there are no guarantees that the Supreme Court will even hear the case, much less rule in Wal-Mart’s favor.

    Wal-Mart decided to close the store in Jonquiere, Quebec, after its workers received union certification by provincial labor officials there last year, and then spent more than three months trying to come to a contract agreement with the retailer. Last week, the United Food and Commercial Workers (UFCW) asked Quebec officials to appoint a mediator, on the grounds that the negotiations had reached an stalemate…but Wal-Mart made that request moot by announcing the May closure of the unit, saying that it was unable to reach an agreement with the union that would "permit it to operate the store in an efficient and profitable matter."

    The Saskatchewan matter is just one of several union-related difficulties facing Wal-Mart in Canada. The company is facing certification applications at about a dozen other locations in Quebec, Saskatchewan and British Columbia.

    Meanwhile, the Toronto Star reports that the UFCW plans to file an unfair labor practices charge against Wal-Mart with the Quebec Labor Relations Board that could, if successful, either force Wal-Mart to keep the store open or pay what are called “significant fines.”

    Wal-Mart spokesperson Andrew Pelletier told the Star that "a highly aggressive" union backed by an "undemocratic" labour law is deliberately targeting Wal-Mart stores.

    And, the Star reports, “the union could exert pressure on Quebec politicians to reconsider whether this is the type of company it wants locating in their jurisdiction. Another remedy is a national economic boycott” of Wal-Mart’s stores.

    Jonquière Mayor Jean Tremblay has accused Wal-Mart of being "a bad corporate citizen. These are labour rules that everybody else follows in Quebec,” according to the Star.

    Wal-Mart CEO H. Lee Scott Jr. defended the company’s move to the Washington Post, saying that “you can't take a store that is a struggling store anyway and add a bunch of people and a bunch of work rules that cause you to even be in worse shape.” The Post writes that “Scott said Wal-Mart saw no upside to the higher labor costs and refused to cede ground to the union for the sake of being ‘altruistic.’

    Scott told the Post that Wal-Mart's strategy for growth is to be "everywhere we are not," even though in the US that means going into urban markets where “the chain is likely to find less land, higher costs and stiffer resistance from labor unions and neighborhood activists.”

    Scott also reportedly addressed the problems that Wal-Mart has faced in Chicago and California, and said that “the chain made a strategic error in Inglewood (California) when it attempted to circumvent what it expected to be an unfavorable city council vote on a new store by seeking a voter referendum instead.

    “’In doing that, I think we came across as a bully who would get their way regardless,’ Scott said. ‘Our size causes us, when we do something inappropriate, which is usually done out of stupidity, to come across as being done out of arrogance. And people just won't stand arrogance.’”
    KC's View:
    This is an interesting defense.

    “We’re not bullies. We’re just occasionally stupid.”

    Hmmm…

    Of course, if you believe Wal-Mart’s Andrew Pelletier, it isn’t just the retailer that is occasionally stupid. It also is the nation’s “undemocratic” labor laws.

    We’re not an expert on Canadian law, but it seems to us that it might be hard to make the argument that a law that allows employees to choose unionization – or not – is less democratic than a company making a unilateral decision to close a store where the employees want said representation.

    Hard, but not impossible.

    Both sides will be ramping up their considerable public relations machineries to get the word out.

    We do have one suggestion for the UFCW, though. Don’t count on a national boycott of Wal-Mart stores being very effective. You try it, and Wal-Mart will just drop its prices so low that nobody will be able to resist shopping there, except for a few militant union leaders (and they’ll probably send their wives, clad in scarves and dark glasses).

    Because however Lee Scott wants to characterize Wal-Mart’s culture, “stupid” is not a word that leaps to mind. Nor is “loser.”

    Whether or not this makes Wal-Mart a bully really depends in who is doing the analysis, and the word itself really is irrelevant. What is clear is that Wal-Mart is powerful enough to want to do things its way, and only its way, with deep enough pockets to fight any battle it thinks is winnable and patience enough to wear down the opposition.

    Like the Borg, Wal-Mart believes that ultimately, resistance is futile.

    Published on: February 11, 2005

    Winn-Dixie reported a second quarter loss of $399.7 million, compared with a loss of $79.5 million for the same quarter last year. Second-quarter revenues were $3.08 billion, compared with $3.23 billion a year ago.

    Year-to-date, Winn-Dixie has had sales of $5.41 billion and a net loss of $552.8 million, compared with sales of $5.65 billion and a net loss of $78.3 million for the same period in 2004.

    The poor results come even as Winn-Dixie has embarked on a reorganization plan that has it closing some stores, renovating others, and changing CEOs – all in the hope that the company can reverse its fortunes.
    KC's View:
    We keep hearing that Winn-Dixie hopes that the new movie, “Because of Winn-Dixie,” will help revive the company’s image…but we’re not sure that this is a long-term strategy for success.

    The interesting thing is that clearly Winn-Dixie is capable of running good stores; we’ve had some email this week testifying to that. But the real problem seems to be that these are perceived as isolated cases, and that making the plan work on a chain-wide basis is problematic at best.

    Published on: February 11, 2005

    Subway, the fast food sandwich chain, announced yesterday that for a limited time it will begin selling Applewood Wild Alaskan Salmon as a menu choice, available as on a roll, in a wrap or on a salad.
    KC's View:
    While we have doubts that this will be any good, we have to admit to being intrigued…by the strategy and the product itself.

    We’ll certainly try the sandwich, just out of curiosity.

    But you have to wonder if Subway is swimming too far upstream with this approach. Our general feeling is that it makes sense to push the cuisine envelope, especially if the food is decent and the nutritional implications positive.

    Published on: February 11, 2005

    Elisabeth Robert, the CEO of the Vermont Teddy Bear Co., announced yesterday that she was resigning from the board of the largest hospital in the state, Fletcher Allen Health Care, because of negative publicity connected to her company’s Valentine’s Day promotion of a “Crazy For You” bear that came dressed in a straightjacket.

    "The recent controversy surrounding one of my company's teddy bears will detract from my ability to serve effectively, and I cannot allow this to occur," she said in a statement.

    As reported here on MNB, the “Crazy for You” bear generated a lot of controversy, as both the company and its CEO were castigated by mental health advocates who believed that it showed a lack of compassion for the mentally ill.
    KC's View:
    We know not everyone agrees with us on this one, but we can’t help but feel that this is yet another victory for the humorless and politically correct.

    Published on: February 11, 2005

    Market share studies in the UK reportedly indicate that Tesco continues to grow in its dominance, boasting 29.1 percent of the nation’s food retailing business during the last quarter, up from 26.8 percent during the same period a year ago.

    Wal-Mart’s Asda group is in second place with 17.1 percent, while Sainsbury is third with 16 percent, and William Morrison Supermarkets has 12.4 percent.
    KC's View:

    Published on: February 11, 2005

    Responding to rumors that Starbucks was planning to increase its prices this year, company chairman Howard Schultz said yesterday that the company has no plans to hike prices.

    The company raised prices by an average of 11 cents last October, after keeping them stable for several years.

    "We're proud of the fact that it was four years plus before we had the increase we've had today and we certainly have no plans for another one at this time," Schultz said.
    KC's View:

    Published on: February 11, 2005


    • As ABC’s Extreme Makeover: Home Edition crew rebuilds an Arizona family’s home this week, their meals are being provided by local grocer Bashas’ Inc., which is donating $5,000 worth of meals to the project.

      In addition, the family receiving the TV’s show’s largesse will receive $3,000 worth of Bashas’ gift cards, and the crew members will get $2,000 in gift cards.


    • Sara Lee Corp. announced yesterday a corporate reorganization that will have it selling off a number of businesses - including spinning off its apparel business and selling its European meats, direct selling, and regional coffee businesses – with total revenue of $8.2 billion.

      At the same time, the company promoted its president, Brenda Barnes, to the position of CEO, succeeding Steve McMillan, who will remain as company chairman through October.

      "Today, Sara Lee is embarking on an aggressive, strategic plan that will transform the entire enterprise into a tightly focused food, beverage and household products company," Barnes said in a prepared statement.

    KC's View:

    Published on: February 11, 2005


    • Dean Foods reported that its net sales for the fourth quarter totaled $2.8 billion, 11 percent more than the fourth quarter of 2003, which it attributed largely to the acquisitions of Horizon Organic and Ross-Swiss Dairies. Net income for the fourth quarter totaled $98.9 million, compared with $86.5 million in the prior year fourth quarter.

      For the year ended December 31, 2004, the company's net sales increased 18 percent to $10.8 billion, compared with $9.2 billion during 2003. Net income for 2004 totaled $285.4 million, compared with $355.7 million in 2003.


    • Molson Coors Brewing Co. said that Coors posted fourth-quarter net income of $55.7 million, up from $36.1 million a year earlier. Revenue rose almost 11 percent to $1.13 billion. The announcement comes days after the merger of Coors and Molson was finalized.

    KC's View:

    Published on: February 11, 2005

    We got a number of emails about Wal-Mart decision to close its Quebec store in the face of unionization.

    MNB user Charles Bartell wrote:

    Wal-Mart's inevitable implosion is rooted in how the organization nurtures their image with consumers - most of which is beyond their control and in the hands and heavily influenced by media. At some point price will become less important to consumers than supporting a perceived malevolent organization. The money WM is spending on advertising a "good community citizen" image is going to strike the media's curiosity to start a hunt for suspected hypocrisy.

    WM's latest move is going to prove the unions point and strengthen the unions'
    position. The publicity is going to feed the anti-WM sentiment gurgling throughout the big cities. How long will it be until Bill O'Reilly lets Hillary alone and moves on to reporting "fair and balanced" stories on the Bad Boy of Arkansas? It will be interesting to see how NPR handles the news - since WM is one of their prime sponsors.


    One MNB user wrote:

    Again, your one-sided point of view on Wal-Mart.

    "Wal-Mart clearly only wants to shake hands with entities that want to do business its way. There‚s no room for compromise, no room for mediation, no room for discussion."

    There is room for all this. However, is it totally wrong for a company, a person even, to want things their way?

    I think not. Wal-Mart has shown time and time again a willingness to discuss, to change, but not fully compromise its position. That it wants its position to be one which it feels is the best for itself is what we all should strive for in every thing we do.

    "The problem, of course, is that annihilation of the competition is just what Wal-Mart is after."

    Grossly overstating its plans and actions as usual! Wal-Mart stays its course, regardless of what its competition does. That is not to say that it will not alter course should it find its competition gaining on it thru some previously overlooked competitor's actions.

    "The NYT quotes Lenny Karp, who has a nice family-owned shoe store in Queens, near where Wal-Mart wants to open its first NY store. "I'm a small retailer. How can I compete with them?" he tells the NYT. "They can devastate a community. We've seen that happen elsewhere. The small-business owner is no match for them."

    Why should they?

    The small business owner should compliment what Wal-Mart offers, not compete with them. It has been shown in many examples that businesses prosper and enjoy increases in their sales by a Wal-Mart entering their market area. They do that not by competing with Wal-Mart but by filling in the gaps Wal-Mart leaves alone in their marketing plan.


    May we respond?

    We agree that it isn’t necessarily wrong to want things your way. It is, however, utter nonsense for Wal-Mart to pretend that it is this homey, folksy company that sometimes gets confused by those big-time city slickers. And if suggesting this is hypocrisy makes us one-sided, so be it.

    As for Wal-Mart being willing to compromise, there are some folks in Quebec who might disagree with that assessment.

    The only folks who don’t believe that Wal-Mart wants to annihilate the competition are citizens of Bentonville, Arkansas.

    And we absolutely agree with your appraisal of how small retailers should compete with Wal-Mart.

    And another MNB user wrote:

    So much is made of Wal-Mart’s vaunted IT and supply chain efficiency. If they were paying the same wages and benefits as their competitors, we’d have a clear understanding of how much their supply chain efficiency contributes to their success. I suspect then we’d learn that Wal-Mart’s secret is really about scaring employees and labor unions.

    And another MNB user wrote:

    Your take on Wal-Mart wanting to shake hands with "like thinkers" reminds me of the "conciliatory" statement George Bush made shortly after being reelected. "We are ready to reach out to all the people who agree with us."




    And we continue to get email about our condemnation of slotting allowances.

    One MNB user wrote:

    Hang on a minute!!! Everyone is very quick to point out that retailers require slotting fees because it is "heroin" to their books, but what about manufacturers who use it like heroin to introduce products without value?

    In case you all have forgotten, P&G doesn't pay slotting fees. What retailer in their right mind would refuse a revolutionary new SKU of Tide because there are no slotting fees? Guess who else doesn't pay slotting fees, Gillette. How many retailers turned down Venus because there was no slotting?

    But then you look at manufacturers who instead of innovating are just creating line extensions or duplications. How many flavors of chicken soup does one store need? How about instant side dishes? The only way these products make it to the shelves is because they pay to slot. Why else would a Category Manager with 5,000 items on their desk managing $500 million
    in sales take the time to evaluate a SKU that might bring $2,000 in incremental sales?

    The fact is, that the solution is in the middle. Any Buyer or Category Manager worth the air they breathe will take an innovative item without requiring slotting. As long as manufacturers produce these items. Retailers need to keep their eyes open trying to find the next Swiffer...but until manufacturers bring these items to the table, they may have to continue to pay to play.


    Another MNB user wrote:

    Reading through all of the e-mails on the slotting topic it seemed as if most people were laying blame on the retailer. I could be way off base but didn't manufacturers create slotting fees as a way to ensure their products got on the shelf? If they didn't create them then I would argue that they are just as responsible for their existence as the retailer is. I agree that slotting is not the best use of a manufacturers money but I don't see them doing anything to help stop the fees. Also as a former Category Manager at a large grocery retailer for 4 years I never once had a vendor or manufacturer ask me to waive the slotting fees we charged or to allocate the money for effective merchandising. If they had I probably would of---don't see how the retailer is to blame for that!

    And MNB user Charles L. Schuster chimed in:

    Why do manufacturers pay slotting? What is the fear in suspending the practice? They have a choice not to pay any account anything. That would include Wal-Mart. Let the item succeed or fail on the manufacturer's ability to sell and on the product's merit. Manufacturers could communicate the first ship date to and the effective dates of the advertising and marketing plans to all accounts. They could use the test market and/or consumer focus group results, the marketing and advertising campaign as well as their salesmanship and expertise in the category to convince the accounts to stock the item. Then, let the strength of the advertising and marketing campaign convince the consumer to try the item. Right-minded retailers that are concerned about "profitable retail sales" and interested in catching the wave at the beginning of a new item's life cycle will stock the item and benefit from the sales. The retailers that refuse to stock the item because of the lack of slotting will disappoint their consumers and force them to go to a competitor to purchase the item.

    Still another MNB user wrote:

    I asked a senior supplier exec if we could do away with slotting fees and replace them with a “discontinuance fee”. I would put their goods in the store and if the goods did not meet certain mutually agreed to sales goals within an agreed time frame there would be fee for “removing” a product that did not sell. His immediate answer was it would not work. I tried this idea on several other supplier executives. There would be no fee paid if the sales targets were met. I could never get one to even discuss it seriously, nor try it experimentally. Now who is it wants slotting fees?

    And MNB user Richard A. Bernstein wrote:

    Your editorial on slotting said it all.

    Thanks.




    Regarding Starbucks’ decision to expand its food offerings, one MNB user wrote:

    The morning rush is critical. Will selling breakfast slow down the line? That will annoy regular/repeat customers. It might run off customers. Will selling food cause customers to be in line or sit/stay for more time than the typical customer? That might make a mess of the established queue and wait process at Starbucks.

    They must focus on not being a victim of FWMTF...Forgetting What Made Them Famous. Are they selling an experience? Or are they selling beverages and food?

    By the way, their new hot chocolate is great. It is consistent with (maybe even better than) what made them famous. My wife, not a coffee drinker, really enjoyed it.





    In response to our coverage of the new Sears Essentials concept announced by the company this week, MNB user Ed Nalley wrote:

    Why are you so negative on Sears Essentials---Spend the energy to outline the concept- The Trade needs for them to be successful--less competition is not good.

    We agree that it would terrific for this concept to be successful. It’s just that we have precious little faith in Sears’ or Kmart’s ability to execute this format, and even less confidence in Fast Eddie Lampert’s commitment to retailing.

    MNB user Bob Vereen had this take:

    Traffic at Sears Hardware stores was so bad, they had to add appliances to try to make them pay off. And the jury is out on the success of that venture.

    So how can 25 Sears Essential stores compete across the country against the 175 Home Depots opening this year, and the hundreds of new or expanded Wal-Marts, Targets and Meijers that will be opening?

    Too little, too late, too undistinguished.


    And MNB user David J. Livingston wrote:

    Those 25 stores add up to about 1 percent of the store base. In the overall scheme of things, this will not amount to much and require an insignificant amount of capital. In other words, more window dressing and no real meaningful change. I'm surprised at how much attention this gets.

    Imagine if Kroger or Safeway decided to remodel 25 stores and change a few things around? I might not even make the trade papers. I think this is all a charade to keep stockholders, employees, landlords, and vendors from panicking.





    We wrote the other day about more legislation designed to prevent obesity-related lawsuits against fast food chains, and one MNB responded:

    I have a little different take on this issue. You remarked that, "It says something about our society that the legislative priorities around the country seem to be focused on protecting fast food restaurants." For me, it seems like the priority is more on stopping unscrupulous individuals and lawyers who try to take advantage of a gaping "loophole" that has developed in the interpretation of law. A loophole created by successful cigarette and hot coffee lawsuits (and the like) that are designed to remove personal responsibility from the equation of life.

    It says something about our society that we want to be stupid, undisciplined and irresponsible in the way we live our lives and figure out some misguided way to profit from it. Shame on us! From where I sit, we have a lot of companies, fast food chains, school districts, etc...that are taking personal responsibility in the fight against obesity by endeavoring to alter their offerings. They realize something needs to be done, and they're trying to do it. It's reported and discussed on MNB all the time. I realize there's more that needs to be done, but I wonder where that same kind of initiative for change is in our society at large and in the legal profession; in particular, that would stop the maddening, unscrupulous, frivolous relationship that exists between the two in the name of making a quick buck (with a whole bunch of zeros behind it).


    And another MNB user wrote:

    This is what I did; I told my kids that fast food is crap and that the more of it they eat the less healthy they will be. I thought it would go in one ear and out the other but I was pleasantly surprised when my 17 year old son saw me eating a McDonalds hamburger the other day and he said “hey dad, I haven’t eaten any fast food in over 3 months” Can we say ‘hoisted on our own petard?”
    KC's View:

    Published on: February 11, 2005

    So last night we tried a 2004 Shiraz from Australia’s The Wishing Tree winery, which is a nice little $10 wine that starts off a little sharp but mellows out nicely.

    We were surprised to find, when we reached for a corkscrew, that the wine was in a screw-top bottle. But being open-minded, we tried it anyway. And did our best to ignore the top.

    Interesting note, though. On the back label it says: “This wine delivers classic Shiraz characters…pop a bottle to enjoy with food and friends.”

    Pop a bottle? Don’t think so. But somehow, “unscrew a bottle” doesn’t sound nearly as cool, and certainly doesn’t belong on the same label as the phrase “classic characters.”

    There’s a lesson here. We know there are supply and cost issues with cork, but we can’t help but worry that this use of screw tops will only devalue the entire segment.

    And on that note, have a good weekend.

    Sláinte!!
    KC's View: