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    Published on: March 2, 2005

    Brown & Cole, the Bellingham, Washington-based supermarket chain, announced that it will sell off eight of its 31 stores, or almost 25 percent of the company, because of an inability to compete effectively with an expanding Wal-Mart presence.

    "This is in large part due to two things," company president Craig W. Cole said in a prepared statement, "health care costs and the deliberate saturation of the market by Wal-Mart."

    The eight stores being sold are all on leased properties, so the sales will only cover equipment, inventory and leases. There are interested parties, according to Cole, and the sale is expected to be completed by the end of May.

    Cole said the company plans to keep its remaining 23 stores.

    Founded in 1909, Brown & Cole reportedly provides health care coverage for 95 percent of its employees, who are largely unionized. According to local press reports, average pay for full-time workers in Wal-Mart’s Washington state outlets is $10.14 an hour, less than at Brown & Cole, and only about half the hourly workers in those stores are covered by the company's health care insurance. None have union contracts.

    "It used to be accepted that good companies took care of their employees," Cole said, accusing Wal-Mart of "inferior wages and benefits for its workers, outsourcing jobs to foreign producers and showing little regard for the environment."

    Cole added, "The American worker and local businesses are becoming road kill in Wal-Mart's march toward the worldwide domination of commerce.”

    Wal-Mart spokesman Eric Berger responded: "To retain the talented associates (employees) that we have, we know that we need to treat them fairly, and we do. Ultimately, the customer chooses which businesses survive. That is why we focus on serving their needs. We assume our competitors do the same."

    Ironically, it was less than a month ago that MNB reported that the Washington State legislature is considering a proposal that would require employers with more than 50 employees to either provide a certain level of health insurance or pay an equivalent amount into the state’s basic health plan, which would then cover the workers.

    The legislation is called The Health Care Responsibility Act, but it is better known around the state as the “Wal-Mart bill,” and was introduced because of reports that some large companies in the state – including Wal-Mart - have hundreds of employees getting state assistance for health care.

    Cole has testified before the legislature that he believed the bill was a good idea. "If we can meet the requirements of the bill, then so can the solar system's largest corporation," he said.

    Cole added, "It's getting to the point that good employers — and I like to think of myself as a good employer — feel like chumps for covering employees and dependents.”
    KC's View:
    We sided with Craig Cole a few weeks ago, and we side with him now.

    Some will read his words and think that he is whining, that he is just one more retailer who couldn’t compete, and that he is using Wal-Mart as a scapegoat.

    But nothing could be further from the truth.

    Cole is operating, we believe, from the old-fashioned premise that employers have a responsibility for taking care of the health needs of all their employees. This makes them better, happier employees, which results in better, more responsible companies.

    Nobody would argue, we suspect, that part of the problem is a health care system in this country that is completely out of control. Sure, if health care costs were cheaper, maybe it would be easier to provide health insurance for more people.

    But Wal-Mart generates close to $300 billion a year in sales. It is alone, among companies, in having the economic clout to be able to do something, to provide more for its employees, not less, to make sure that everybody has health insurance, no matter how little or how much they earn. Hell, maybe what Wal-Mart ought to do is create a “Northern Exposure” scenario – offer to put hundreds of people through medical school but then those people have to put in, say, three or four years as staff doctors at Wal-Mart stores around the country, making sure that people who work there have proper and affordable medical care.

    That’s just one idea. There are probably hundreds that would have little impact on the bottom line, but could have a tremendous impact on the national debate.

    But that doesn’t seem to be the Wal-Mart way.

    Former US Labor Secretary Robert Reich had an interesting column in the New York Times the other day in which he said, quite correctly, that Wal-Mart is just following the lead of its shoppers, who want cheaper and cheaper products. If shoppers wanted to support local businesses that provided better health care or paid their people better, then shoppers would patronize those businesses. But they don’t. They shop at Wal-Mart.

    As Shakespeare once wrote, “The fault, dear Brutus, is not in our stars, but in ourselves.”

    So, the argument goes, Wal-Mart really is only following the customer.

    But maybe, just maybe, it is time for Wal-Mart to lead on this issue. Instead of creating road kill, maybe it is time to build roads.

    Published on: March 2, 2005

    Interesting piece in the Ann Arbor News< that illustrates the impact that technological changes can create behavioral shifts that end up affecting how a retailer goes to market.

    Sort of like dominoes.

    It seems that Borders Group has been looking at three years of steadily declining business coming out of the music side of its Borders Books & Music stores. Part of the problem is that overall sales of CDs by brick and mortar stores have been off, except for a brief resurgence last year, affected by the growth of online downloads as well as Internet sales in the category. And part of the problem is that Borders hasn’t exactly specialized in cutting edge music, focusing more on slower moving if more traditional categories such as jazz and classical.

    For the moment, Borders is reducing the amount of space it devotes to CDs in its stores by between 20-25 percent, giving that space to the growing DVD category. (DVD sales at Borders grew 20 percent last year, actually a little better than industry-wide sales, and counter-balancing the CD sales decline.)

    Peter Faricy, Borders’ vice president of multimedia, tells the News that he believes the stores’ core customers still enjoy music, and is not yet considering taking the “Music” out of the store name.

    One of the solutions he has come up with is the creation of multiple listening stations for the stores “that will allow listeners to hear virtually every song ever recorded. It also makes recommendations for other music based on aspects of the singer or band. For example, a Frank Sinatra album could provide links to dozens of other artists, based on the customer's appreciation of big band music or of Sinatra's vocals.” The system will be included in all new stores and major remodels.

    While the new system may have the effect of helping Borders sell more CDs and introduce its customers to new performers, the digital challenge still looms large. Apple Computer, for example, estimates that since it launched its iTunes service (which links up with its enormously popular iPod), it has sold more than 250 million songs – and expects to sell another 500 million songs in 2005 alone.

    "We are clearly aware that there is a digital revolution on the horizon at some point," Faricy tells the paper. "I can assure you we are making sure that Borders' strategy is meeting our customers' needs."
    KC's View:
    It is an interesting problem, and one that we’re a part of – since we’re sitting here listening to our iPod as we write these words. And while fully 800 or so of the 1,000 songs we’ve got on our iPod at the moment have been downloaded from existing CDs in our collection that we wanted to digitize, the other 200 have been bought digitally using iTunes. (Some are new albums, and some are digital downloads of old and favorite albums that have been either lost or damaged.) If someone our age has embraced this change so fully, can you imagine about the young people who, when you come right down to it, listen to a lot more music than we do?

    The problem with the Borders solution, as we see it, is that it isn’t really addressing the digital problem. It only is helping to expand the horizons of people who already have made the decision to buy a CD. But the real threat to the brick-and-mortar CD business comes from iTunes and Amazon.com – each of which offers recommendations to users.

    And here’s the other problem that we think Borders faces. Eventually – and pretty soon – people are going to start downloading movies and TV shows onto their computers the same way they are now downloading music. It is inevitable. And Borders is going to have to figure out a way to compensate for that loss of business.

    Ironically, the piece of business of its business that may be least threatened is the book business. We think it will be some time before people start downloading books digitally and reading them on their computers…it just isn’t the same thing as having a hardcover or paperback that you can open and read by the fire or on an airplane or wherever.

    Go figure. Companies like Borders went into the CD and DVD business to address concerns they had about book sales,

    Best laid plans…

    Published on: March 2, 2005

    The Boston Globe reports that British researchers at the University of Nottingham have concluded that women who skipped breakfast tended to experience an increase in their cholesterol levels, higher blood sugar levels, and overall weight gain – unlike women who did eat breakfast, who had none of those issues.’

    In other words, scientists are now saying what mothers have been telling us for decades: breakfast is the most important meal of the day.
    KC's View:
    Go figure.

    Published on: March 2, 2005

    The Lakeland Ledger reports that Publix Super Markets stock has reached a record high of $64 per share, up almost 10 percent from last October.

    Publix stock is not publicly traded, and is owned almost 100 percent by its employees. Or, as the company puts it: “Publix is owned by more than 58,000 stockholders and more than 87,000 participants of its Employee Stock Ownership Plan. During designated offering periods, Publix's common stock is made available for sale to eligible active employees and non-employee members of its Board of Directors. Publix's common stock is not publicly traded on a stock exchange and, therefore, does not have a "ticker" symbol. The market price of Publix's common stock is determined by its Board of Directors, based upon appraisals prepared by an independent appraiser.”

    At the same time, Publix has begun the celebration this year of its 75th anniversary with a series of parties and promotions in its stores.

    The logo for the anniversary features the words "It's been our pleasure."
    KC's View:
    We’ve always believed that employee ownership is one of the best ways to keep a company effective. Publix proves it.

    Published on: March 2, 2005

    The Boston Globe reports that a new survey by the Conference Board says that half of US workers are happy in their jobs, down from almost 59 percent a decade ago. Fourteen percent say they are “very happy,” compared to 18.4 percent who said that in 1995.

    The Globe writes that “the biggest decline in on-the-job happiness was among workers earning $25,000 to $35,000 and among workers between the ages of 35 to 44.

    “The workers most satisfied with their jobs are those earning $50,000 or more and workers at least 65 years old, the survey found.”
    KC's View:
    In the retail business, we suspect that the numbers wouldn’t be even this good if you surveyed people who work in the stores…and we think it is largely because the retailing business is a “command and control” culture.

    Happiness comes not just from compensation, but also from empowerment, responsibility, and the ability to see one’s work create meaningful results. Happiness comes from being viewed by one’s employer as an asset, not as a cost or a liability.

    Published on: March 2, 2005


    • There are reports in the Canadian media that the Great Atlantic & Pacific Tea Co. (A&P) is considering the sale of its Canadian operations; a decision on the matter could come this week.

      A sale could net the troubled A&P more than $800 million (US), according to some estimates.


    • The Boston Globe reports that a year after Albertsons acquired Shaws Supermarkets for $2.1 billion, it plans to rebrand the 92 pharmacies inside Shaws stores under the Osco name. The Osco name will be posted both inside and outside the stores.

      Albertson's sold off its 80 Osco stores in New England in late 2001 to Brooks Pharmacy for $240 million.


    • Luc Vandevelde, the new chairman of Carrefour, has gone on the record as saying that the company has no need or intention of merging with another retailer, and currently has both “the critical mass and the means to defend itself” from competitive challenges in France and elsewhere.


    • Rite Aid has announced the launch of a new free senior loyalty program called “Living More,” which is designed to provide benefits and savings to Rite Aid's patients who are at least 60 years old. Included in the benefits for seniors who enroll in the Living More program are 10% off all cash prescriptions, 10% off Rite Aid brand products every day, and special offerings targeted to their lifestyles based on their buying habits.

      Seniors who enroll in the program will also receive 10% off many non-prescription items on the first Thursday of each month, 10% off select vitamins, herbs and supplements every Tuesday, and unadvertised monthly specials throughout the store, as well as access to a quarterly online Living More newsletter.

    KC's View:
    At last. Something to live for.

    Published on: March 2, 2005


    • Oregon-based Willamette Valley Vineyards will begin including on its label for 2002 and 2003 Pinot Noirs the following federally approved statement: "Pinot noir develops a natural defense against botrytis (mold) in our moist, cool climate -- the antioxidant resveratrol."

      Resveratrol is the compound found in red wine believed to help prevent the development of heart disease and certain kinds of cancers.

    KC's View:

    Published on: March 2, 2005


    • Publix’s sales for the fourth quarter of 2004 reached approximately $4.8 billion, a 10.3 percent increase from last year’s $4.3 billion. Same-store sales were up six percent for the period. Fourth quarter net earnings were approximately $232.9 million this year, compared to $177.7 million in 2003, an increase of 31.0 percent.

      Annual sales at Publix were $18.6 billion, a 10.7 percent increase from last year’s $16.8 billion, with same-store sales up 5.7 percent. Net earnings for 2004 were $819.4 million, compared to $660.9 million for 2003.


    • BJ’s Wholesale Club reported fourth quarter net income of $47 million, down from $49.2 million during the same period a year earlier. The company blamed the results on accounting errors that needed to be corrected.

      Sales for the period rose seven percent to $2.05 billion from $1.92 billion a year earlier, with same-store sales up 3.4 percent.

      Annual income rose to $114.4 million, from $102.9 million in 2003. Revenue was 10 percent higher at $7.38 billion, with same-store sales growing six percent for the year.


    • Ketchup maker H.J. Heinz Co. reported third quarter earnings of $152.4 million, compared to $202.2 million earned during the same period a year ago. The company attributed the decline to a write-off of an investment in the Hain Celestial Group. Heinz also reported third quarter revenues of $2.26 billion, compared with $2.09 billion during the same period last year.

    KC's View:

    Published on: March 2, 2005

    Food, beverage and consumer products companies worldwide will feature their latest innovations in the Third Annual New Product Showcase and compete for the coveted Retailers Choice Awards at the 2005 Food Marketing Institute Show, May 1-3 in Chicago.

    The New Product Showcase will feature products in 14 different categories: bakery; beverages; condiments and sauces; dairy products and dairy substitutions; entrees/prepared foods/meal solutions; ethnic/international foods; processed and fresh meats and seafood products; shelf stable grocery (baby foods, canned foods, cereals, pastas, etc.); snacks, confectionary and candies; vegetarian; seasonal; health and beauty care; equipment; and technology. The submitting company may only select one category per product.

    To qualify, products must have been launched in the past year and they must be completely new, a category or line extension or, in exceptional cases, re-launched or repackaged. In addition, product manufacturers must be exhibiting at the FMI Show or the U.S. Food Export Showcase.

    Companies whose products are selected for inclusion in the Showcase will be afforded key benefits:

    • Highlighted in the official show guide.

    • Given a “New Product” logo sign that can be posted at their booth.

    • Provided the opportunity to place product samples in private Retailer Conference Suites.

    Companies with the most popular products in the Showcase will be presented with the 2005 Retailers Choice Awards. Under this program, retailer and wholesaler company representatives attending the FMI Show will vote for their favorite products in each category. Winners will be announced on Tuesday, May 3, during the Show.

    For more information, go to:
    http://www.fmi.org/events/may/2005/
    KC's View:
    We’re also pleased to announce that we’ll be hosting this year’s new products-oriented Super Session, entitled “New Products: A View Forward,” scheduled for the FMI Show on Monday morning, May 2.

    Featuring a number of great speakers, we’ll be looking at new product trends from both the retailer and consumer perspective, and will be engaging with the audience for plenty of good, provocative discussion. We’ll have more on this as we get closer to FMI 2005…but we certainly hope that you’ll join us.

    Published on: March 2, 2005

    Jacquelin Ldevia Beadles Ukrop, who in 1937 co-founded the Ukrop's Super Markets chain with her husband Joe, died Saturday after living with Alzheimer's disease for several years. She was 89.

    Joe Ukrop died in 2002.

    Jacqueline Ukrop is survived by two sons, six grandchildren and six great-grandchildren – not to mention a legendary and progressive company that bears her name.
    KC's View:

    Published on: March 2, 2005

    by Bobbie Randall, MEd, RD, LD

    We don’t publish a lot of guest columns, but this one – originally written for Buehler’s Fresh Food Markets in Ohio for its website - struck us as worth reprinting in its entirety because it frames the issue of salt consumption in an intelligent and contextual fashion.

      Everyone loves a good mystery. The detective work is intriguing and the solutions often catch us off guard. Well, there is a controversy that has developed into a "salt mystery." Let me explain.

      For centuries salt has been recognized for a myriad of uses. After typing, "salt," into the search engine of my computer more information popped up than I could include in this article. Salt can do everything from unclog a greasy drain to shine a copper bottomed pot to preserve meat.

      Salt literally gives us life. It also reminds us that all life has origins in the primordial sea. It has seasoned the superstitious, the warlike, the devout and the activist. It has shaped history and inspired artists, storytellers, and cooks. It is an article of trade, a "cure" and a medium for sculpture and song.
      The human body contains about four ounces of salt. It is important for muscle contraction, blood circulation, and food digestion. Without it the heart would not beat. This is where I open up a can of worms.

      At one end of the can is the issue that there is no evidence that reducing dietary sodium improves the risk for heart attacks or strokes for the general population. At the other side with a jagged can lid is the fact that many Americans are sensitive to sodium and that it is connected to high blood pressure, cardiac and renal complications.

      One organization is suing the Federal Food and Drug Administration because enough is not being done to decrease sodium in our foods. The new Dietary Guidelines for Americans 2005 recommends a reduced level but the lawsuit states that it is all talk and no action. It is noted that 150,000 people in North America die prematurely every year from eating too much salt, primarily from cardiac related complications.

      But scientists disagree over how much is too much. For years many researchers have claimed that a high sodium intake threatens people by contributing to high blood pressure. Recently, though, new research studies have begun to rehabilitate salt's reputation. Up to date investigations claim that there is no reason for doctors to recommend reducing sodium intake for people with normal blood pressure. In fact, some doctors have discovered that a treatment for chronic fatigue includes salt supplements and plenty of pickles and other salty foods.

      The argument is that people get most of their salt from processed foods, not by pouring salt on their own food. Activists want the food manufacturers to remove much of the hidden sodium in our processed foods. They do not realize that some popular products will change flavor and become less desirable. The makers of packaged gourmet dinners would all have to be in unison with sodium reduction or one would have the advantage of being tastier just because it did not lower the sodium content. It has become a major dilemma in the salt mystery.

      The true mystery revolves around the discovery of who is sensitive to salt and who is not. While at a party last Saturday I watched many of my friends coat the rim of their drink glasses with a halo of salt. In fact, one of the guys dared me to write about the evening and the lost shaker of salt that was discovered as the music blared and the people danced.

      Following the Dietary Guidelines for Americans 2005, my friends got most of their recommended daily allowance of sodium perched on the edge of their stemmed glass. That doesn't account for the chips, salsa, lunchmeat and spinach dip that they gobbled down as the music played on and on.

      The salt mystery revolves around the incidence of high blood pressure, cardiac disease, renal disease and the treatments for related complications. Add the increase of hidden sodium in our food supply with the new Dietary Guidelines and you get worm soup. A mixture of facts that has a life of its own but at the same time can kill many who taste it.

      A clue in this dilemma lies with your family history. If your parents or grandparents or elderly aunts and uncles have or had high blood pressure, cardiac or renal disease, you have a high potential of being salt sensitive. Limit processed foods and avoid adding salt to your food. Limit snack chips and crackers that are loaded with salt and do not buy peanuts that were given a sodium bath before bagging.

      On the other side of the mystery, if you are among those Americans who have normal blood pressure or who do not take specific medications for heart disease or are free of renal disease, have at it. Coat your glass with salt and swallow another handful of sodium sticks (pickle spears). Keep on dancing and drink plenty of fluid.
    KC's View:

    Published on: March 2, 2005

    We wrote yesterday about an editorial by Advertising Age editor-in-chief Rance Crain, in which he decried the growing notion that mass marketing is dead. Maybe the problem isn’t that the mass market doesn’t exist anymore, he argues. Maybe the problem is that lousy advertising doesn’t do anything to reach or appeal to the mass market, and the world is filled with lousy advertising.

    To which one MNB user responded:

    Advertising continues to sink to new lows. More and more a spot appears and when I have finished watching it, I either cannot figure out what the product is or cannot remember what it is later. Back in the days of early TV, there was not a doubt about the name and the purpose of the product being advertised. Now it seems to be a contest in cuteness or a stretch at trying to be funny or entertain. No wonder mass market advertising is not successful.




    We also wrote yesterday about how McDonald’s-owned Chipotle is using a limited selection and perceived quality to its advantage.

    One MNB user responded:

    Isn't limited choice what Mickey-D's was all about when it got started, and what made them so darn successful (well before we all started "loving it")?

    But another MNB user took a different approach:

    with Chipotle is the same one I have with every fast food restaurant (an oxymoron, in my opinion) - there is no 'fast' about it. The line at Chipotle is always long and seems to take forever to move. If it was structured to have at least two prep lines going it would be better. I will only go into McDonald's under duress (i.e., my kids are begging me). I stopped at McDonald's (under duress) yesterday and the wait, service and employee attitudes were all painful.

    It’s like the old Yogi Berra line: “Nobody goes there anymore. It’s too crowded.”




    Regarding the possibility that Kellogg Co. plans to add an omega-3 fatty acid, typically found in fish, to products that could include Pop Tarts and/or Corn Flakes, MNB user Martha Schueneman wrote:

    I'm leery about artificial enhancements like this. How do we know that the omega-3 acids aren't working in concert with other nutrients in the fish to provide their benefits? Isolating nutrients is tricky enough--witness the beta carotene and cancer study that was aborted a few years ago. Putting them where they don't necessarily belong is too much engineering for me.

    I buy Pop-Tarts once or twice a year so I can't imagine my opinion will sway Kellogg's, but if they don't keep original, unenhanced Pop-Tarts on the market I'll be buying store-brand toaster pastries for my son.





    And we continue to get letters about Winn-Dixie’s travails, including its decision to pay CEO Peter Lynch a $1.5 million retention bonus and hire a customer service czar.

    For example, MNB user Michael F. Parker wrote:

    To the best of my knowledge, Mr. Lynch has no experience in guiding a company through bankruptcy. I would equally assume that due diligence prior to accepting the position would have led a reasonable, prudent person to the possibility of a bankruptcy filing. I believe this bonus sends a very bad message to all employees, especially the ones who will lose their jobs due to prior leadership errors.

    Regarding the appointment of a customer service Czar, it is my belief that being the cheerleader for customer service and demonstrating respect for customers must resonate from the CEO. Customers pay Peter’s salary as well as the salary of all employees of Winn Dixie. If the leadership of Winn Dixie understood this, perhaps they wouldn’t be facing a no-confidence vote from customers.

    Success in retail is relatively simple, customers must perceive that as a retailer you are both unique and relevant. If Mr. Lynch and his team fail to reinvent Winn Dixie, then bankruptcy is only delaying the eventual outcome.


    And another MNB user had exactly the right idea:

    They should hire the Puerto Rican deli lady from the Hallandale Beach store to be the customer service czar. She would probably be happy with much less than the person Lynch is thinking of and would be better for the customer.

    How great would that be…and it would send exactly the right message to customers and employees.
    KC's View: