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    Published on: March 17, 2005

    Advertising Age reports that the Children's Advertising Review Unit (CARU) – an internal organization within the advertising industry – plans to enhance its oversight and enforcement role, in part as a response to calls for a greater federal government role in regulating advertising to children.

    “As the concerns change, we begin to apply [the guidelines] differently,” CARU director Elizabeth Lascoutx tells Ad Age. “One of our guidelines was that representation of food products should be made so as to encourage sound use of a product toward healthy development of children and development of good nutritional practices.”

    At the same time, CARU criticized Wrigley and Burger King for misleading and irresponsible advertising to children, a move interpreted as signaling a new toughness.

    Manly Molpus, president and CEO of the Grocery Manufacturers of America (GMA), issued the following statement: “With regard to advertising, the food and advertising industries have a 30-year record of successfully working with the Children’s Advertising Review Unit (CARU) to monitor ads to children to ensure they meet strict guidelines. Individual companies also have internal policies and programs that ensure that communications to children are done responsibly. All of these industry efforts are under continual review to ensure they meet the highest possible standards.”

    While it appears that marketers are circling the wagons to prevent government interference, the Bush administration has shown no inclination to expand the government’s regulatory role. Federal Trade Commission (FTC) chairwoman Deborah Majoras told a conference sponsored by the Consumer Federation of America that the US government will neither ban nor limit the advertising of junk food to children. Majoras said that the government will expect the food industry to develop its own guidelines for when such advertising is appropriate, and will sponsor a workshop this summer to help marketers create these self-imposed limits.

    That may not be good enough for some, however.

    A bi-partisan group of senators – including Hillary Clinton (D-NY), Rick Santorum (R-Pennsylvania), Joe Lieberman (D-Connecticut), and Sam Brownback (R-Kansas) – plans to reintroduce legislation that would increase funding for research into the impact of media and advertising on children’s on food choices. This legislation is seen as a possible first step toward formalized government intervention.

    And, the federal government's policy seems contrary to the positions being taken by some state legislatures, which have been considering various forms of intervention, such as snack taxes and the banning of junk food from schools.
    KC's View:
    We know that a lot of MNB users feel that the federal government ought to butt out. And we certainly respect that.

    The better question is how consumers feel.

    Over on the website, Phil Lempert wrote yesterday that “we believe that the states have it right, and that the federal government is abdicating what should be its responsibility in this matter. Why establish guidelines for kids, and then allow companies to irresponsibly market products to children that don’t meet these guidelines?

    “Consumers should demand no less of a government that we fund with our tax dollars.”

    And, did a poll, asking consumers what they think – and as of this writing, only 25 percent of respondents said they thought the government should stay out of the regulation business in this case. Fifty percent thought that the federal government should allow only the marketing of foods that meet certain nutritional guidelines to kids, and 25 percent thought that all marketing to kids ought to be banned.

    We know why industry folks feel the way they do. But maybe we ought to be thinking harder about how consumers feel and what they think. Because in the long run, that probably is more important.

    Published on: March 17, 2005

    Albertsons CEO Larry Johnston announced yesterday a new $250 million, two-year cost-cutting program that will target a reduction in administrative expenses and expanded centralized, chain-wide purchasing.

    Labor costs are not included in the new program, according to the company.

    The plan comes in response to Albertsons’ most recent earnings reports, which were off 20 percent in 2004 compared to 2003, in part because of the long labor strike/lockout in Southern California, and in part because of the impact of a bad hurricane season in Florida.

    Just last year, Albertsons completed a three-year, $1 billion cost-cutting program.
    KC's View:
    The problem, it seems to us, is that you can’t save your way to prosperity…and we’re not sure if Albertsons is doing enough to create compelling shopping experiences that provide a differentiated experience compared to its competition.

    Centralized purchasing, for example, while it might make sense financially, isn’t necessarily the best way to be responsive to local tastes and requirements. It saves money, but it doesn’t always build a connection to local shoppers.

    The jury remains out.

    Published on: March 17, 2005

    Claiming that the US government is using unfair trade practices by keeping its border closed to Canadian cattle, a group of Canadian ranchers is suing the US for more than $300 million in damages.

    The group is called Canadian Cattlemen for Fair Trade, and it maintains that the US government has cost it significant sales by keeping the border closed.

    Of course, the suit does not seem to take into account the fact that the Bush administration actually is trying to open the border, but has been slowed by lawsuits filed by US cattlemen concerned that an open border will lead to more mad cow disease…not to mention lower beef prices because of greater supply.
    KC's View:
    Dumb move.

    First of all, the Bush administration wants the border opened, but has been stopped by the courts from doing so. Second, there are enough bad feelings between Canada and the US at the moment, and this suit will only serve to exacerbate the situation.

    We’re just not sure what litigation accomplishes at this point…except, maybe, allowing Canadian cattlemen to vent a bit.

    Published on: March 17, 2005

    • Following the defeat last month of a unionization move at a Colorado Wal-Mart Tire & Lube Center, the National Labor Relations Board (NLRB) has scheduled a March 25 hearing into allegations that the company intimidated and bullied workers there into voting against the proposal.

      The United Food and Commercial Workers (UFCW) has complained that Wal-Mart stacked the deck by adding hand-picked employees to the department’s staff, as well as not allowing any union official to observe the voting.

      "After a preliminary investigation I have concluded that the (union's) objections raise substantial and material issues of fact, including credibility resolutions, which can best be resolved at a hearing," said NLRB regional director Allan Benson said.

    • Nike reportedly will make a new line of athletic shoes that will be sold only at Wal-Mart. The line will be made by Nike subsidiary Exeter Brand Group under the Starter label; it is the first time Nike has made a line exclusively for a discount chain.

      It also is the first time that Wal-Mart has sold serious athletic shoes, as opposed to sneakers that are used for casual wear. They will retail for $40 and will be available in 400 stores starting next week.

    KC's View:

    Published on: March 17, 2005

    The Wall Street Journal reports this morning that Toys R Us will be sold for about $6 billion to a group made up of two equity firms - - Kohlberg Kravis Roberts and Bain Capital Partners – and real estate developer Vornado Realty Trust.

    The deal includes both Toys R Us’ toy retailing division, which it had contemplated selling off separately, and its baby supplies division.

    The WSJ suggests that the deal may be more about real estate than retailing, and that the leases held by Toys R Us may be more valuable than the businesses it runs.

    While Toys R Us has been smacked around of late by Wal-Mart, with sales going from $7 billion in 2000 to $6.3 billion in 2003, the WSJ also reports that the company’s retailing operations will be operated, albeit in “leaner and meaner” fashion.
    KC's View:
    Remarkable. The Sears-Kmart deal seems to be more about real estate than retailing, and now the Toys R Us deal may have similar motivations.

    The problem is, once all the real estate has been sold, what happens if only a couple of companies are actually left in the retailing biz?

    It won’t be good for anyone.

    There’s also the suggestion that before selling off leases, the new ownership will want to see if offering exclusive merchandise – AKA, stuff not available at Wal-Mart – helps to turn around its fortunes.

    But we think it’ll have to go farther – maybe so far as reinventing the idea of toy shopping in some way that nobody has yet considered.

    Published on: March 17, 2005

    Reports out of the UK say that Atkins Nutritionals UK, the British arm of the diet company, is being closed down because of disappointing sales of its branded products there.

    The company says it hopes to keep its some 20 SKUs on store shelves and to keep some sort of presence in the UK.

    While a reported three million British citizens have tried a low-carb diet, there has been controversy there because of charges that the Atkins plan is unhealthy.
    KC's View:

    Published on: March 17, 2005

    • The federal government has given Oregon’s Willamette Valley Vineyards the go-ahead to mention the presence of reservatrol, an antioxdant, on two of its Pinot Noir wine labels.

      While stopping short of making health claims, the label will reference reservatrol and explain what an antioxidant is.

    KC's View:

    Published on: March 17, 2005

    • Duane Reade Inc. today reported that its fourth quarter net sales increased 12.8% to $432.5 million, with same-store sales up 0.1 percent over the same period a year ago. The company posted a net loss for the period of $16.5 million, compared to a $4.6 million net loss a year ago.

      Net sales for the full year increased 9.1% to $1.6 billion from $1.5 billion in the previous year, with same-store sales up 0.6 percent for the year. The net loss for the twelve month period was $50.7 million, compared to net income a year ago of $5.1 million.

    KC's View:

    Published on: March 17, 2005

    Suitable for St. Patrick’s Day, the Arizona Republic reports:

      “Few consider beer a health food, but among brews, Guinness has fewer calories and fewer carbohydrates than almost every major brand. And, like chocolate and wine, the darker the beer, the better it may be for your heart. A University of Wisconsin-Madison scientist found that Guinness Stout, a dark beer, produced substantially more anti-clotting activity than light beer. Guinness also is loaded with flavonoids and antioxidants that help prevent arteries from clogging.

      “’We don't really promote the beer as medicine, but Guinness has been low-calorie, low-carb since its conception,’ said Fergal Murray, brewmaster for Guinness in Dublin, Ireland.”
    KC's View:
    It’s our experience that Guinness cures a lot of ills. Mental and physical.

    And the idea that it may actually be good for you…well, that’s more than one could hope for.

    Published on: March 17, 2005

    Not surprisingly, we got a number of emails about yesterday’s story reporting on a new book, entitled “The Secrets of Retailing or How to Beat Wal-Mart,” by Marc Joseph, president/COO of Dollar Days International.

    Joseph’s three basic “secrets”: retailers smaller than Wal-Mart can buy small batches of unique products, which allows them to differentiate themselves; small retailers can offer differentiated and customized customer service; and small retailers can work without the costly management infrastructure that larger retailers such as Wal-Mart have.

    MNB user Mel Mann responded:

    Regarding your comments on defining and maintaining a differentiation strategy, I find continued resistance to any decision and action that will be 'polarizing'. The current definition of this word in business appears to be a fear that everyone won't buy your product/service all the time. Yet my lessons in business have shown the most loyal consumers are to those businesses that intentionally polarize their brand, offerings, service, value, etc. – look at Saturn or Apple for two examples. Here the word 'loyal' is defined as "they keep coming back to buy". Isn't it curious the resources spent trying to attract and keep marginal customers perceived as essential to growth, at the expense of customers craving a unique relationship and willing to offer long term business to a company that helps them define their individuality?

    Is this a lack of leadership or an abundance of greed?

    Not sure, but you make a great point. In order to have a business/product/service that some people will love, you have to be willing to risk the possibility that some people will hate it. And that’s okay.

    (That’s not just retailing. Here at MNB World HQ, we know that MNB isn’t for everyone. If it were, it would mean that we were too vanilla…and there would be no reason for anyone to read us.)

    The supermarket industry is guilty of many things, but lowest common denominator marketing may be the worst. Look to only hit singles – or just try to not strike out – and you never hit a home run.

    Another MNB user wrote:

    It seems to me that Mr. Joseph's book, "The Secrets of Retailing or How to Beat Wal-Mart" isn't titled correctly. He isn't telling you how to "beat" Wal-Mart, he's telling you how to "compete with and (hopefully) survive" Wal-Mart. There is a difference! The term "beat" means to "come out better in a competition, race or conflict - to be superior." Based on what little information you are able to provide from the press release, that's not the kind of information this book is going to provide. I would venture to say there isn't a retailer out there "beating" Wal-Mart at their game, but there certainly are numerous retailers, large and small, who are managing to compete and survive with Wal-Mart around. The reasons for their success are as varied as the operations they run, and it's not always as easy or as simple as 1, 2, 3.

    You’re right. You can’t beat Wal-Mart at its own game.

    What we always wonder is why so many retailers insist on playing Wal-Mart’s game, knowing that the best they can achieve is a close second. In the end, they are a lot more likely to achieve irrelevance.

    We can name a number of retailers who are winning…but they are playing by their own rules, not Wal-Mart’s.
    KC's View: