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    Published on: June 9, 2005

    Information Resources Inc. (IRI) has released a new study, “Echo Boom Young Adults - The Next Growth Wave,” which suggests that “to fully tap into this group's significant discretionary spending power, today's marketers must target the young adult echo boomers (age 21-27) who already head households and have become the primary CPG purchase decision makers.”

    The report urges manufacturers to “begin investing in marketing and product development initiatives that resonate well with this segment's lifestage and lifestyle and carefully track purchase behavior for their brands, categories, and stores across echo boomer segments.” And, IRI suggests, “strong spending indices among echo boomers with kids represent significant long-term growth opportunity for many convenience meal categories, such as refrigerated lunches and dry packaged dinners. Retailers should strongly consider baby supplies as a potential differentiator to attract the echo with kids market, while baby supply manufacturers should consider partnering with key retail accounts in the development of programs to attract young parents.

    “The report also offers that the echo boomers with kids segment also allocates a higher proportion of their total CPG dollars to private label products than the average household with kids. Knowing this, IRI recommends that retailers explore the opportunity to increase private label penetration and share across bigger-ticket, high-spend echo categories, while working with manufacturers to determine the optimal category mix of private label and branded products.”
    KC's View:
    While it indeed is important to identify what categories will be of the greatest interest to Echo boomers as they age, it also is critical to use this demographic as a stage upon which to start building a new approach to retailing. Because the next demographic group – those currently between the ages of 10 and 21 – will be one that will have revolutionary attitudes toward how they acquire things, fueled by their appreciation for all things technological and desire for instant gratification. As we’ve noted before, this is a non-linear generation, and they will demand a non-linear shopping experience.

    It’s time to start figuring out what that is going to be.

    By the way, there was another point in the IRI study that intrigued us. It speculates that “the majority of Echo Boom adults, though mindful of their weight, are still less likely than the general population to follow a specific diet and, contrarily, are more likely to visit fast-food chains. Also, this segment appears to be far less concerned about chronic disease, such as high cholesterol, heart problems, etc., than consumers in older age brackets, and is therefore less likely to seek out products with specific health benefits.”

    In other words, they’re not any brighter than anyone else about nutrition issues.

    And that strikes us as pretty good reason for increased nutrition education in schools and better oversight of the food and beverages sold in schools. Because these younger folks (and we’re dismayed just by the fact that we’re referring to them as “these younger folks”) clearly don’t get it.

    Published on: June 9, 2005

    The Chicago Sun-Times reports that the Illinois General Assembly has approved a measure that would create and publicize a list of employers that offer their workers inadequate private health insurance, causing these employees to go on the public dole to get help paying medical bills.

    Gov. Rod Blagojevich has indicated he plans to sign the bill into law.

    "These types of bills are aimed at bringing negative publicity to large companies who bring hundreds of thousands of new jobs to this country," Nate Hurst, a spokesman for Wal-Mart, told the Sun-Times. Hurst said that Wal-Mart is likely to make the list simply because it employs more than 43,000 people in Illinois, regardless of whether it deserves to be on it or not.

    Rep. Mary Flowers (D-Chicago) disagreed. "If they don't want to be embarrassed, they can do something about it," she said. "But you tell me, why is it that the taxpayers of the state of Illinois are funding the richest company in the nation?"

    The Sun-Times notes that Wisconsin officials recently caused an uproar when they “disclosed that more than 1,200 Wal-Mart employees and their dependents use that state's Medicaid program at a cost of $2.7 million.”

    The paper also notes that at least 24 other states are considering similar proposals – and that Wal-Mart launched vigorous and successful opposition in places like Colorado and Maryland.

    Assuming the bill is signed, the Sun-Times writes, “the first report would come out in October 2006 and include only businesses with more than 100 employees and at least 25 workers on the Medicaid rolls. The reports would stop after 2009 unless lawmakers extend the program.”
    KC's View:
    Let’s leave Wal-Mart out of the equation for the moment, since the very mention of the Bentonville Behemoth tends to polarize the discussion.

    We’re trying to understand exactly what the objection is – especially since obviously there are some companies that are able to provide sufficient health benefits that they don’t make the list. If some companies don’t, and a sizable percentage of their employees are on public assistance as a result, isn’t that a legitimate fact to be brought to the attention of the taxpayer?

    Of course, it is a more complicated issue than that. Some would say, quite correctly, that some companies will have a large number of part-time, teenaged employees who don’t need or want health care benefits, and therefore shouldn’t be branded by such a “list of shame.” That’s a fair observation, and such circumstances should be worked into any formulation.

    On the other hand, perhaps there should also be a list of companies that have received major tax breaks from local and state governments, and they could be cross-referenced with those employers with a large percentage of workers on public assistance.

    What we’re really talking about here is full disclosure. Complete and in context, but full.

    Published on: June 9, 2005

    The Washington Post reports on a Wharton study suggesting that the “supermarket industry has been slow to respond to consumer needs, in part because grocery chains have some outmoded ideas of how people really shop.”

    Among the findings: “Shoppers like to go in a counterclockwise direction; they don't weave up and down every aisle, in fact they rarely go all the way down any aisle; and to speed things up, they stick to the perimeter and avoid huge chunks of the store.” The researchers also believe that, according to the Post, “the grocery industry has spent too much time focusing on such things as loyalty programs (discount cards, for example) and not enough time on store layouts that meet shoppers' needs.”

    The Post also notes that “quick trips, in particular, are a growing trend among shoppers, who might not think about what to make for dinner until they're driving home at the end of the day. In fact, the traditional once-a-week trip to the market to stock up on groceries is fast becoming a relic.” And the Wharton researchers say that stores need to be reengineered to reflect these shifting priorities.
    KC's View:
    What a crock. On so many levels.

    First of all, the Wharton folks seem to assume that the poor folks who run the supermarket industry have no idea what they are doing, have no understanding of the consumer, and that this situation can only be remedied by some academics with computers.

    We also suspect that the Wharton researchers don’t do the regular shopping for their families. They look at the supermarket as a laboratory, not as an organic, evolving organism.

    Of course, a lot of supermarket executives don’t do the food shopping for their families, either. And a lot of supermarkets aren’t organic, evolving organisms, but rather are linear, stagnant entities.

    Wharton does have the observation about loyalty marketing right, except for the wrong reason. Loyalty marketing hasn’t been a transformational initiative for many chains not because it doesn’t matter as much as store layout, but because they weren’t doing loyalty marketing – they were just offering discounts through another venue.

    The problem with stores, in our humble (or maybe not so humble) opinion, isn’t so much how stores are laid out, but that most stores have a fairly homogenous approach to marketing and merchandising, doing very little to differentiate themselves from the competition.

    The Wharton folks seem to think it is all a matter of science. What they don’t realize – and what a lot of retailers don’t realize – is that great retailing also is an art.

    Published on: June 9, 2005

    In his “Moneybox” column on this morning, Daniel Gross writes about what Wal-Mart has to do if the retailer is to start appealing to more affluent customers, a shift that company CEO Lee Scott pointed to late last week as critical to continued growth.

    “To appeal to higher-income customers…Wal-Mart will have to do the sorts of things that hurt margins,” Gross writes. “Upper-income shoppers live in places where real estate and labor costs are higher, where unions have clout, and where politicians tend to oppose Wal-Mart's arrival.” And, he writes, it traditionally has been a lot harder for a value-oriented retailer to start selling upscale products than it is for an upscale company to start selling somewhat cheaper items.

    “What's more,” he writes, “Wal-Mart has been until recently a famously inward-looking company. Its competitive advantage has always been the stuff behind the scenes—sourcing, logistics, inventory control, cost control. Wal-Mart has always been less interested in, and comparatively weak on, external factors like public relations and marketing. For four decades, that formula has worked fine. The coastal elites who run ad agencies, the media, and large companies have long been forced to trek to Bentonville, Ark., to educate themselves about the consuming and retailing habits of middle America, to acknowledge Wal-Mart's power, and to nod dutifully at the hokey Wal-Mart cheer. Now, the calf-skin shoe will apparently be on the other foot. Seeking growth, Wal-Mart will have to familiarize itself with the shopping habits of people with whom they are not familiar: yuppies, urban sophisticates, bourgeois bohemians, suburban nondesperate housewives, kids with trust funds, foodies, health nuts…”
    KC's View:
    Gross’s piece is somewhat tongue-in-cheek, but also pretty perceptive about the challenges facing Wal-Mart.

    Is it just us, though, or does it seem to anyone else like Wal-Mart believes that it can convert upscale Americans to its way of doing things? And that management doesn’t believe that big changes need to be made to appeal to these shoppers?

    That’s just our sense of things, and we could be wrong.

    But we are reminded of the time many years ago when both Carrefour and Auchan, the French hypermarket retailers, opened stores in Philadelphia and Texas, respectively. We interviewed executives from both companies at the time, and they were convinced that they could teach Americans to shop like the French.

    That didn’t work out so well.

    We’re not suggesting that Wal-Mart will make the same mistake. It is unlikely.

    But not everyone wants to be taught how to shop someone else’s way.

    Published on: June 9, 2005

    Published reports say that McDonald’s longtime mascot, Ronald McDonald, is getting a makeover, being portrayed in new commercials as a leaner, more physically fit version of his former self.

    (To put this change in context, remember that the first Ronald McDonald was Willard Scott.)

    Ronald will now be seen playing basketball, going snowboarding and skateboarding, and generally urging kids to get more exercise and eat more fruits and vegetables.

    The makeover is part of McDonald’s ongoing effort to improve its nutrition image and counter charges that it is partly responsible for the nation’s childhood obesity problem.
    KC's View:
    You have to give McDonald’s credit for working this new angle very, very hard.

    But we have to admit that when we read the story, we immediately thought of all the beer commercials where great looking women were shown, the implication being that they could drink lots of beer and maintain their figures….and that if we guys drank a lot of beer, women would find us attractive.

    Which, of course, isn’t strictly accurate.

    Published on: June 9, 2005

    The Cincinnati Post offers ample evidence of the kind of impact that Wal-Mart can have on a manufacturer’s business.

    Chiquita Brands announced yesterday that because of a dispute over pricing, Wal-Mart will cut back on the number of bananas it buys from the company by one-third – which will have the impact of reducing Chiquita’s US banana market share from 37 percent to 33 percent.

    It isn’t that Wal-Mart is going to sell less bananas. It’s just that it is going to get many of them elsewhere.

    Chiquita said that it will attempt to make up the business through sales to smaller customers, food services and wholesalers.
    KC's View:
    Now, don’t send us email accusing us of being unfairly critical of Wal-Mart. This story is not being posted for that reason – nobody is saying that Chiquita is right or that Wal-Mart is wrong.

    We just think that this story brings into sharp relief the kind of power that Wal-Mart has…and that manufacturers cede to Wal-Mart when they allow too much of their business to be done with one retailer.

    Published on: June 9, 2005

    The Produce Marketing Association (PMA) has released a new study saying that 46 percent of respondents indicated that their children eat consume most of their fresh fruits and vegetables at snack time, compared to 30 percent who said dinnertime.

    In addition, six out of ten respondents said that taste – or perhaps lack of consistent taste – was the primary obstacle to their kids eating more produce.

    Four of ten respondents said that they were most concerned about convenience when shopping for produce, and only 13 percent said that branding made it more likely they would choose fruit and/or vegetables.

    Sixty-two percent of those surveyed said that fresh produce purchases were planned, while 24 percent said these tended to be impulse purchases.
    KC's View:

    Published on: June 9, 2005

    More than 500 drivers, warehouse and distribution workers, members of Teamsters Local 703 in Chicago, overwhelmingly approved a new contract agreement with Safeway-owned Dominick's. The employees provide the warehousing and delivery of the majority of grocery, produce, dairy, deli, meat, frozen foods and general merchandise to the 111 Dominick's stores in the area.

    The approved contract includes a wage and benefit package increase of $3.05 over 30 months; full retroactivity back to April 1, 2004, which is when the previous contract expired; maintenance of health benefits, pension and severance plans; and what the union termed “strong job protections including a prohibition on third party contractors.”

    The voting Teamsters made up a recalcitrant group of employees who had rejected a Dominick’s offer late last month that was approved by two other groups. Safeway then said it would end the contract extension that was in place to the point.
    KC's View:
    At which point, apparently, the union blinked.

    Published on: June 9, 2005

    Advertising Age reports that a survey done by Kraft Foods and Kellogg Co. suggests that 58 percent of respondents say that food companies in the US don’t do enough to combat the nation’s obesity epidemic. This result is despite the fact that both Kellogg and Kraft have made an effort to increasingly center their marketing messages on health and nutrition issues.
    KC's View:
    We wonder what the same 58 percent would say about parental responsibility.

    That said, a clear, unambiguous and consistent message about health and nutrition seems to us to be a marketing and merchandising requirement these days.

    Published on: June 9, 2005

    The New York Times reports this morning that Pathmark shareholders will vote today on the purchase of a potentially controlling stake in the company by Yucaipa Companies, an investment firm based in California – despite the fact that some investors are concerned by the fact that the company’s board has rejected other, more lucrative offers.
    KC's View:
    The question is whether the board is looking out for the company or looking out for shareholders – which may not necessarily be the same thing. Higher bids for Pathmark might make shareholders more money in the short term, but might hurt the company in the long run.

    Published on: June 9, 2005

    The Los Angeles Times reports this morning that in a pilot program to be launched next month in Southern California, Costco will offer family and individual health insurance coverage to customers who pay $100 a year for ‘executive’ membership.

    According to the LAT, “company officials would not quote premiums but said the insurance would be 5% to 20% cheaper than policies individuals could buy on their own. Costco expects to offer coverage statewide by the end of the year and may eventually make it available to regular members.”

    Also, published reports say that Costco’s Canadian operations plan to start up a travel agency business there, as well as expand the number of gas stations it has. The company also wants to start selling cars from at least some of its locations.
    KC's View:

    Published on: June 9, 2005

    The CBC reports that the New Brunswick Solid Waste Association is urging provincial officials to impose a deposit on all paper cups, hoping that such a move would cut back on refuse that has become a blight on the Canadian landscape.

    The initiative would have retailers that sell coffee in paper cups charging a nickel or dime more per cup, and then refunding the money if people brought the cups back in to be recycled.
    KC's View:
    It is hard to fault the motivation, but this sounds like a bureaucratic and operational nightmare.

    Published on: June 9, 2005

    • Wal-Mart acknowledged that Peter Kanelos, who served as the company’s community affairs director in Arizona and Southern California and who approved an ad campaign that equated opposition to a Wal-Mart Supercenter with Nazi book burning, has left the company.

      Wal-Mart said that Kanelos resigned. Kanelos said he left the company on “mutually agreeable terms.”

    KC's View:
    Unlikely that he’ll be looking for employment at Barnes & Noble or Borders.

    Published on: June 9, 2005

    • The Skyway News reports on speculation that Lunds Food Holdings may play a larger role than expected in the development of a downtown block where the company has been planning to build a new supermarket, but that now appears to be slated for conversion “to what Lunds President Tres Lund has referred to as a European-style, ‘urban village.’”

      In addition to one of Lunds’ trademark service-and-fresh foods oriented supermarkets, the likelihood seems to be that other retail partners will be attracted to the area.

    • Published reports say that Hy-Vee will change the name of its 26-unit drugstore chain, Drug Town, to Hy-Vee Drugstores, which is believed will help the company build to a greater extent on the credibility it has in the markets it serves.

    • Carrefour reportedly will buy 10 hypermarkets in Brazil from Portuguese retailer Sonae for the equivalent of $110 million (US).

    KC's View:

    Published on: June 9, 2005

    • McDonald’s said that its global systemwide sales for May rose 5.9 percent, with total same-store sales up 1.8 percent. In the US, total store sales were up 4.9 percent, and same-store sales were up 4.2 percent.

    KC's View:

    Published on: June 9, 2005

    • The Wall Street Journal reports this morning that Albertsons has named Adrian Downes, the company's group vice president and controller, to be the company’s chief accounting officer.

    • Whole Foods Market named Hass Hassan, the founder of Alfalfa’s Markets in Colorado (which was acquired by Whole Foods in 1995), to its board of directors. Hassan also founded Fresh & Wild, an organic food retailer in the UK, which was acquired by Whole Foods Market in 2004.

    KC's View:

    Published on: June 9, 2005

    Continued debate about the role of schools in nutrition education, the role of government in mandating certain standards for foods served and sold in school, and the role of parents in raising their kids.

    One MNB user wrote:

    The problem lies at home. It is the parents responsibility to raise their children. Lifestyle has changed in the US in the last 20 years. The availability of fast food has increased dramatically. When I grew up there was no computer or gaming systems, therefore we played outside and burned up calories. Eating out all the time was expensive so we cooked at home. The kids now have money and choose to buy fast food. They sit in front of a computer or gaming system instead of going outside to play. Is the next step the government mandating certain foods and so much exercise per day at home? I would hope not.

    Another MNB user speculated as to what might happen if schools start restricting the sale of junk food:

    How long will it take for the enterprising youth of today to open up shop at their local school? I am sure they will be selling many of the forbidden products at a considerable mark up. Speaking from the experiences of my youth kids will line up to purchase these items at a considerably higher price. It's not about banning the foods it's about educating the kids.

    Funny image, though…teenagers will be loitering in the hallways pushing Twinkies and Dr. Pepper.

    Don’t think of this as pushing illegal foods. Think of it as them getting an unintended education in economics and the free market.

    And another MNB user wrote:

    I evidently had a charmed life growing up. My school lunches were awesome. The lunchroom "ladies" made biscuits from scratch, prepared vegetables the way my mom did and served foods with a great deal of pride. They considered packed lunches to be an insult to their craft and sought out ways to entice kids to eat "their" food, rather than bring from home.

    Fast forward to my own five year old son, who has just finished kindergarten. The lunchroom ladies have been replaced with "servers" who just dish out the stuff that arrived on a truck that morning. The vegetables I learned to eat as a child were unrecognizable this year as I had lunch with my son. I have passed on broccoli stalks swimming in yellow cheese product, bloated soggy spaghetti, and even chicken nuggets that my son will not touch, even though that is his food of choice, when given a choice elsewhere.

    I think the comment you made the other day about Ksears paying more attention to the customers who buy stock, than the customers who walk through the front door is applicable here. School nutrition programs should be delivered by people not trucks. Yes, I am knocking the fine people who prepare my son's lunches in a central kitchen. I want my child to learn math from a real live teacher in the classroom, and I want his nutritional upbringing to be reinforced by a real live person in the lunchroom, not a "server" who has no idea how the items were prepared.

    Another MNB user chimed in:

    Concerning school nutrition, it used to be about working hard to have healthy choices. Now-- we are far beyond that aspect and into controlling or banning certain items. This is tricky water to navigate for several reasons, one being that certain entities are now making choices for us. As you stated in your commentary, it's up to us as parents to manage certain issues. From what I can see, the public school system in this country has it's hands full with other, more pressing issues related to the education of our children now that they have done a good job providing nutritional choices. The pendulum always swings to extremes and is rarely in the middle this days.

    MNB user Al Kober wrote:

    Sounds a lot like prohibition, and that didn't 't work.

    And still another member of the MNB community wrote:

    Childhood obesity goes beyond what the children are eating. They need more than the 50 min. of gym they would get in school. How about a little less video games and more playing outside and taking walks? I still don't see how or why schools should have to take on the task of teaching these kids good habits. Good and bad habits start and end in the home.

    Understand something. We’re not suggesting the schools should replace the parents. Far from it.

    What we are saying is that as parents and taxpayers, maybe it makes sense to take greater control over what is being served in school cafeterias, and to make sure that the educational experience is extended to the lunch period.

    This isn’t avoiding responsibility. This is exercising it.

    Finally, another MNB user wrote:

    I had to chuckle at your POV. In the next to the last paragraph you mention any number of initiatives that should serve our children well as they get older that will make them "MORE ROUNDED and educated human beings." Here I thought the whole point of this debate was to eliminate MORE ROUNDED human beings!!

    We’ve got a million of them…

    The other day we referred to the new Kmart-Sears combination as Ksears, to which MNB user John B. Lightfoot responded:

    Interesting commentary re Kmart & Sears. But KSears? How do you pronounce Ksears? A bit of a hard to digest word, I'd say. Not very catchy.

    Perhaps SMART or S-Mart brand would be more indicative of a new era for this joint partnership of the one-time industry BIG's. What say you?

    It is indigestible.

    Our point exactly.

    Another MNB user wrote:

    I would call it's just a question of what the "S" stands for...

    We suspect that some old Kmart shareholders and employees may have some ideas about that…
    KC's View: