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    Published on: December 23, 2005

    Executives for Albertsons, the nation’s second largest grocery company and the chain that yesterday turned down a $9.6 billion acquisition offer, are now saying that the entire company no longer is for sale.

    However, the company said would be willing to sell off underperforming divisions.

    MNB reported on Thursday that Albertsons had for unknown reasons broken off negotiations with a consortium that included Supervalu, CVS, investment fund Cerberus Capital Management, and real estate firm Kimco Realty. CVS was then reported to be negotiating to buy Albertsons’ Sav-on and Osco drug chains, but apparently bailed out of those discussions as well.

    Analysts speculated yesterday that antitrust concerns may have scuttled the sale.

    In an interview published this morning by the Idaho Statesman, embattled Albertsons CEO Larry Johnston said that “put simply, we did not receive a bid that we could accept.”

    Johnston said that from this point on, “It is business as usual, and we're going to continue operating here in Boise. We will no longer be focusing on the sale of the company. We plan to continue to grow our profitable grocery business, create a more compelling shopping experience and growing our free standing drugstore business,” though he plans to sell off underperforming assets. And Johnston said, the company remains committed to cutting costs and raising productivity levels.

    As for his own future, Johnston said: “I am looking forward to continuing to lead this great company. One thing this strategic review has allowed me to do is to develop an even deeper appreciation for this great company and our tremendous team of 240,000 associates across the country. I am so proud of their accomplishments, not only their ability to offer our customers an outstanding shopping experience, but our ongoing commitment to the communities that we serve.”
    KC's View:
    First of all, give it a little bit of time and there won’t be a helluva lot of difference between the “entire company” and the company’s “underperforming divisions.”

    Okay, maybe that’s a little hyperbole. But you get our point.

    What would worry us about this if we owned stock in Albertsons or otherwise had our future tied up in the company’s performance is that no matter what the CEO says, management doesn’t seem to have a real commitment to running the company. The only reason it is doing so is that it couldn’t get enough money to sell it.

    That’s hardly the same thing.

    Published on: December 23, 2005

    In California, a jury in Alameda County Superior Court has found Wal-Mart guilty of denying lunch breaks to employees, and hit the retailer with fines that amounted to $115 million in punitive damages, and $57 million in general damages. After the lawyers are paid, those monies will be distributed among 116,000 current and former Wal-Mart employees.

    Wal-Mart said it would appeal the verdict and fine, even though it conceded during trial that it had “compliance issues” with the California statute requiring lunch breaks.

    KC's View:
    Even if the lawyers didn’t get a penny and Wal-Mart didn’t win the appeal, that verdict breaks down to about $1,482 per employee…and if each of those employees wanted to have lunch next year for 250 working days, they’d have less than six bucks from the fine to do so.

    Which means they’d be eating at McDonald’s. And probably the one in the front of the local Wal-Mart.

    Published on: December 23, 2005

    The Seattle Post-Intelligencer reports that “Costco Wholesale Corp. won a battle against the Washington State Liquor Control Board, when U.S. District Judge Marsha Pechman ruled Washington's three-tier system for distributing beer and wine breaks federal antitrust law.”

    The ruling is expected to eventually allow Costco and other retailers to directly source beer and wine from out-of-state producers without going through distributors/middlemen who can control the flow and cost of product.

    However, the newspaper notes that the state legislature has to weigh in on the subject, and could ban all direct shipping to retailers – a move that Costco and a number of small wineries say would limit supply, raise prices and potentially put small vintners out of business.
    KC's View:
    We are completely on Costco’s side in this issue. The restrictions and regulations that allow distributors to essentially put a hammerlock on the system essentially are anti-entrepreneurial…and have no place in a 21st century economy.

    Published on: December 23, 2005

    USA Today reports that “after falling 1.5% last year, sales of sweet baked goods are expected to rise 0.4% in 2005 to almost $12 billion,.” And, it says that sales of ice cream “are expected to rise 3.1% to $21.7 billion, and the $17.8 billion chocolate candy business will continue to grow at a 4% clip.”

    Analysts say that some of these increases may be due to a backlash against the low-carb mania that was running rampant a year ago. But in addition, there is a suggestion that a national unease about ware and politics may be leading people to indulge in comfort foods.

    Some manufacturers are counting on it, coming out with such products as “Quaker Oats’ Breakfast Cookie,” “Lean Cuisine Desserts,” and “Papa john’s Dessert Pizzas” to cater to this trend.
    KC's View:
    It isn’t a particularly new revelation to suggest that the same people can be driven by diet and nutrition concerns on certain days of the week, and by “I need to indulge myself” whims on other days of the week.

    However, despite this ongoing trend, it is remarkable that more stores don’t try to actively cater to these differing moods in varying ways. Most have no idea or inclination – which means that they are leaving sales on the table.

    Published on: December 23, 2005

    • In an interview with the Financial Times, Procter & Gamble CEO A.G. Lafley says that the company “plans to adopt distribution systems and business practices used by Gillette in dealing with large retailers” as the two companies integrate their systems – a radically different approach to acquisitions than it has used in the past.

    "We've done this integration differently in virtually every way,” Lafley told FT. “It wasn't just 'best of both' in terms of leadership, management and staff, it was best of both in terms of systems."

    Lafley also said that the Pringles snack division only has about two or three years to get its act together and meet financial targets, or it will be sold.
    KC's View:

    Published on: December 23, 2005

    • Unified Western Grocers reported that its 2005 annual net earnings were up 46 percent to $10.8 million, even though sales for the period were down 3.3 percent to $2.9 billion. UWG CEO Al Plamann attributed the improved earnings to productivity measures and cost controls.

    • American Greetings announced third quarter net income of $12.9 million, down significantly from $62.8 million in net profit during the same period a year ago. American Greetings’ third-quarter sales declined 4.7 percent to $558.6 million from $586.2 million a year ago.

    • ConAgra Foods reported that its second quarter net income dropped to $163.1 million, from $239.6 million, in the same period last year. ConAgra's sales fell five percent from last year to $3.81 billion for the quarter.

    • General Mills announced that its second quarter income rose slightly to $370 million, from $367 million the year before. Sales were $3.27 billion, up three percent from $3.17 billion a year ago.
    KC's View:

    Published on: December 23, 2005

    We wrote yesterday about a Los Angeles Times column eviscerating Kroger and Ralphs for policies used during the lockout/strike that have resulted in a multi-count indictment against the company for illegal labor practices.

    To which one MNB user responded:

    What is new here?

    Should Ralph's pull this stunt? No. They need to be punished hard for this attempt to go around the law.

    However, when I read a story, I always try to consider the source, The Los Angeles Times is a strong Pro-Union paper. They reached a point in their "reporting" that I canceled the paper years ago. (When I did live in the area). Where is the balance in their reporting? Granted, there is little positive in this report for Ralph's, they should be hung out to dry. I just wish that the people in LA would understand that there is little fairness in the LA Times’ reports.

    Fair enough.

    But to be completely accurate, the piece we quoted yesterday was clearly marked as a column – which means that it is allowed to have an opinion and an attitude.

    You may not like the columnist and his or her opinions. But they are clearly marked “opinion.”

    Sort of like ours.

    Another MNB user wrote about the companies’ argument that top managers “didn’t know” about the labor policies:

    Kevin, regarding the Ralph's mess: the "I didn't know about it" defense is infuriating. The people at the top get paid the big bucks to know. From Ken Lay to the officers in charge of AbuGhrab to grocery store executives, how long are we going to let them say "I didn't know?"

    We need more Harry Truman types who will say "The buck stops here."

    Responding to the Albertsons mess, one MNB user wrote:

    The Albertsons Board of Directors felt it wasn't important to have executives that knew how to sell groceries, it was more important to have managers who knew how to manage Wall Street expectations.

    Isn't it ironic that they turn out to be incompetent at that as well?

    Another MNB user wrote:

    It's amazing that a "Toaster Salesman" has been allowed to essentially snuff the life out of this company!

    We wouldn’t want to be an Albertsons employee facing the Christmas and New Year’s holidays with little or no confidence in upper management.

    We wrote yesterday about the fact that online grocery shopping, because it requires the making of a list, actually can help save money in the long run. Which led one MNB user to disagree with the notion that people tend to waste money when they go to the brick-and-mortar store:

    I view this article in a different way. I see this as customers being impulsive when they are shopping, not wasteful.

    Low, fair prices are expected by consumers. But isn't it the job of the Super Marketer to get customers to spend more than they actually intend to once in the store? How many times have you bought grocery items as an "impulse buy", only to eventually toss them out because that seemed like a good value or a "must have" at the time. The impulse item is an important part of what supermarkets need to take more advantage of to help increase their appeal (and bottom line), whether it is in the grocery dept. or the general merchandise dept.

    We agree that impulse purchases are important to supermarkets…but they may not be seen that way by consumers.

    One man’s impulse is another man’s waste.

    On the subject of the upcoming animated film “Foodfight!”, which takes place completely in a grocery store, one MNB user wrote:

    I think there are some interesting issues surrounding this movie:

    I wonder if this approach will have some ramifications to the private label business. With an entire store filled with branded products and the enemy being “generic” it might send the message to the younger generation that there is something wrong with a brand name they do not recognize. Which also begs the questions: With all the concern about advertising targeting children will be some backlash associated with a child oriented movie about brands?

    Also, it will be interesting to see an entire movie centered on branded consumer packaged goods. With the invention of TiVo, businesses have looked for new ways to advertise their products where the consumer can’t/won’t fast forward through. Recently, we see more and more product placement within the context of our programming in an attempt to bring about new product awareness in the face of our ability to tune out conventional advertising.

    All very good questions. It had better be a great movie, or the backlash about product placement will be enormous.

    MNB user Kimberly Uecker wrote:

    I honestly can't wait to see this, as I want my own brands to be "Brand X" in the real world. Taking on the big guys and making 'em quake; them losing sleep over my growing market share - I can't wait.
    KC's View:

    Published on: December 23, 2005

    I was reading an interesting interview conducted by New York Times writer David Pogue and posted on the “Circuits” email sent out by the NYT each week.

    The interviewee was Todd Wagner, CEO of 2929 Entertainment, the company cofounded by Dallas Mavericks owner Mark Cuban. This company is experimenting with what in the movie business is called “simultaneous release” strategies – or the idea that a film could be released at the same time in movie theaters, on television, and on DVD – plus whatever new technologies might become available in the future.

    While there are a lot of naysayers in the traditional, mainstream film business, Wagner tells Pogue: “We've learned a valuable lesson, I hope, from the music industry: if somebody doesn't give people what they're looking for, then someone else will fill that void. If I hear a song on the radio, they don't say, ‘Oh, and in four months you can buy the CD.’ Right? They say, ‘Hey, download it to your iPod today!’

    “So all we're saying is, shouldn't we maybe learn from that?” Wagner says it almost doesn’t matter what the industry wants. “We've seen the lessons of the music industry,” he says. “We know how technology is today. We know that this generation wants things now. We know it's a digital world.”

    Wagner says that he’s completely open to figuring out what this new business model will look like. For example, if the DVD of a movie is to be sold the same day as the movie comes out in theaters, maybe the theater owners should get a percentage of the DVD revenue.

    “Do I think it can work?” he asks. “Yes. But how it all plays out, that's what we're gonna play with: Are the DVDs only available at the movie theater the first week, and then they're available to the retailers? Will it air on TV twice? Will it air at the same time? Will the DVD be priced at a premium? How much of a premium?

    “You know, I could sit here and say, ‘Oh, this is how it'll play out. We'll do this and this and this.’ But if there's one thing I'm certain of, it's that we don't know yet. And I wouldn't wanna lock ourselves in to say, ‘This is the model.’ That, to me, would be as shameful as saying the old model's right.

    “I'm just saying, let's experiment. Let's be entrepreneurs and try these things. And if the response is there, if the number of DVD units is increasing for a movie of this type over what they might normally be, and yet the theater attendance is normal for a movie like that, maybe we've learned something.”

    This strikes me as an incredibly smart approach to business. In a changing world with an evolving and shifting consumer base, there is no reason that a business model has to be set in stone.

    “If there’s one thing I’m certain of, it’s that we don’t know yet.”


    Words of wisdom to apply to all our businesses in the coming year.

    I can understand why Boston Red Sox fans are upset at Johnny Damon. Leaving the Sox for a better offer is one thing. But taking up residence in Yankee Stadium’s storied center field is unforgivable.

    There is just one question I’d like to ask, though.

    The Red Sox offered $40 million for four years, the Yankees $52 million for the same period. (Insane numbers, I grant you, but let’s get past that.)

    Here’s my question:

    Who among us would leave $12 million on the table?

    It isn’t like Damon only played for the Sox. He also played in Kansas City and Oakland. And it isn’t like the Sox haven’t been willing to let franchise players go when it suited their needs. (Anybody remember the Sox believing that Roger Clemens was finished – a decade ago?)

    Who among us would leave $12 million on the table?

    Actually, reports are that Paul Konerko did – resigning with the world champion Chicago White Sox for less money than he could have gotten elsewhere.

    Go figure.

    Roy Hobbs lives.

    Great cover story this week in Time about the charitable efforts of Bill and Melinda Gates and Bono, all of whom were named the magazine’s “Persons of the Year” for 2005. They could all be just making more money, but instead they are dedicating themselves to ridding the world of poverty and disease. Which sounds absurd when you say the words out loud, but then you read about their efforts and it suddenly seems doable.

    Hell, almost anything is possible. You get that message loud and clear when you read the second article in the magazine, about the “Partners of the Year”: former presidents George Bush and Bill Clinton, who have forged a remarkable friendship and alliance aimed at specific causes like tsunami relief efforts.

    Doesn’t anyone else think that Jim Carrey simply isn’t funny? Because I can’t imagine any reason to see the remake of “Fun With Dick & Jane.”

    I can’t even imagine what Tony Dungy is feeling right now. Suddenly, all the noise about an undefeated season looks just like that. Noise. And ultimately unimportant.

    Actually, I always felt there was only one good reason for the Colts to go undefeated this year: to shut up all those aging Miami Dolphins who actively and vocally root against any other team to replicate what they did in 1972. if they had any class at all, they’d just say, “Good luck. We know how hard it is.” And leave it at that.

    I don’t care what the critics say. I’m going to see the movie version of “The Producers.” And I’m going to enjoy it, damn it.

    This is my last “OffBeat” column for 2005. I’m putting the site on hiatus next week, and will return on January 3 with an all-new edition of MNB.

    In this case, “all new” has greater meaning than usual. Because MNB actually will be new and improved, with an entirely new site design that hopefully will be more user friendly…an archival system that works far better than the old one…an email program that will avoid some of the spam filters we’ve been running into… sponsorship features that we believe will be catnip to advertisers…and some other new and evolving features that I think are pretty cool.

    But you’ll have to wait until January 3 to see what I’m talking about.

    I’m particularly excited about another event planned for 2006 – my first book, entitled “Retail Wisdom, Wanderings & Wisecracks: The Best of MorningNewsBeat (& Some New Stuff).” This is intended to be more than a compendium of old columns and reports, but also a book that will put much of what I’ve seen and heard into greater context.

    And, because such a book wouldn’t be complete without them, it’ll even have wine recommendations and some recipes! I’m thrilled and flattered that it also will have an introduction by Feargal Quinn, the legendary food retailer who saw huge success with his own book, “Crowning the Customer” (which, if you haven’t read it, you should immediately order from

    I’ll have details as we get closer to publication…

    If you celebrate Christmas, Merry Christmas. If you celebrate Hanukkah, Happy Hanukkah. If you celebrate Kwanzaa, then Happy Kwanzaa. And if you celebrate Festivus….well, you get the idea.

    Whatever you celebrate, I hope you have a happy and safe holiday, and a prosperous New Year.


    And, as always, Sláinte!!

    KC's View: