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    Published on: February 13, 2006

    Great piece by the Indianapolis Business Journal looking at the travails being suffered by Marsh Supermarkets, which has been suffering from declining profits, troubling debt and the possibility that the family-run, publicly held business would be sold off. The company’s problems were further exposed last week when the company’s board of directors decided to close nine stores and fire four family members - David Marsh, the company’s president, as well as Arthur Marsh, Don Marsh Jr., and Joseph Heerens. Remaining are Don Marsh, the company’s founder and CEO, and William Marsh, his brother, who becomes interim president.

    The Journal piece, entitled “The Ties That Blind,” explores questionable business practices by the family and how they have now put the entire company in jeopardy:

    • “At least three of the seven ostensibly ‘independent’ members of the 10-person board had financial or family ties that might have made them reluctant to challenge Chairman and CEO Don Marsh on important decisions,” the Journal writes. “For example, the chairman of the Compensation Committee is restaurateur Stephen M. Huse, whose daughter Kimberly is married to Don's son, company executive Arthur Marsh. The company does not mention the relationship between Huse and the Marsh family in proxy statements or other regulatory filings.

    “The other two members of the Compensation Committee - J. Michael Blakley, CEO of Indianapolis building contractor The Blakley Corp.; and James K. Risk III, CEO of Lafayette electrical equipment distributor Kirby Risk Corp. - collectively received nearly $2 million in business from the company over the past five years.

    “Corporate governance experts look askance at doling out lucrative business to board members, saying it can lead them to acquiesce to decisions they otherwise might question.”

    • The Journal also notes that CEO Don Marsh has enjoyed a pay package that it not only larger that that paid to CEOs of similar-sized companies, but even that paid to CEOs of much larger companies. Last year, he received salary and bonus of $1.3 million, and that doesn’t even include the $7.1 million he’ll received under a special, supplemental pension plan, nor his piece of $4 million in dividends being paid out to shareholders each year despite the fact that the company was strapped for cash and not turning a profit.

    By comparison, the CEO of Publix – which actually makes money - is paid $714,000 a year, the CEO of Wild Oats is paid $540,000, and the CEO of Fresh Brands is paid $375,000 a year – and each of these companies has a vastly higher market capitalization than Marsh.

    The Journal writes, “The proxy statement shows Don Marsh is far from the only Marsh family member taking home a substantial paycheck. Don's son David, the company president, received $477,000 in salary and bonus last year. In addition, seven others who are Marshes or married to Marshes collectively earned $1.6 million last year, the proxy statement shows. For example, former spokeswoman Jodi Marsh, who is in the process of divorcing David Marsh, earned $163,077.”
    KC's View:
    Assuming that this reporting by the Journal is correct, and there is no reason to doubt its veracity, then there really is only one word to describe all this.

    Disgusting.

    One can only imagine what the employees and shareholders who have believed in the company and the family for the past decades must be thinking. Betrayal, for one thing. Concern about the future, for another.

    When Marsh decided to become a public company, it took on a responsibility beyond the one it already had to its customers and employees. And it appears, from all this reporting, that the family essentially was using the company as a way of enriching itself, even as Wal-Mart built stores and grew its own market share.

    You have to assume that the size of the Marsh morass is just becoming apparent, and that there will be shareholder lawsuits and official investigations into the actions of its leadership.

    And in the end, when all the skeletons have been exposed and all the secrets laid bare, there will likely still be one overpowering emotion that many will feel.

    Disgust.

    Published on: February 13, 2006

    MSNBC reports on a new study saying that “the odors from foods ranging from garlic and onions to ginger and strawberries may be nutritional signals that the human nose has learned to recognize.” In other words, often the foods and ingredients that smell the best are the ones that are healthiest for us.

    However, the study – first published in the journal, Science - also notes that modern breeding techniques have focused on increasing “color, shape, yield and disease resistance instead of flavor and nutrition.” And so, the healthiest foods sometimes are having the best nutritional qualities bred right out of them – developed as lowest-common-denominator foods rather than robust, aromatic products that also happen to be good for you.
    KC's View:
    It is distressing, sometimes, to know that we live in a world where the lowest common denominator of anything is considered to be desirable goal.

    It also probably is a signal that we’re getting old and cranky.

    Published on: February 13, 2006

    The Chicago Sun-Times reports that Starbucks is teaming with Yahoo! for an online “Espresso Dating Guide” that offers dating advice and matchmaking services – as well as information about Starbucks locations and a $10 Starbucks gift card to anyone who subscribes to the Yahoo! Personals service.

    Meanwhile, the company has found that its Chantico chocolate drink – described as “a drinkable dessert” – is less than a match made in heaven. It has pulled Chantico off the market, saying that its relative inflexibility – it was available in just one size and one variation – made it unattractive to a customer base that loves to customize its coffee drinks.
    KC's View:
    Lesson learned. Customers like to be in control…and that’s actually a pretty good lesson to which all retailers should pay attention.

    Published on: February 13, 2006

    New Lifestyle Publication Enters Women’s Health Category After Strong Response at Retail to initial Issues.

    The magazine’s point of difference is positive and empowering content. Women’s Health will serve to encourage women to be all they can be and celebrate their strength and vitality.

    Rodale sold five issues of the magazine at retail special that performed above industry standards and garnered a sell-through rate north of 40% for all five editions. Strong sales exceeding 200,000 for each newsstand issue were coupled with tremendous feedback from readers. Women’s Health is truly one of the most solid newsstand successes in the industry this year!

    For more information please e-mail: Dick.TerlaakPoot@Rodale.com.
    KC's View:

    Published on: February 13, 2006

    • The Yakima Herald-Republic reports that the Washington State legislature is expected to consider bills that “would require businesses with 5,000 or more employees in the state to spend at least 9 percent of their payroll costs on employee health care, or pay the difference into the state's health care fund. Maryland adopted a similar law this year and some 30 other states are considering the same action.”

    Floor votes are expected shortly.
    KC's View:

    Published on: February 13, 2006

    In Facts, Figures & The Future this month, Phil Lempert issues a stern warning about last week’s report suggesting that there is no connection between a low-fat diet and the likelihood of contracting heart disease.

    “Since 1900, Cardiovascular Disease (CVD) has been the number one killer in the United States every year, except in 1918,” Lempert writes. “In 2006, that means that nearly 2500 Americans die of CVD every day - or 1 person every 35 seconds.

    “I have lived with this reality first hand. My mom, Lillian Lempert, who many of you met over the years and many more know through my stories of her adventures, passed away unexpectedly due to heart disease on January 20th...She had her first heart attack at age 50 after years of smoking (she never smoked again), a triple bypass followed as did 4 more heart attacks and a pacemaker.

    “She was a vibrant and energetic heart patient who tried her best to change her lifestyle to enjoy her life. She switched to a heart healthy diet (and stuck to it most of the time) and read labels. And there is little doubt that reducing fat, calories and sodium helped her to be as active as she was.

    “Which is why the report that was issued last week by the National Institutes of Health as part of the Women's Health Initiative, which has cast doubt on the effectiveness of a low-fat diet in preventing heart disease or cancer, sends the wrong message to the consumer. And while many nutritionists and doctors have already suggested that the study is questionable, especially since the women in the study were for the most part post-menopausal and didn't actually reduce the percent fat in their diets to the study's 20% recommended level. The reality is that it is in the headlines, consumers have read them and are now trying to figure out what foods to eat.

    “Health, as the Institutes' report states, needs to be looked at as a complete picture with a diversity of nutrients, exercise and proper sleep habits. Of course it does...but just as we have seen in the past, poor nutrition communication leads to confusion in the supermarket aisle.

    “Studies and reports like this are dangerous to the shopper, and we in the food world need to continue the ‘nutritional correction’ that we started in 2004 by reducing portion size, calories, fats, sodium and sugars and at the same time adding more whole grains and fibers to our foods.”

    In other F3 stories:

    • Michael Sansolo, senior vice president of the Food Marketing Institute (FMI), writes about technology issues that were highlighted at the recent FMI Marketechnics conference that seem to be far beyond the mastery of most businesses – and what the industry can do about it.

    • A look at how consumers are seeking out and finding environmentally friendly sanitation products, in part because of growing evidence that traditional cleansers may be making people sick.

    • How and why value retailing continues to grow in popularity.

    • Sales opportunities connected to next month’s St. Patrick’s Day observance.

    And much more.

    To get your copy, go to:

    http://www.factsfiguresfuture.com/

    F3 is a joint production of the Food Marketing Institute (FMI), ACNielsen, and Phil Lempert.

    (Full disclosure: MNB Content Guy Kevin Coupe is a contributor to F3.)
    KC's View:

    Published on: February 13, 2006

    The New York Times reported over the weekend about the continuing controversy about aspartame, the popular artificial sweetener, which according to an Italian researcher may cause cancer.

    According to the Times, his “research found that the sweetener was associated with unusually high rates of lymphomas, leukemias and other cancers in rats that had been given doses of it starting at what would be equivalent to four to five 20-ounce bottles of diet soda a day for a 150-pound person. The study, which involved 1,900 laboratory rats and cost $1 million, was conducted at the European Ramazzini Foundation of Oncology and Environmental Sciences, a nonprofit organization that studies cancer-causing substances…”

    While many in the food industry have dismissed the findings as inaccurate, the “findings have energized a vociferous group of researchers, health advocates and others who say they are convinced that aspartame is a toxin associated with a variety of health troubles, including headaches, dizziness, blindness and seizures.”

    At the very least, some say, there needs to be additional research into aspartame’s effects.

    Aspartame is sold under the brand names Nutra-Sweet and Equal and is found in such popular products as Diet Coke, Diet Pepsi, Diet Snapple and Sugar Free Kool-Aid, and it is consumed by hundreds of millions of people consume it worldwide. Hence the resistance by some to further studies – last year, aspartame was a $570 million business.
    KC's View:

    Published on: February 13, 2006

    Netflix, often held out as a strong example of finding a new business model to compete with an established presence (in this case, Blockbuster), got hit with some unusual negative publicity late last week with reports that it is “throttling” shipments of DVDs to frequent renters.

    The company is being charged by some heavy users of delaying shipments to them because it wants to protect its profits – it makes more money if people get fewer DVDs for the regular monthly fee. So it reportedly is shoving frequent shoppers to the back of the line for oft-requested DVDs, preferring to send them to infrequent renters and new customers.

    The kicker: Netflix essentially admits to this policy in its posted terms of service, and CEO/founder Reed Hastings says that he rarely gets complaints about what is called a “fairness algorithm,” and notes that the company enjoyed customer satisfaction ratings.
    KC's View:
    So, essentially, Netflix admits that it actually has a policy of not rewarding its best customers – though it needs to be noted that in this case, “best customers” probably aren’t spending any more than less frequent shoppers, just getting better value for their money.

    While we understand the business logic, we have to admit that this is a policy that troubles us – both as a pundit and a longtime and loyal Netflix customer.

    Now, we’re not aware of ever having our shipments throttled…but maybe we don’t rent enough. The shipments certainly seem to come fast enough. But it seems to us that if Netflix is concerned about its profits, it ought to be looking for ways to increase the spend by frequent users, not diminish their service.

    This story also should make retailers of other stripes think – are there cases where you are giving your best customers lesser or indistinctive service?

    Published on: February 13, 2006

    Tesco announced that it is acquiring 27 Edeka stores operating in the Czech Republic, a market where it has had units since 1996. The move will almost double Tesco’s size there, while leaving Germany’s Edeka with just 11 units in the country.

    Terms of the deal were not disclosed.

    The move came just days after Tesco announced it is coming to the US west coast with an unspecified number of convenience stores, spending more than $400 million a year to get the units up and running.
    KC's View:

    Published on: February 13, 2006

    • In the UK, the Association of Convenience Stores (ACS) has filed a complaint with the government’s Office of Fair Trading (OFT) claiming that Tesco is overcharging customers in its convenience stores operating under the One Stop banner. The ACS says that Tesco’s prices in One Stop stores are 20 percent higher than in its Tesco Express units.

    Tesco denies the charges.

    • Jasper, Indiana-based Buehler Foods’ reorganization plan has gotten preliminary approval from a bankruptcy court judge, which should allow it to emerge from Chapter 11 protection by the first week of April.

    • The acquisition of Gladson Interactive, which provides shelf management, planogram and creative services, by Mike Spindler from the company’s founder, Ted Gladson, has been officially announced.

    Spindler is the former president of MyWebGrocer.com, and he remains on that company’s board.

    (Full disclosure: Gladson Interactive is a current sponsor of MNB.)
    KC's View:

    Published on: February 13, 2006

    We just want to welcome Rodale Inc. to MNB as a new sponsor, and urge you to click through on either its tile ad or the Corporate DrumBeat information above.

    On a regular basis, Rodale will be using MNB to offer information about its stable of lifestyle magazines and the sales opportunity that each of them offer to retailers.

    Of course, we think that there is another opportunity here. When we do speeches and retreats around the country, we often speak about the need to find marketing and merchandising ideas in new and unusual places – and one of the things we recommend is looking in magazines (like Women’s Health!) for stories about the issues that are relevant to shoppers.

    For example, in the most recent issue there is an article about “foods that fight the flu” – think there may be a few merchandising ideas in there?

    So there are three good reasons to check out Rodale’s MNB ads – 1) because they’ll help you sell magazines, 2) because they’ll give you other ideas for selling other, relevant products, and 3) because Rodale is supporting MNB, making it possible for you to continue to get this news service free every day.
    KC's View:

    Published on: February 13, 2006

    Peter Benchley, who served as a speechwriter for President Lyndon B. Johnson, and who was both journalist and conservationist during a long career, died Saturday at age 65. The cause: idiopathic pulmonary fibrosis, a progressive and fatal scarring of the lungs.

    He was also known for a little novel that begat a film that managed to keep a lot of people from swimming in the ocean for a long, long time: “Jaws.”
    KC's View:

    Published on: February 13, 2006

    We had a story last Friday about how a blind student at the University of California at Berkeley has filed a class action lawsuit against Target Corp. complaining that “the retailer is committing civil-rights violations because its Web site is inaccessible to those who cannot see,” and that it “denies blind Californians equal access to goods and services available to those who can see.”

    The suit, citing the Americans with Disabilities Act (ADA), says that Target “excludes the blind from full and equal participation in the growing Internet economy that is increasingly a fundamental part of daily life.”

    This story generated a number of emails.

    MNB user Bill Drew wrote:

    Perhaps there is more here than meets the eye (pun intended) and much more to web technology than I am aware of (no doubt in my mind), but it seems to me that this is another misuse of the ADA.

    The ADA can't cure this person's blindness any more than it can cure my son who has Down Syndrome and who is mentally retarded. Should I file suit as well and cite the ADA because my son can't click to find the latest CD or DVD he wants to order? I advocate for him every day with the hope that he will be accepted for who he is, limitations and all, but I would never, ever use the ADA in this way. Certainly, it would be in Target's best interest to use the latest technology available so that their website is as user-friendly as possible, but to force them to do so through the ADA? Absurd.


    MNB user Brona Cosgrave wrote:

    Putting aside any judgment on the validity of such a law suit. Target is just another user of the technology available. Should not such a law suit be directed towards those that provide access to the Internet? If the sound technology exists to allow visually impaired people access the internet via computer page reading, is it not the hardware and/or software providers responsibility to ensure 100% access for all?

    MNB user Dan Crooks wrote:

    What a crock. And next will they sue Ford or GM because they cannot drive their products? And what about NBC, CBS, ABC, AMC, MSNBC, PBS, and all the thousands of television stations that they cannot watch. This is just another sad example of our litigious society.

    Surely a student at Berkeley could find someone to hand them a telephone and provide the phone number of Target so that they might place an order over the phone. Why not sue the owner of a brick and mortar store because they have created window displays that the blind cannot enjoy. When a blind person cannot operate a motor vehicle themselves, few can, they find other means of transportation, perhaps a driver, a taxi, or a bus.

    Perhaps there is a business opportunity here, say a service that would read a website to those who cannot read it themselves, be they blind, challenged, illiterate, or just plain lazy.

    Maybe this is about creating a web experience that is not so dependent on the ability to see, but isn’t that like trying to create an automobile race that is not dependent on the ability to drive.

    Followed to the extreme, every website owner could be sued for this same “offense”.


    One MNB user wrote:

    I would have thought his first interest would be reading his text books, most of which he would have trouble with, as there would be no Braille version. He isn't suing publishers though, as that would be laughed at as they have been in existence for so long. Perhaps a letter to Target stating how big an audience the blind market is, and that their website is unfriendly to them would have got a better action than this. My Aunt & Uncle are deaf -- together with deaf friends, they boycotted 2 of the larger phone companies here because their SMS rates were excessive. They signed a petition letter of sorts, and now 1 of those phone companies has dropped its rates, AND offered lower monthly access to the group. The other didn't, so it chose to miss out on the business.




    We had a story last week about a new Safeway Lifestyle store, but one MNB user has a quibble with the company’s strategy:

    Although I applaud Safeway’s efforts to reinvent themselves and try to compete with smarter, leaner, savvier operators, you shouldn’t believe all of the double speak and spin that you hear about this store. Having been intimately involved with the development of it in certain departments, it is a step in the correct direction. However, there are glaring flaws with the store and it’s still just a Safeway. The first problem is the size. This store is massive and hard to shop. I’ve been there in the last week and watched many exasperated customers wander through the store in a daze.

    Second, Safeway will not support the labor in order to make this store work. There are a half-dozen or so kiosks that will need to be staffed by at least one person. This store is in a tough market and after the initial phase where Safeway thinks it’s okay to lose money, they will stop this support.

    Third, Safeway is still hiring their regular employee to work at the store. When you go to Whole Foods and buy a piece of cheese from their extensive cheese case, the employee knows every single cheese, what it tastes like, they up-sell different items, and make suggestions because they are truly passionate about food. Safeway doesn’t think like this, and they won’t pay enough to attract quality workers to do this. Working at Safeway has about the same air of mystique and charm as working at McDonald’s and it’s how people perceive it. WFM on the other hand…that’s a hot commodity. There is a noticeable difference in terms of the employees and the atmosphere in Safeway and WFM. On a fundamental level, the people at corporate Safeway despise store level labor. WFM is one of Fortune’s top companies to work for for a reason—they realize that labor is their path to the consumer and the best way to represent themselves to consumers.

    Fourth, although their product offering is expanded, there are still glaring voids in terms of product. If you look at their cheese case, it’s a sham. Same with the deli. I’m sorry, but foodies are not into Jennie-O turkey. They want Diestel, interesting flavors in items, and stuff with no nitrates/nitrites. And the regular consumer for Whole Foods and TJ’s feels the same way. Being a foodie, I was genuinely disappointed, and I think that the food-conscious citizens of Boulder will be as well. Safeway thinks they are into food, but they aren’t. (Great example from Norcal, because I love wine and know you do to, they merchandise stuff like Kendall Jackson Chardonnay with steaks, and cabernet in the seafood department. Go figure. All it tells me is that they DON’T GET IT.)

    Ultimately, what they need to do is to create a strategy that focuses on letting people know what Ingredients for Life stands for. I’ll ask you though: do you really know? They don’t have any brand positioning statements (trust me I’ve asked)! Brian Cornell won an award from Supermarket News for his “re-branding efforts,” but honestly, all he did was create a slogan. Sure the store looks nice, but if Safeway doesn’t fundamentally change their attitude about food, branding, and intelligently losing business, they are going to go the way of the Colorado buffalo and the plains Indians before them.


    KC's View: