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    Published on: March 16, 2006

    The Associated Press reports that the US Department of Agriculture (USDA) plans to scale back the expanded surveillance program for bovine spongiform encephalopathy (BSE), better known as mad cow disease, despite the fact that just this week the third case of BSE in the US has been discovered.

    The increased surveillance program was begun after the first case of mad cow was found in Washington State in December 2003, and the second was discovered last year in Texas. The latest case was in Alabama, and officials say the infected cow did not enter the food supply.

    Reports earlier this week suggested that the Bush administration had been planning to scale back testing if it could get through the winter without a new case, and the latest case of BSE prompted many to speculate that USDA would have to cancel those plans.

    While some consumer groups have called for even greater testing – with some believing that the US should follow the Japanese model and test every cow – the beef industry has called such proposals costly and unrealistic.

    The AP reports that before the expanded testing went into effect, about 55 cows were tested each day, and that the enhanced program tested about 1,000. When the cutbacks take place, it will reduce the number of cattle being tested each day to roughly 110.

    USDA Secretary Mike Johanns told reporters that testing always was planned to be temporary, and that testing never was meant to be a food safety measure, but rather simply a way to figure out how widespread the disease might be.
    KC's View:
    Oh! We’ve been operating under the assumption that the mad cow testing was being done to make sure that the food supply was safe, not just as a way to find how safe or unsafe it happens to be.

    This explains everything – including what strikes us as utter insensitivity over at USDA. (There have been a lot of reports this week about GOP concerns that the Bush White House has developed a political tin ear, and this seems to be one more possible example.)

    Forget whether or not it is true. How do you make this comment at a time when a new case of mad cow has been identified, and at least some consumers and activist groups will be suggesting that there may be more cases out there that have not been identified?

    It is entirely conceivable that this new posturing was USDA could cause additional problems for the Bush administration, which has been trying to convince the Japanese government to reopen its borders to US been imports. Those borders were closed when the first case of mad cow was found in the US in December 2003, and then reopened late last year, only to be closed again early this year when beef containing spinal matter – specifically banned by the agreement reopening the border – was found in a Japan-bound shipment. How does USDA persuade Japan that a reduced surveillance system is going to work?

    It seems to us that USDA continues to go out of its way to suggest to people that its understanding of mad cow disease is chiefly related to the fact that it is full of bull.

    Published on: March 16, 2006

    Drugstore chain CVS said this week that it is being investigated by the US Securities and Exchange Commission (SEC) for having received more than $40 million in barter credits from a third party, and also for having made a $12.5 million cash payment to that party.

    CVS already has concluded after an internal probe that its accounting in this case was incorrect.

    In the wake of the internal probe, the company’s controller and principal accounting officer, Larry D. Solberg, and its treasurer, Philip Galbo, resigned. Company CFO David Rickard now is serving as interim principal accounting officer.
    KC's View:

    Published on: March 16, 2006

    The battle for market share among coffee shops is highlighted this morning in stories running in both the Los Angeles Times and USA Today. The difference between the two stories is that one focuses specifically on retailers jousting for the second position in LA, while the other looks at the Starbucks-McDonald’s-Dunkin’ Donuts battle for morning dominance.

    The LAT writes that in the City of Angels, there has been a tacit admission that “in the coffee business, there is Starbucks Corp., and then there is everybody else.” So the battle is taking place among players that include Coffee Bean, Peet's Coffee & Tea, Caribou Coffee, Diedrich Coffee, and franchiser It's a Grind.

    There are two basic coffee realities in the Los Angeles market, according to the Times. One is that Starbucks simply is too ubiquitous to be seriously challenged. The other is that while everybody else is fighting to be second, almost everybody else seems to be making money by finding ways to differentiate themselves.

    Coffee Bean, for example, has signed a deal with Kroger’s Ralphs chain to open mini-cafés in a number of its stores. (Starbucks has a similar deal with Safeway’s Vons chain.)

    USA Today writes that McDonald’s decision to improve its coffee and making a real marketing push for morning sales has generated some push-back by Starbucks and Dunkin’ Donuts. Just yesterday, “to get consumers to wake up and smell their brands, Starbucks poured an estimated half-million 12-ounce cups of (free) coffee at its 7,500 stores nationwide and Dunkin' Donuts provided free taxi rides in Boston and New York and sample shots of its Hot Turbo coffee, a regular cup with a shot of espresso.

    Meanwhile, old discounting habits die hard for McDonald’s – which decided to hype its upscaled coffee with coupons that were available in newspapers all over the country last Sunday.
    KC's View:
    The great lesson here is that the competition is forcing everyone to raise the level of their games. It’s the great thing about consumers that sometimes is ignored by marketers – they usually respond to efforts to educate them and give them better products and services.

    Too many retailers keep pursuing the lowest common denominator, forgetting that aspirational retailing usually is a far better path to differentiation and profit.

    Published on: March 16, 2006

    • The New York Daily News reports that Fairway Market, which operates highly successful stores in Manhattan – one on the Upper West Side and one in Harlem – will shortly open a new store on Brooklyn’s Red Hook waterfront. Once open, the News writes, it “will be the biggest outpost of the mini chain, which…is known for gourmet food at competitive prices.”

    The project, because of zoning and legal complications, is more than a year behind schedule.

    • Published reports say that arch-rivals Wal-Mart and Tesco are each considering making a play for the South Korean stores owned by Carrefour, which reportedly is considering the sale of some or all of its stores there.

    All three retailers have denied the report.
    KC's View:

    Published on: March 16, 2006

    • Wal-Mart reportedly has increased its ownership stake in the 375-store Central American Retail Holding Co., or Carhco, from 33 percent to 51 percent and changed the name to Wal-Mart Central America.

    Wal-Mart first acquired a piece of the company from Ahold in September 2005.

    Terms of the deal were not disclosed.
    KC's View:

    Published on: March 16, 2006

    • Delhaize Group reported that the just-completed fiscal year generated net profit that was the equivalent of $453.5 million (US), up from $367.2 million (US) a year ago. The company already had reported a 4.2 percent increase in annual sales to $23.1 billion (US).

    The company also said it would increase its capital expenditures in the US – mostly on conversions of Kash n’ Karry stores to the Sweetbay concept in Florida – by $150 million to $700 million this year.

    • Sears Holding Corp. announced that its fourth quarter profit increased to $648 million, up from $309 million during the same period a year ago, while fourth-quarter revenue rose to $16 billion from $6 billion.

    The company’s full-year net income fell to $858 million, from $1.1 billion a year earlier. Revenue rose to $49.1 billion from $19.8 billion.

    Some analysts said that while the turnaround was impressive, they are concerned that it was connected to cost-cutting and may not be sustainable in the long run.
    KC's View:

    Published on: March 16, 2006

    We had a story the other day about how Kmart settled a case related to violations of the Americans with Disability Act (ADA), agreeing to spend as much as $70 million over the next eight years to bring its stores into ADA compliance. In our commentary, we wondered what the odds are that Kmart actually will be in business in eight years…

    MNB user Lisa Malmarowski responded:

    Yep - another example of how Kmart has let down their shoppers. As a retailer, it should be a sad day when the courts have to order you to make changes so people can easily shop your stores and use your restrooms.

    I think the most ridiculous part is that they have eight years. They should have reacted to this before it ever came to court. And the courts let them off easy. You're right KC - the changes will never happen because it's doubtful they'll even be around.


    MNB user David J. Livingston added:

    I came to the same conclusion as you on Kmart. When I read the court was going to give Kmart 8 years to comply I just laughed. There is barely a Kmart now. I can't even vision Kmart being in existence in three years, let alone 8.




    We also got several emails responding to our story about how Northwest Airlines has decided to charge extra for certain aisle seats…and several of them made the same and canny observation.

    MNB user Sam Narotsky wrote:

    Wouldn’t Northwestern have been better off positioning this as offering a discount on the lousy seats?

    And MNB user Steve Lutz wrote:

    Wouldn't it have made more sense to announce a plan to begin "discounting" the price on the middle seats that nobody wants to sit in anyway. If I really want a cheap fare, I'll gladly take a less desirable seat. They could have been cast as heroes. Instead they are seen as pikers. Well, if the shoe fits...

    MNB user Sriram Daita thought we were making much ado about nothing:

    I do not see anything working with NW policy. At a company they have the right to charge any fare and as a consumer I have the right to either accept or reject the fare hike. So I am not sure where you are going with the story.

    Where we are going is that we think it is crazy how airlines have gone about cutting, cutting, cutting and then charging, charging, charging for services previously taken for granted. We understand that the economics of the airline business are difficult, but these changes have been handled about as badly by some airlines as one can imagine.

    And here’s the thing. When we think that something is outrageous or stupid or offensive, we believe in speaking up…maybe because we grew up in the late sixties and early seventies.




    Reaction to this week’s new mad cow revelations, including this email from MNB user Evan J. Zobel:

    The only way that the public might feel more secure about our beef supply is if an efficient and accurate blood test is developed such that prior to slaughter, the cow can be tested and then subsequently removed from the human food chain if the results come back positive.

    MNB user Justin L. Jones wrote:

    It is not realistic to think that determining the age and origin of every cow is feasible at this point in time. While mad cow disease has been in the public spotlight for a few years (with the first case in the US back in 2003), farmers have many cows that are much older than that. It is impractical to think that a farmer can go back and trace the origin of every cow he/she has.

    In many cases, it is not possible because programs have just been put in place in the past year or two and are still not widespread. And one reason they are not wide spread yet, is that to start these programs, farmers have to go from the “ground up” and this takes a lot of time and a lot of money to do the initial start-up.

    As the son of a small farmer in the Midwest, there are many things that a farmer wants to do to better his/her livestock operation and ultimately his family’s livelihood, but may not be able to afford it or may not have the time to get fully accomplished because they are stretched thin in the first place.

    In my father’s case, he has started to document, tag and vaccinate according to the new policies and procedures on his NEW calves and some of his existing cattle that he either raised on the farm within the past few years or purchased close to home. However, it is virtually impossible to do the complete regimen of documentation on the older ones (in addition to the fact that determining older cow’s age is extremely difficult because much of it is centered on teeth and jaw development and merely gives a rough estimate after cows get older). It is unfortunate, but a reality nonetheless. It will take many years for farmers to cycle through the older cows to the point that they are out of the food chain and only documented ones are active in the system.

    I agree that the policies and procedures must be adopted nationwide, but the government and the public must understand that it will take time. Farmers know that implementing the procedures to document and vaccinate properly will result in a more stable demand for US beef, but some are only able to do so much given their financial position. Farmers have good intentions, but the want and the desire to do it can only go so far as the clock and the wallet will allow.


    We think that at the very least, every cow born in the US should be fitted with a permanent RFID tag…and that a program should be implemented that would tag every cow – so at the very least, we’d know where every cow came from and traceability would be less of an issue.

    MNB user Rebecca Brown wrote:

    Kevin, thank you for continuing to be the sounding board for this very important issue. I've been watching this issue for years, having had a family member die from CJD and having watched our government deny the cause of that event. Please continue to provide the information we need to make change happen in the way we test our cattle. Meanwhile, people should think about what might be in that piece of steak before consuming it. And don't forget the wild meat - from deer to elk, our government continues to drop contaminated feed to wild life in this country.




    We reported yesterday how Publix is investing in an enormous number of generators for its stores in order to deal with future hurricane problems. To which MNB user Chris Murray responded:

    As a resident of Florida, I commend Publix decision to install generators. Not only will this allow the units to keep perishable products safe during times of lost power, but it also will allow the stores to open quickly after the hurricane has passed. There are many items you don't realize you need until after the storm and having a local store open can help fill that need.

    As an added bonus...a store with air conditioning...is a great escape when you don't have power for a week or two.


    We commented that while installing generators is one approach, we sometimes prefer the Jimmy Buffett solution, as exemplified in the lyrics of “Trying To Reason With Hurricane Season”:

    “Squalls out on the gulf stream
    Big storm's coming soon
    Passed out in my hammock
    God I slept till way past noon
    Stood up and tried to focus
    I Hoped I wouldn't have to look far
    Knew I could use a bloody mary
    So I stumbled next door to the bar…”


    To which MNB user David Saunders responded:

    Buffett's approach to life is how many of us Parrott Heads get through each day. 8 salesman covering a 4 state territory for me and an average of 125 emails a day, just a quick brief song by Jimmy puts it, and life in general, all in perspective.

    It's Gotta be Five O'Clock Somewhere!

    KC's View:

    Published on: March 16, 2006

    The Hartman Group defines “Zones of Tension” as “when what we say isn't what we do.” The fact is that most people do try to practice what they preach and finding ways to get the two in better alignment is what generates change…and understanding how to help people align what they say with what they do is what generates sales.

    Want to know more? Click on the “Consumer Pulse” tile ad on the right hand side of the page, or go to:

    http://www.hartman-group.com/products/CP/new.html
    KC's View: