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    Published on: March 24, 2006

    The San Jose Mercury News reports that Kansas-based Creekstone Farms Premium Beef plans to file a lawsuit against the US Department of Agriculture (USDA) over the agency’s refusal to allow it to test all of its cattle for bovine spongiform encephalopathy (BSE), better known as mad cow disease.

    CEO John Stewart tells the paper, “Our customers, particularly our Asian customers, have requested it over and over again. "We feel strongly that if customers are asking for tested beef, we should be allowed to provide that.”

    However, USDA’s position is that testing by private companies will not assure food safety. The Mercury News notes that larger meatpackers also tend to be against private testing because it would be extremely burdensome for them, but they’d almost have to do it if smaller packers were doing it.

    It was just last week that the USDA confirmed that a cow in Alabama tested positive for BSE, the third cow in the US confirmed to have had the disease. The new BSE discovery came while the Bush administration was trying unsuccessfully 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.

    Then, despite the new discovery, USDA announced that it plans to scale back the expanded BSE surveillance program that was begun after the first case of mad cow was found in Washington State in December 2003. The USDA has been testing one percent of all the cows in the US.
    KC's View:
    Not only does it make eminent sense for independent companies to test their own cows for mad cow disease, but we think they ought to go ahead and do it anyway and challenge the USDA’s authority in this matter. Make the argument in a public forum that if USDA isn’t going to do its job, then the company is going to do so.

    It’s an argument that the government cannot possibly win in the court of public opinion.

    Published on: March 24, 2006

    Interesting piece in Business Week about how toy retailer FAO Schwarz decided to find a new way to find and develop innovative toys that aren’t sold by discount competitors such as Wal-Mart and Toys R Us. The company actually is auditioning independent toy inventors, inviting them in to pitch their product ideas to the company’s executives.

    Company CEO Ed Schmults, who used to be at Patagonia and Red Envelope, tells the magazine that he’s surprised by how little risk taking there is in the toy business. "I don't see a lot of creativity, a lot of new designs from many toy companies," he says.
    KC's View:
    First of all, it has to be acknowledged that Schmults has a lot of work to do, since FAO is barely a ghost of its former self with just two stores (in New York and Las Vegas).

    But we have to say that we love this idea, and it seems like a particularly apt thing for an independent retailer to do in order to compete both financially and creatively with bigger, stronger rivals.

    More retailers ought to do that – reach out to unusual sources, including customers, for big ideas that can redefine their businesses.

    Published on: March 24, 2006

    The Wisconsin State Journal reports that “five Madison grocery stores, including Whole Foods Market and four stores owned by Roundy's Supermarkets overcharged consumers by adding the weight of packaging to the price of deli and bread products.” It reportedly is the second time that Whole Foods has been hit with such a charge by the city of Madison.

    The paper says that “Roundy's is charged with 150 violations. Whole Foods is charged with 79 violations. Each count carries a fine of $100 to $1,000.”

    Vivian King, spokeswoman for Roundy's, tells the Journal that the company is looking into the accusations. "Overcharging customers in any way is unacceptable at Roundy's Supermarkets," she said. "If we investigate and determine that our scales were calibrated incorrectly, we will correct them. If human error is to blame, we will re-train our employees and make sure they have the tools that help prevent human error."

    Whole Foods did not comment.
    KC's View:
    Stuff happens, and the best way to deal with it is to determine the facts and be transparent about both the problems and the solutions.

    We are reminded of our favorite Latin proverb, and mention it here because it seems appropriate: “Trust, like the soul, never returns once it goes.”

    Published on: March 24, 2006

    The Pittsburgh Business Times reports that Supervalu has sold one of its Shop ‘n Save stores in the region to Tom Jamieson, one of the format’s franchisees.

    Jamieson tells the paper that his plan is to close the store and actually change it so that the space includes a smaller Shop ‘n Save store and a Save-A-Lot limited assortment store.

    Supervalu previously announced that it would sell all 20 of its Shop ‘n Save stores in the Pittsburgh area.
    KC's View:

    Published on: March 24, 2006

    The Canadian Press reports that Dr. Ruth Collins-Nakai, the cardiologist who is the current president of the Canadian Medical Association (CMA), has called for a tax on junk food as a way of fighting childhood obesity.

    "Healthy choices should be cheaper and more readily available,” she said. "The corollary is that you make unhealthy choices less available and one way to do that is to tax them. Certainly it works for cigarettes.”

    And, she said, "This decline is a national disgrace. We simply must do more for child health.”

    The CMA already has called for junk food to be officially banned from Canada’s public schools, though it hasn’t had any luck with that proposal, either.

    KC's View:

    Published on: March 24, 2006

    • The Washington Post reports that Wal-Mart has decided to “drop part of its application to open a bank, a move that could ease some opposition in Congress to the bid by the world's largest retailer to start financial operations.” The move would, according to the Post, “withdraw its proposed exemption from the Community Reinvestment Act, a U.S. law that places requirements on banks and savings institutions to help meet credit needs of low- and moderate-income neighborhoods.”

    Wal-Mart says that it wants to open a bank so it can save money on electronic payment processing fees, though a number of lawmakers and other banks have objected to the company having that kind of power in the financial services business.
    KC's View:

    Published on: March 24, 2006

    • Dollar General reported that it earned $145.3 million in the fourth quarter, up from $133.9 million during the same period a year ago. Quarterly revenue rose 12 percent to $2.48 billion, with same-store sales down 1.6 percent.

    • Drugstore chain Duane Reade reported that its net sales for 2005 were $1.6 billion, or about the same as in 2004. The company also reported a net loss for the year of $100.4 million, or almost twice the loss of $52.1 million reported a year ago. Same-store sales were up almost two percent.

    • William Morrison Supermarkets in the UK reported an annual loss that was the equivalent of $436 million (US), compared to a profit a year earlier of $182 million (US). It was the first yearly loss reported in the company’s history. Sales for the year were the equivalent of $21.1 billion, or about even with last year’s sales.

    • Family Dollar reported second quarter net income of $54.5 million, compared to $80.1 million during the same period a year ago. As previously reported, sales for the second quarter of fiscal 2006 were approximately $1.7 billion, or 9.4 percent above sales of approximately $1.6 billion for the second quarter of fiscal 2005. Same-store sales were up about 3.2 percent.
    KC's View:

    Published on: March 24, 2006

    • The Dallas News reports that the investor group led by Cerberus Capital Management LP and Kimco Realty Corp. that is acquiring 655 Albertsons stores has hired a number of former Albertsons executives to run various operations.

    William Emmons, who left the company after three decades of service, is rejoining Albertsons as president of the D-FW division.

    Wayne Dennigham, the former president of the Dallas-Fort Worth division who left the company in 2004 after 25 years with the company, was named president of the Rocky Mountain region.

    Last week, Cerberus said Robert Miller has been hired to be chief executive officer of the new Albertsons company.
    KC's View:
    Interesting, isn’t it, that these guys left the company when Larry Johnston was in charge, but now are returning under new ownership.

    It certainly seems to say something profound.

    Published on: March 24, 2006

    Yesterday MNB ran a story that said the following…

    The New York Times reports that a nonprofit group called the Cornucopia Institute is ranking “organic milk and dairy products based on federal organic standards as well as environmental and humane concerns.”

    The goal, according to the organization, is to put some teeth into government regulations about organics that it perceives the US Department of Agriculture (USDA) is doing little to enforce. "This is a tool to help consumers shop with firms that represent their values,” Mark Kastel, a founder of the group, tells the Times.

    The paper reports that “to get at the heart of the producers' actual practices, the institute sent a survey by certified mail to known marketers of organic dairy products in the United States. The survey consisted of 19 questions about the care and feeding of their cows.
    “Using the producers' answers, the institute ranked more than 65 brands, with 18 receiving the highest rating.” Ironically, there were 10 companies that received no rating because they did not respond – and they included “the best-known brands: Aurora Organic Dairy and three owned by Dean Foods (Horizon Organic, Organic Cow of Vermont and Alta Dena), which, the institute estimates, have a 60 percent to 70 percent share of the market.”

    According to the Times story, the Organic Trade Association (OTA) is “distressed” by the survey and the attention it has garnered, and has criticized it for being nonscientific and “sowing seeds of distrust in organic farming and organic products.”

    Our comment: The OTA had better be careful, or it might be viewed as protecting its members even at the risk of misinforming the consumers who count on products being what manufacturers say they are. That’s the kind of perception that sows seeds of mistrust, not a consumer group trying to get at the facts.

    We’re rerunning the story in its entirety because it generated a number of emails, all of them saying pretty much the same thing – that the Cornucopia Institute was not what it seemed to be, and that we were giving it way too much credibility. (So was the New York Times.)

    One MNB user wrote:

    I'm a global supply chain projects manager at Whole Foods Market and have been watching the milk industry for a while now. The Cornucopia Institute is a shill organization that seems primarily focused on boosting Organic Valley and denigrating Horizon.

    Its founder, Kastel, is a paid consultant for Organic Valley. One of his primary attacks on Horizon is their use of milk from Aurora Dairy (which complies with organic standards, though it still looks like (and generally is) a factory farm.

    The story that they don't report is that OV buys milk from Aurora as well. And they buy milk from Horizon. In fact, all large organic producers buy raw milk from each other at times to round out production.

    Another MNB user wrote:

    The Cornucopia “survey”…was a 19-question, open-ended push poll that almost all of the large organic dairies declined to answer because its conclusions were foregone. The non-respondents represent 60 to 70 percent of the organic dairy products sold in this country. Mark Kastel of Cornucopia chose to rate the non-respondents anyway, which is hardly objective.

    Horizon has two large certified organic farms and 325 farmer partners, some of whom milk as few as a dozen cows. Another 179 family farms are underwritten by Horizon as they transition to certified organic production, a three-year process.

    The truth is, with organic dairy demand growing 20 percent a year, large farms are a necessary part of the equation if organic milk is to remain widely available and affordable. The milk from those farms is as organic as the milk from the dozen-cow farms, with lower environmental impact and healthier working conditions for both animals and people.

    Another MNB user wrote:

    Before you place too much faith in the practices of the Cornucopia Institute, I would suggest you do your own little investigation. As a Buyer of Organic Produce, I have had a "run-in" with these folks and found their tactics to be less than honorable and their beliefs to be misguided. I am very leery of anyone that might paint them in a good light. While the OTA may not have all the best intentions for the growth of this enormous category, I firmly believe that the Cornucopia Institute is even more devious about their motives and information to the consumer.

    In addition, we spoke to someone yesterday who read the cover letter that went out with the survey – and not only did that letter make clear the Institute’s forgone conclusions, but it even had what was called a “threatening tone” about Kastel’s intentions in terms of publicizing the results.

    The unpleasant truth is that we didn’t check out the Cornucopia Institute before reporting on the Times story – it was one in the morning on the west coast, we were working on about four hours sleep and a fast-approaching deadline, and we just did the piece assigning Kastel and the Times too much credibility. (The NYT writer may or may not be able to offer the same explanation.) It’s no excuse, though. We should have known better.

    However, the interesting thing is that we also got the following email yesterday, suggesting that while the survey may be skewed, there is certainly room for multiple opinions in the organics industry:

    I can tell you that indeed the perception by many of my peers is that the OTA is firmly in the pocket of big business - they are not a consumer group, but in fact a lobby group for big business. The very fact that they supported the watered down version of the rule via the Harvey case is proof. Gee, now my certified organic products MAY contain "non organic ingredients IF the organic product is not commercially available". Please define 'commercially unavailable' when you're a huge processor like Kellogg? That could mean virtually anything that doesn't meet your cost profile or ease of procurement.

    My feelings about the Cornucopia Institute are mixed, but they are on target with this. The public has the perception that organic is good - on many levels for many reasons, but the truth is much different. The heart of the organic label is rapidly deteriorating, and more and more organic products are being produced by large agri-business that follows the letter of the Organic Rule, but not the intent. And I believe that the OTA supports this trend.

    All organics are not created equal and that's why informed consumers are looking to local sources they can trust - even if they're not 'certified organic'. To supply a multi-national the size of Wal-Mart means that some really large scale farming and production needs to happen. And even though the OTA states that "Organic agriculture can be a lifeline for small farms because it offers an alternative market where sellers can command fair prices for crops", how many of the 'small farms' can afford to compete with organic large scale farms?

    MNB user Tom Kroupa put the essential debate in a nutshell:

    Ever since the food conglomerates purchased organic companies we have seen them lobby congress to reduce the organic standards we in the industry fought so hard to create.

    So other organizations see this and are concerned enough to re-instate those standards.

    Whatever the motivation, there certainly seems to be a reasonable debate that should and must take place about standards.

    To be continued…
    KC's View:

    Published on: March 24, 2006

    So Barry Bonds is suing the authors of the new book about his alleged steroid use, “Game of Shadows,” saying that they illegally obtained grand jury testimony in writing the tome.

    The suit does not accuse them of lying about his steroid use. Which might have been a little more problematic to prove.

    Note to Bonds: In the past, the law has held that reporters are not guilty of anything when printing grand jury testimony, unless they obtained it by illegal means (like breaking and entering).

    But the suit really isn’t about accuracy, or the truth. It’s about throwing up a smoke screen so maybe, just maybe, people will stop looking at Bonds like the shameless, artificially pumped up cheat that he is.

    The guess here is that it won’t work.

    I’m in Anaheim, California, where I’m speaking this morning at Natural products Expo West. I’m thrilled to be here, and the folks at New Hope Media and the Natural Marketing Institute have been a pleasure to deal with.

    But I have been surprised by one thing. Coming out here to mingle with all these folks dedicated to a natural and organic lifestyle, I expected to see folks who were brimming with health, striding energetically around with clear eyes and ruddy complexions. These people don’t look any healthier than me, and I don’t exactly live a natural and organic existence…

    Want to hear what sounds like a wonderful jazz album? (I’m trying to teach myself about jazz, but it is going slowly. I love listening to much of it, but the subtleties elude me to this point.)

    Anyway, I’ve discovered a fellow named George Cables, who plays a terrific piano (as if I am any sort of judge of such things). His album, “Looking for the Light” is alternately energetic and noirish…and it’s been a lovely addition to the old iPod.

    Last night, I went to a terrific little restaurant in Orange, California – the Citrus City Grille, where I had a marvelous Chilean Sea Bass, served on a bed of asparagus risotto. I washed it down with a delightfully smooth 2004 Bearboat Pinot Noir from the Russian River Valley in Northern California.

    Two movies and a novel to chat about this week, all of which address the selective morality of violence from different perspectives…

    “V For Vendetta” has generated a lot of discussion because of what people see as sympathy for terrorism. It takes place in a Britain of the future, when democracy has fallen victim to a leader who rules through intimidation and fear, creating a totalitarian state that somehow seems simultaneously unlikely and familiar. (The US is referred to as “the former United States,” where chaos rules because of an unnamed war and plague. Mad cow disease or avian flu, perhaps?)

    The “V” of the title might be described as a terrorist, or perhaps as a freedom fighter. He is a masked man who has as his goal the destruction of the totalitarian regime, for reasons that become clear in the course of the movie. Played by Hugo Weaving, he is erudite and magnetic – if a little too verbose from time to time. He rescues and then educates an apolitical young woman, played by Natalie Portman, who serves in some ways as a proxy for the audience, allowing us to understand “V” as she does.

    I expected to hate this movie, and was surprised by how much I liked it. Not that it is a perfect movie by any means, and there certainly are scenes of destruction that can make one queasy in a time when terrorism and 9-11 is still on everybody’s mind.

    But uncomfortable though it may be, “V For Vendetta” actually is about ideas. Reduced to its most basic, this movie can trace its lineage to film heroes like Zorro, The Lone Ranger, The Green Hornet, and, of course, Batman. At no point did audiences think of them as terrorists – and yet, the Spaniards who ruled California probably would have thought of Zorro as one, had the word even existed then.

    “V For Vendetta” is interesting, thought provoking, and essentially political. I liked it, though I expect that a lot of people will disagree with me.

    The other movie that spoke about violence from a different perspective was “A History of Violence,” the David Cronenberg movie that came out last year and starred Viggo Mortensen as a small town diner owner in Indiana who, in an unexpected burst of violence, rescues some of his customers from murderous thugs, and then has to live with adulation, a little bit of fear, and the attentions of some gangsters who believe he is a mob enforcer who disappeared 20 years ago from Philadelphia. “A History of violence” is just out on DVD, and certainly worth renting.

    Again, not a perfect movie – but an interesting one, mostly because the director seems interested not so much in the history of violence, but in the repercussions – the physical destruction, for one thing, and the way in which a single act of violence can create ripples that affect everything surrounding it. An example is in how the lead character’s defense of his customers changes his teenaged son; early in the movie, the son is seen joking his way out of a confrontation with a bully, but later he resorts to violence in a similar situation. While you can abhor the act, you also can’t help but think that the bully deserved it….and it is that shift in perspective in which Cronenberg is really interested.

    Robert Crais has steadily become of one of my favorite crime novelists, first with his Elvis Cole series of detective novel that explore a Los Angeles that in some ways has changed a lot and in others is exactly the same as the city where Philip Marlowe and Lew Archer plied their trade. But he has increasingly has been writing stand-alone novels that are quite good – and the latest, “Two Minute Rule,” is excellent.

    The setup is simple. A lifelong criminal gets out of jail determined not to make the same mistakes that landed him in prison for most of his adult life. One of the things he wants to do is introduce himself to the son he never really knew – a son who eventually became a police officer, giving the ex-con a measure of relief that his misguided past was not being repeated by his child. But on the day he gets out of prison, the son is killed – and at least some of the evidence suggests that he was a crooked cop.

    “Two Minute Rule” traces the ex-con’s search for the man who killed his son, and for the truth about how the son lived his life. Snappy, involving and an easy read, the book creates interesting characters and then lets them grow and change and even make mistakes – the kind that could get them killed.

    Good stuff.

    Have a great weekend. Sláinte!!

    KC's View: