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    Published on: May 4, 2006

    If you want to get to the kids, you still have to go through Mom - she is the primary 'gatekeeper' of children's wellness products and services.

    Shopping trips by Mom for her family can be characterized as nurturing, duty-oriented, responsible and care for the family (shopping for groceries, staple personal care products, and household sundries). When Moms go shopping they tend to focus squarely on the obligation to fulfill the individual needs of household members (i.e., children, spouse, and pets), often ignoring their own needs in the process.

    So, what specific questions does Mom ask as she's walking down the supermarket aisle? To find out, click on the “Consumer Pulse” tile ad on the right hand side of the page, or go to:
    KC's View:

    Published on: May 4, 2006

    This week in his MNB Radio commentary, Content Guy Kevin Coupe ponders the notion that technology doesn't just change the world. It also changes expectations…and sometimes it does so in a way that makes the world you greet today different from the world you said goodbye to yesterday.

    To listen, click on the icon at the left hand side of this page, or go to:
    KC's View:

    Published on: May 4, 2006

    Every Food Marketing Institute (FMI) Show features an assessment of the state of the industry presented by Michael Sansolo, the association's senior vice president. This year will be no different…and to get a preview of this year's edition, MNB conducted an exclusive e-interview with Sansolo.

    MNB: Your session is entitled “The Changing Face of the Food Industry.” But it seems to us that the reason that the industry is changing is that there is a “Changing Face of the Consumer” and a “Changing face of the Competition.” To which – the consumer or the competition – do you think the food industry is best responsive?

    Michael Sansolo: It’s really not a choice of one or the other. This industry is in a constant state of change largely because our shoppers are constantly changing, which in turn creates new forms of competition and new challenges that must be understood and addressed. The bottom line is pretty simple: the status quo must always be questioned and altered. A company can’t focus on just changing with the consumer or the competition. They have to do both.

    MNB: What are the competitive opportunities presented by consumers and competition that you think the food industry has missed, or still needs to take advantage of?

    Michael Sansolo: The great challenge of all this constant change is that there is always an opportunity to grab, but we have to find it first and make sure it is worth grabbing. Think of all the products that are essential to our daily lives (I know how the Content Guy loves his I-Pod) that we didn’t know we needed until someone started selling them.

    Our customers are as varied and complex as ever. Their needs are just as varied as are the many ways they value the experience they receive. The opportunities are that way too.

    MNB: FMI has come to the conclusion, helped by the likes of people such as Joseph Califano, that a greater emphasis needs to be placed on the family dinner – both for sociological as well as business reasons. But we wonder if perhaps this is too late...that we are so fractured as a society, with so many distractions, that getting families to eat dinner together one more time a month is just a band-aid, and not really a cure. What do you think?

    Michael Sansolo: This is an incredibly interesting issue and one that may have deep implications for our families as well as our industry. The materials from Joseph Califano’s group and others make it clear that eating together at home many times each week is the key. It’s all about creating greater family interaction and all the benefits that will bring. I’m not an expert on family structure, but in learning about this topic it’s hard to argue with some of the logic. This may not be a miracle cure for society’s ills, but it certainly seems to be a very logical step. After all, what could be a better way of knowing about our kids’ lives than by having a daily conversation with them?

    Like everything, though, this is simpler said than done and that’s where our industry can find opportunity. For people to get back to the family dinner table, we have to continue to help them my making mealtime—and shopping for mealtime—ever easier. This is an effort most of the industry has been pursuing for quite a time, but the studies from Califano’s group give us added impetus.

    If your readers are interested, they can find material about this topic at the Center for Addiction and Substance Abuse (CASA) at Columbia University. Plus, Califano will speak at the FMI show on Monday morning, as part of the SPEAKS presentation.

    MNB: One of the operating precepts that we’ve long espoused on MNB is that the middle of the road is where you find roadkill, and the mainstream is where you go to drown. Does FMI’s research over the past year bear this out? Is it fair to say that even Wal-Mart, with its new emphasis on organics and sustainability, seems to be realizing that it needs to find new ways to differentiate itself?

    Michael Sansolo: I think we all struggle with finding the right words on this topic. It isn’t the middle of the road that’s death, I’d argue mediocrity is death. What our statistics show more clearly this year than ever is the sharp difference in performance between companies in the industry. There are some who are growing at a phenomenal pace and, honestly, there are others who are losing.

    Yet there is no easy way of characterizing the winners. Some are niche merchants and some are traditional operators. Some are large and some are very small. The key seems to be that companies that have a clear strategy and are getting their teams to execute that strategy every day, are winning.

    It’s just possible that the middle of the road is a state of mind, and that’s the place no one should be.

    MNB: Analysts seem to feel that the wave of new mergers and acquisitions is just beginning, and that we’re going to see a lot more of it through the US business community, including the food industry. What do you think the impact will be on how consumers are served?

    Michael Sansolo: For the most part, shoppers have always seemed to focus on the experience they get at an individual store and whether it fulfills their needs. It’s like the old axiom on how most politics is really local. Supermarket shopping is definitely local—if my store serves my needs well, the ownership or merger activity really doesn’t impact me as a shopper. If a merger somehow lessens the shopping experience by removing products or services shoppers like or by making the store more remote from the customer, then the impact is felt.

    However, we all know that what motivates shopper behavior is incredibly varied. Increasingly, there are shoppers who are taking an interest in the business practices of the establishments they use. There are shoppers who want to know about everything from labor practices to buying patterns—especially related to environmentally friendly sourcing. We hear increasing questions about sustainable agriculture and fair trade. This may not motivate every shopper, but for some, these are becoming vital issues.

    MNB: What’s the biggest positive surprise from this year’s numbers? How about the biggest disappointment?

    Michael Sansolo: The best news may come from shoppers themselves, who continually tell surveyors that supermarkets remain one of the industries they most trust and most like. We have an enormous well of good will that we have to learn to tap better. I also think retailers should take heart in the incredible importance shoppers put on perishables. It’s good to know that the emphasis on areas like meat and produce is valued and can drive shopping decisions, but of course, stores have to deliver on that promise.

    The most disappointing statistic for me was the poor rating the industry gave itself in how customers would rate food shopping. It shouldn’t be over-simplified, but the industry is the only force that can change that opinion. If we feel shoppers generally dislike food shopping, it should be a call to action for massive change within companies to make the experience better somehow.

    MNB: Finally, I know you hurt your leg in a softball game recently, and spent most of April hobbling around in a cast. Weird question, but what’s the business metaphor you’ve learned from your accident and recovery?

    Michael Sansolo: Luckily, I can say that I did clearly follow one business cliché to the best of my ability. I did keep my eye on the ball and I actually made a catch on the play when I was injured. (A pyrrhic victory at best.)

    Seriously, what I learned was the importance of a good team. Although my injury happened at a very busy time for FMI in preparation for the May convention, there was no impact on any aspect of the show. I’m lucky to have a really good team of people around me who are incredibly proficient at what they do. It reminds you that the best path to success to success if having a good team of talented and committed people.

    The 2006 FMI Show is scheduled for May 7-9 in Chicago, Illinois.
    KC's View:
    Need we remind you yet again that on Sunday, May 7, after FMI has shut down for the evening, we will be hanging out at the bar at one of our favorite Chicago bistros, Bin 36, from 6-7:30 p.m.?

    If any members of the MNB community would like to stop by, say hello, and chat for a bit…well, the first couple of bottles of wine will be on us.

    (Bin 36 is located at 339 N Dearborn on the west side of Marina City, between the river and Kinzie.)

    We’ll see you in Chicago.

    Published on: May 4, 2006

    The Washington Post reports that an agreement has been reached that will have the nation's beverage industry voluntarily removing all high-calorie soft drinks from all public elementary, middle and high schools.

    According to the Post, "The agreement sets different rules for elementary schools, middle schools and high schools and comes at a time when the beverage industry is under increasing pressure to limit sales of its least healthful products in schools…The agreement calls for eliminating sales of sodas, diet sodas, sports drinks, juice drinks, apple juice or grape juice in elementary schools. Water and more healthful juices such as orange juice could continue to be sold, but in only eight ounce or smaller containers."

    The Post notes that "in middle schools, the same drinks will be offered but in containers as large as 10 ounces. In high schools, the drink size will be limited to 12 ounces. No sugary sodas will be sold, and half the drinks offered will be water or a low-calorie beverage, such as diet soda, diet lemonade or diet iced tea. Sports drinks will be allowed, as will juice drinks as long as they have fewer than 100 calories per serving."

    Local governments and schools will, of course, be able to enforce stricter regulations.

    The agreement expands on self-imposed regulations that were announced last year, and is timely in its announcement. "The announcement follows a report yesterday by the Department of Health and Human Services and the Federal Trade Commission calling on the food, advertising and entertainment industries to limit their marketing of junk food to kids," the Post writes, noting that because "childhood obesity has doubled among young children and tripled among adolescents in the past 25 years, the report said companies must do more to promote more healthful products that are lower in calories and higher in nutritional benefits."

    It is unknown whether the agreement will slow down some consumer and public health advocates who have been planning tobacco-style litigation against the soft drink companies for allegedly contributing to the nation's obesity crisis.

    The agreement is a joint initiative of the William J. Clinton Foundation and the American Heart Association, working with the nation's soft drink manufacturers.
    KC's View:
    As parents, we think this is an important move…but it will end up being irrelevant unless the schools invest in credible nutrition programs that teach kids about the importance of what they put in their bodies.

    Teach kids of understand and love food in a healthy way, and a real difference can be made. Just take away soda, and it becomes about denial…and it will eventually be a fruitless endeavor.

    Published on: May 4, 2006

    The Los Angeles Times reports this morning that "the California Grocers Association announced Wednesday that it intended to sue the city of Los Angeles over a law that makes it harder to immediately fire grocery store employees swept up in a takeover."

    The worker retention law requires that grocers not fire employees of companies that they acquire for three months after the deal is finalized.

    "This ordinance violates equal protection requirements by singling out a certain class of grocery retailers without placing similar requirements on competitors," said Peter Larkin, president of the grocers association, arguing that the law discourages companies to grow their businesses.
    KC's View:

    Published on: May 4, 2006

    Marsh Supermarkets announced yesterday the signing of the definitive merger agreement to be acquired by MSH Supermarkets Holding Corp., an affiliate of Sun Capital Partners, Inc., for about $88 million.

    The deal is scheduled to be closed in the third quarter of this year.

    Marsh is a 75-year-old family run company that has hit rocky times of late, at least in part because of tough competition in the markets where it operates. However, it exacerbated its troubles when it went public and created a level of debt – more than $200 million by some reports - which some analysts suggested would cripple the company's operations in the long term. And company management was subject to considerable criticism for questionable business practices, including the creation of exorbitant pay and benefit packages for members of the family who worked for the chain.

    Just two months ago, 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.

    Don E. Marsh, who remained as chairman/CEO of Marsh Supermarkets, released a statement saying, ``We have conducted a thorough process of analyzing strategic alternatives and are pleased to move forward with an affiliate of Sun Capital Partners. Sun Capital's financial resources and deep retail operating experience will give Marsh the support we need to compete, grow, and further enhance our business in a changing market.''

    Of course, Marsh's enthusiasm for the deal may be influenced that he reportedly will leave the company when the sale is completed and get severance pay of at least $1.2 million a year for the next five years. He also is eligible for an annual pension of more than $430,000. And he reportedly will get more than $13 million for the stock he owns.
    KC's View:
    Take the money and run, baby. Take the money and run.

    Published on: May 4, 2006

    The Wall Street Journal this morning reports on what food industry observers have seen coming for some time: "In a bid to capture a slice of the fast-growing organic-foods market, mainstream supermarket chains are rushing out their own store-brand lines that can cost significantly less than comparable specialty brands often found at health-food and gourmet stores. The pricing could remove a big barrier for many Americans who have wanted to try organic rice, cookies or cans of soup but have been put off by the prices. Though the store brands are less expensive, the chains say they adhere to the same federal standards for what constitutes organic as other brands.

    According to the WSJ, "Driving these moves is a desire to capture some of the growing consumer interest in organic foods -- which are often perceived as more healthful and environmentally friendly because their ingredients must be grown without pesticides. Chains are also looking to push back against specialty-food retailers like Whole Foods Market Inc., which have siphoned away customers in recent years."
    KC's View:
    It is going to be interesting to see what happens when some of these major retailers start selling organic and natural foods for roughly the same price as traditional products. Even hard core healthy consumers, who might ordinarily not even consider shopping at a Wal-Mart, will be tempted to take advantage of lower prices while remaining consistent with their priorities.

    Published on: May 4, 2006

    Unilever has published a study saying that while Hispanic food shoppers tend to be better prepared for their food shopping trips, retailers tend not to appreciate them, thinking that bilingual signs and coupons will be enough to cement their loyalty.

    The result? "Hispanics are far less satisfied with their shopping experience than the general market," says Mike Twitty, group research manager of shopper insights at Unilever's U.S. unit. "Only 35 percent of Hispanic shoppers are extremely satisfied with their shopping experiences, versus the general market, where it's 58 percent."

    Hispanic consumers tend to spend less in-store because they are better prepared with lists and menus, and what's needed, the study suggests, are product lines and shopping experiences that are more specifically tied to the Hispanic experience in America and that speak to these customers in terms relevant to their lives.
    KC's View:

    Published on: May 4, 2006

    The Miami Herald reports that despite running into some bureaucratic resistance, Publix is moving ahead with its $100 million plans to install 400 generators in its stores, many of them in time for the upcoming hurricane season.

    "Publix has applied for 43 permits and received 26 in South Florida, which means that the July 1 completion deadline for the entire project could be in jeopardy," the Herald reports. "Companywide, Publix has filed for 104 permits and got approval for 70 locations."

    ''We're working fast and furious to get at least some of the generators installed by hurricane season,'' Anne Hendricks, a South Florida spokeswoman for Publix, tells the paper. ``Since we've announced the initiative, we've had some cities and counties knocking on our doors saying they want to help. But there is still some work to be done.''
    KC's View:

    Published on: May 4, 2006

    ACNielsen says that Wal-Mart's Asda Group in the UK has moved back into the second spot with a 15.4 percent market share for the last quarter, passing Sainsbury, which had 15.1 percent of the UK market. Sainsbury had briefly passed Asda and moved into second position, in a horse race that shows no sign of abating any time soon.

    Tesco remains the nation's number one food retailer with a 29.1 percent share of the market.
    KC's View:

    Published on: May 4, 2006

    • Wal-Mart has been making a lot of noise lately about changing the way it does business, from focusing on sustainability and environmental issues to creating more upscale stores that will appeal to a new and expanded demographic. The company took yet another step yesterday in reorganizing its business, putting its $578 million US advertising business up for review.

    This means that its current ad agencies have been notified that the company may change agencies, and both the old and new agencies will be able to pitch the account.
    KC's View:

    Published on: May 4, 2006

    • Washington State officials said yesterday that they plan to appeal a court decision that would have essentially disbanded the three-tier system in the state for selling wine and beer. The existing system requires the use of distributors, and Costco sued the government, arguing that it was anti-competitive and resulted in artificially high prices. The court agreed, but the state now plans to challenge that decision.

    • Kroger reportedly will sell 12 Cala Foods and Bell Market stores in Northern California to an investor group that includes Harley DeLano, the former president of the Cala chain. The move continues Kroger's withdrawal from the Northern California marketplace.

    USA Today reports that Frito-Lay will begin a national roll-out "of Lay's and Ruffles chips cooked in sunflower oil instead of cottonseed oil, to reduce saturated fat. By the end of 2006, the chips cooked in NuSun sunflower oil will be sold nationwide."

    According to the company, "Saturated fat in the flagship Lay's Classic chips, for example, will drop by 66%, from 3 grams per 1-ounce serving to a single gram. Based on Lay's total sales, the switch will cut 60 million pounds of saturated fat a year from the nation's diet…"

    • Ahold CEO Anders Moberg reportedly has informed his board of directors that there is no truth to rumors that he is considering stepping down from his job, nor is it true that he considering a breakup and sale of the company.

    • The Orlando Sentinel reports that Starbucks has acquired 56 mall-based Barnie's Coffee & Tea shops, many of them in Florida. The stores will be converted to the Starbucks name once the deal is finalized in September. Terms of the sale were not disclosed.

    • Pathmark officials said yesterday that they will debut a new prototype store with a greater-than-usual focus on fresh foods on the store's perimeter, which the company said is key to developing customer loyalty. The new format should begin rolling out later this year.

    • It was announced earlier this week that Wal-Mart's Asda Group in the UK planned to get into the real estate business, selling residential real estate via the Internet. Now, its archrival Tesco reportedly is looking for partners that will allow it to develop a similar business model.

    • The Wall Street Journal reports this morning that contrary to previously published reports, Delhaize has no plans to sell off its Czech Republic division, but that it will invest money and resources to make the Czech stores profitable.
    KC's View:

    Published on: May 4, 2006

    • Whole Foods posted second quarter profit of $51.8 million, up 27 percent from the same period a year ago. Q2 sales were up 21 percent to $1.3 billion, with same store sales up 11.9 percent.

    • Costco Wholesale Corp. reported that its April sales were up 11 percent to $4.39 billion. Same-store sales for the month were up seven percent.

    • Starbucks reported second quarter profits of $127 million, up 27 percent from the $100 million in profits reported during the same period a year ago. Q2 sales were up to $1.89 billion, from $1.5 billion last year.

    • Procter & Gamble reported third quarter earnings of $2.21 billion, up 37 percent compared with $1.61 billion during the same period a year ago. Net sales jumped 21 percent to $17.25 billion. Excluding the impact of acquisitions, divestitures and foreign exchange, sales rose 6 percent.
    KC's View:

    Published on: May 4, 2006

    • Clorox Chairman/CEO Gerald E. "Jerry" Johnston, 58, has announced his retirement, citing health concerns. Johnston had a heart attack two months ago, and he said that his health and family had to be his priority at this time.

    Robert Matschullat will continue serving as interim chairman and CEO while an executive search is conducted.
    KC's View:

    Published on: May 4, 2006

    MNB had a story yesterday about the caffeine addiction being developed by thousands of young teenagers, often lured by upscale coffee drinks that taste more like milkshakes than coffee.

    We wrote that we "would agree that too much coffee is probably not a good thing for young people. But part of the problem is that we have all these kids getting up at 6:30 am to go to school, when their bodies simply aren’t oriented that way. We spent a fair amount of time this morning trying to get our 16-year-old and 11-year-old out of bed and off to school. Frankly, there were moments when we thought that intravenous caffeine sent directly into their veins seemed like a pretty good idea."

    MNB user Joe Fraioli responded:

    I obviously agree with the study and caffeine’s effects on all, including teenagers. However just like anything else it is up to the parents to decide their children path not everyone else. I just worry that these studies can eventually turn into protests and complaints from those with the delusion that it is everyone else that needs to worry about their children but them; i.e. Parent Councils trying to remove Without a Trace from TV, Kraft is making our kids fat, etc. etc. The fact that people like to pass the buck and blame others for their failures makes me sick, perhaps I can file a lawsuit against them for my illness - after all it is their fault!

    MNB user Randy Aszman wrote:

    Interesting. This weekend I was at my local 7-11 and while in line, saw what appeared to be a 12-14yr.old with a bag of sunflower seeds and a can of Rock Star, an energy drink. I thought that this was odd given his age. I know at his age I didn’t need any stimulants. I hope this isn’t a developing trend with teenagers as reported.

    One MNB user took issue with our comment about the sleep cycles of young people:

    I do not agree with your assumption. I think the human body is naturally oriented to arise with the sun and sleep shortly after nightfall (though it would be interesting to see if there are scientific studies that back-up either assumption). I tend to believe the fault lies not in the early school hours, but in the attraction to keep teens awake into the late night, increasingly fostered by TV and entertainment scheduling. "Early to bed, early to rise ..." remains a very healthy orientation for bodies of all ages. I too struggle with passing this wisdom on to my teens.

    We made that comment based on sleep studies that we've read about, though to be honest, you're probably right that there are plenty of environmental influences.

    But since we are unlikely to go back to a world where there are no computers or iPods or televisions, and where kids come home to milk the cows and do their homework and then go to bed as the sun sets, the environmental issues have to be factored into what we expect from these kids.

    Another MNB user wrote:

    I agree with your comments…Out of all the things my teenager could be drinking or eating, this is a non-issue…

    In a similar vein, we had a story yesterday about an Ad Age column criticizing Starbucks. Writer Laura Ries characterized Starbucks as a company that has taken its eye off the ball: "At Starbucks plans are brewing to triple its size and become the world's largest fast-food brand," she writes. "And then there's the music and movie businesses the chain has gotten into.

    "It's the same old story. A company narrows its focus and becomes a big brand and a big success. Then it gets arrogant, cocky and greedy and decides it can take over the world and be all things to everybody. Wrong.

    "When will company leaders learn? Starbucks is a strong coffee brand because its brew packs a powerful punch. Dilute the thing with too much water and you'll end up with a lousy brand and a terrible cup of coffee."

    MNB user Mohan Mehra responded:

    I agree with Laura Reis regarding her view on the Starbucks brand. Starbucks is coffee, it is authentic, and it has tapped into the boomer generation and become their brand of choice. It has significant opportunities to grow within the coffee "space" through more targeted outlets, appealing to other age groups, product innovation and rigorous cost management. It is not necessary to extend into all the ancillary categories that it is trying to.

    Another MNB user wrote:

    I don’t agree that (this) applies to Starbucks. After all the “Arrogant” companies usually do not care about giving back to the community or to their employees or if they do they stop doing it when the Arrogance meter reaching 8 or 9, unlike Starbucks who continues to push the boundaries on the benefits of PT employees and other community causes.

    And, for the moment at least, we'll give MNB user Art Turock the last word:

    No one understands the Starbucks brand better than Howard Schultz, and he repeatedly admonishes business pundits that "It's not the coffee." Starbuck's appeal is far greater. Their mission statement is "To provide an uplifting experience that enriches people’s daily lives."

    So being in the uplifting spirits business is far more than the coffee business.. Music, progressive media, and well selected food products are all consistent with this experience. All of these brand extensions are appropriate to Starbucks core customer... (not like Wal-Mart making an attempt to draw the Target customer with more upscale offerings in clothing, food, consumer electronics).

    Starbucks does lots of testing and sometimes finds certain products don't work... their magazine bombed and was quickly pulled from the stores. I don't see Starbucks as making the "same mistake" as other brands that extended their reach too far.

    We agree.

    KC's View: