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    Published on: June 9, 2006

    Forbes reports that Wendy’s International has announced that it will switch to a non-hydrogenated oil – with no artery-clogging trans fat - for the frying of French fries and breaded chicken items by the end of the summer.

    "The trend is for a bit healthier," said Lori Estrada, Wendy's senior vice president for research and development. "We wanted to look at our products and improve our nutritional profile." The company said that there would be no change in taste, but that because the new oil has a shorter shelf life than the old oil, employees will have to be trained how to use it.

    McDonald’s promised to make the same change four years ago, but still has not done so. Its management has said it is still conducting tests to see if it can come with a version that doesn’t change product taste, and that it cannot commit to when it actually will happen.
    KC's View:
    By promising what it has never delivered, McDonald’s looks bad. Now that Wendy’s is actually making the change, it only makes McDonald’s look worse.

    Published on: June 9, 2006

    Interesting piece in the Wall Street Journal about men who became classified as “Mr. Mom” back in the seventies and eighties when they took on tasks traditionally performed by their spouses. Now older, with grown children, they are taking on a new role: “Mr. Grandmom.”

    “Mr. Grandmoms today are redefining the parameters of grandfatherhood,” The Journal writes. “This year, as Father's Day approaches, more grandfathers than ever are participating in and having a greater influence on their grandchildren's lives, research shows. And given their previous Mr. Mom roles, their capabilities are high.”

    One of the reasons that these men are taking on these roles, according to the piece, is that grandmothers often find themselves performing redundant tasks – they do the same sorts of things that moms do. But in a society where there are many single mothers raising children on their own, grandfathers end up being the primary male presence in their grandchildren’s lives.

    And loving it.
    KC's View:
    We found this story to be rather touching, maybe because it made us think about the whole grandparenting thing. Our kids aren’t quite old enough yet where their having kids is in any way imminent, but we don’t find the image of being a grandparent at all displeasing.

    It just never occurred to us that this might be a whole new demographic group – “Mr. Grandmom” – with actual marketing implications.

    By the way, we were serious with the headline. Let’s find Michael Keaton, Teri Garr, Martin Mull, and all the folks who made “Mr. Mom” back in 1983, and let’s put on a sequel! It wasn’t like the original was a great movie, but it was a movie that struck a chord and took note of an essential truth.

    And it was funny, especially because of Keaton, one of the underrated actors of the last 20 years.

    Published on: June 9, 2006

    It increasingly looks like a permanent and complete repeal of the estate tax – usually labeled the “death tax” by its opponents, which have included the Food Marketing Institute (FMI) and the National Grocers Association (NGA) – simply will not happen in this US Senate session because of a lack of votes.

    In session this week, the Senate was unable to muster enough votes to move the estate tax ban along, effectively ending its chances for this year.

    However, there are both Republicans and Democrats working for some sort of compromise that would exempt all but the most wealthy from paying an estate tax, and would prevent family businesses and farms from being taxed when passed on to a family member as part of an estate.

    There is an unusual clock ticking as negotiations continue. The 2001 tax cuts passed by Congress and signed by President Bush included a phased estate tax repeal, with a total repeal to take effect in 2010. However, this repeal was only to be effective for a single year, with 2011 estate taxes reverting to earlier levels – creating the possibility that children would be rooting for their parents to die before December 31, 2010, so that they aren’t hit with a big estate tax bill.

    While opponents of the estate tax make the point that the money being taxed is actually money that already has been taxed as income, others argue that at a time or record deficit spending it is hard to support a tax cut that could, according to some sources, cost the federal treasury about $1 trillion in lost revenues and debt interest costs over the next decade.
    KC's View:

    Published on: June 9, 2006

    The New York Times writes about how Starbucks is getting competition from the likes of Dunkin' Donuts, McDonald's and Burger King – all of which are taking the approach that they are for regular coffee drinkers, not snobs.

    “They may not want the snob appeal of Starbucks, but the challengers certainly want a bigger slice of the booming $8.4 billion retail coffee market,” the NYT writes. “And that is just the amount sold in coffee shops. Starbucks accounted for $6.1 billion of the total in 2005, up from $3.7 billion in 2003.”

    All three companies are trying to improve their coffee products, but they also “have been playing up their un-Starbucks features — like fast service, easy-to-pronounce sizes and, that all-American mainstay, the drive-through. Then there is the price: an average 12-ounce cup of McDonald's Premium Roast coffee is 99 cents, well under Starbucks' standard price for drip coffee and a far cry from some of its drinks that can cost upward of $4.”
    KC's View:
    We think that it makes perfect sense for these retailers to look to compete with Starbucks by offering products and prices that are somewhat different. But it also strikes us that their strategy may not take into account the fact that there are a lot of average people out there for whom Starbucks is a welcome indulgence. It is more than about coffee; it also is about aspirational attitudes that go beyond coffee

    Published on: June 9, 2006

    Published reports say that the Walt Disney Co. has signed a deal to license its brand names to a series of fresh produce items that will be showing up in supermarkets. In addition, it is rolling out a brand of dog food called “Old Yeller, “ which already can be found in Kroger stores.
    KC's View:
    We could be wrong about this, but didn’t Old Yeller die in the movie? And do customers really want to feed their dogs a food named after a hound that died?

    Sometimes, Disney forgets its own heritage. Reminds us of when they opened a collection of nightclubs in Florida in a section called Pleasure Island...apparently forgetting that in “Pinocchio,” Pleasure Island was where bad boys got turned into donkeys.

    Though maybe they assumed that on the new Pleasure Island, young men would behave like asses.

    But we digress…

    Published on: June 9, 2006

    In a court filing related to the lawsuit challenging its decision to deliver Powerade to Wal-Mart’s warehouse instead of directly to stores, Coca-Cola has testified that the retailer plans to double its purchases of Powerade based on the new distribution model. Otherwise, Coke, says, it seems likely that Wal-Mart will simply create a private label version that will hurt all branded sports drinks.

    The suit was filed by bottlers who objected to being bypassed in the new system.

    KC's View:

    Published on: June 9, 2006

    • Wal-Mart announced that it has hired Joe Quinn, policy director for Arkansas Gov. Mike Huckabee, to be director of state health care policy, responsible, according to the company, for helping to expand the company’s health care benefits.

    Press reports note that Quinn is the fourth member of the Huckabee administration to depart in recent months. Huckabee cannot seek reelection this year because of the state’s term limits rules; he is believed by many to be considering a run for the Republican presidential nomination.

    MarketWatch reports that when Sheila C. Bair, President Bush’s nominee to lead the Federal Deposit Insurance Corporation (FDIC) was questioned this week by the US Senate Banking Committee, she never was asked about Wal-Mart’s application to obtain a banking charter.

    Which is interesting since the FDIC will have to rule on the application, and has been waiting for a full board before making a decision.

    And also is interesting because 98 Congressmen sent a letter to the FDIC Thursday asking the agency to impose a moratorium on allowing these companies to acquire banking powers.

    • Interesting piece in the Joplin Globe about a 125,000 square foot building in Jane, Missouri, that is located behind a Wal-Mart Supercenter. The building is owned by Wal-Mart, but not open to the public; in fact, even the county assessor had to sign a nondisclosure agreement just to get in for an inspection.

    Speculation is that the building houses Wal-Mart’s data center, where it analyzes all of the purchase information gathered in its stores. But Wal-Mart is not commenting.

    According to the Globe, “The Jane data center is an enigmatic icon to the power of data, which has helped Wal-Mart become the largest retailer in the world, and to the corporation's growing secrecy since founder Sam Walton's death in 1992.”
    KC's View:

    Published on: June 9, 2006

    • Spartan Stores reportedly will close two Family Fare supermarkets this weekend, in Grandville, Mich., and Holland, Mich.
    KC's View:

    Published on: June 9, 2006

    • David Golub, VP of administrative operations at Golub Corp.’s Price Chopper Supermarkets, has been promoted to the position of VP of store operations.

    • The Food Marketing Institute (FMI) announced that it has appointed of Jim Kendzel, a 24-year veteran of NSF International, a nonprofit, independent provider of public health testing and certification, to be its managing director of the Safe Quality Food Institute (SQFI), a division of the trade association.
    KC's View:

    Published on: June 9, 2006

    Yesterday, MNB reported on a story that suggested that the announced closing of 100 Albertsons stores in various markets could add an additional$70 million in revenue to Safeway’s coffers.

    Much as we hate to admit it, we read the story in the San Jose Mercury News at 2 am and then wrote our piece at 3 am…which may explain why we got the numbers wrong. The story actually said that Safeway could generate $175 million more in sales, and that Kroger could get another $75 million in sales.

    KC's View:
    Sorry about that.

    Though we have to say that our numbers seem a lot more realistic.

    Published on: June 9, 2006

    • Rite Aid posted May sales of $1.68 billion, up 3.4 percent from the same month a year ago. Same-store sales were up four percent.
    KC's View:

    Published on: June 9, 2006

    MNB posted an email yesterday from a man whose wife suffered from too much consumption of mercury, a relevant issue because of the debate over how much of it is in canned tuna and other fish, and the health implications especially on pregnant women.

    It also promoted an email from another MNB user:

    I was very interested in the article from the man that wrote about his wife with the Mercury poisoning and would like to know if this man would be willing to share what her level of Mercury poisoning was and would also like to know about what health issues and mental issues she had to deal with concerning this problem. I too, have recently found out that I have high levels of Mercury and am dealing with a health problem. I have gone for a second blood test as well as a urine test and am waiting for the results. I have printed this article and will show to my doctor. I would also be interested in her Doctor's name if they would be willing to share it. I would appreciate any help or information.

    If he is willing to be identified to you, we will pass his name along. We promise. And we wish you well.




    We also got an email from MNB user Randall Onstead, responding to yesterday’s MNB Radio piece about Central Market and Whole Foods in Austin, Texas:

    Your radio piece on Awesome Austin is spot-on. The supermarket operators who get the fact that “it’s about the food,” are the ones who will survive. Whole Foods and HEB are two great examples of this.

    Thanks.




    We also got a nice email from an MNB user about our piece yesterday criticizing how retailers use slotting and promotional allowances, putting them to the bottom line instead of actually trying to drive product:

    Your comments are so accurate with regard to how some retailers apply these promotional dollars (especially with some publicly traded companies) trying to hit the budgetary needs at quarter close...it can be such a scramble. Your "house of cards" analogy is scary true.




    Here’s something that we never thought about when it comes to the Albertsons’ store closings announced by Cerberus earlier this week. One MNB user pointed out:

    Let's hope they've realized that sometimes it is those "underperforming" stores that allow you the efficiencies to run the rest of the organization at a profit. Sure, if their warehouse & trucking is experiencing 22% overtime, then perhaps closing 22% of the fleet of stores makes sense....but if not, it's not healthy to have a poorly performing supply chain. The same needs to be considered for media buying & distribution, packaging, buying power, etc.....

    We noted that the fast decision by Cerberus to close these underperforming stores was yet another damnation of Larry Johnston’s tenure at Albertsons, even though he’ll still get his $120 million severance package. To which one MNB user responded:

    It continues to amaze me how boards of directors seem to reward failure on such a monumental scale.

    Here in Louisiana, there is no other chain who is higher in pricing, whose stores are laid out to intentionally keep the customer going in circles in order to prolong the shop, and whose attitude is largely unapologetic about being uncompetitive.

    It is no wonder to me these stores are underperforming. They just never seemed to get it.


    By the way, regarding the actions being taken by Cerberus to cut costs at Albertsons, one MNB user sent us the following email:

    I am in China as I email this with the buyers. I will tell you that they arbitrarily cancelled many orders that were ready to ship with no regard to the factories that had borrowed money to buy materials. Cerberus answer to that was too bad we will not accept the goods.

    It sounds like the cutting has just begun.




    We got a number of emails responding to our various stories about brand equity, prompted by Federated’s decision to do away with the storied Marshall Field’s banner in Chicago.

    One MNB user wrote:

    I’m a former Chicago resident. Like many Chicagoans, you can’t help but become passionate about Chicago history even if you’re there for just a few years. This issue goes well beyond nostalgia for an old department store.

    Anyone who knows anything about Chicago history knows that Marshall Field is one of the key persons responsible for the beautiful “free and clear” 17-mile lakefront. Although he has not the original author of the famous Burnham Plan which declared that the lakefront shall be forever for the public, he frequently used his own money to sue developers who conspired to ignore the plan – much to the intense displeasure of fellow rich Chicagoans.

    Chicago owes a lot to this man.


    It always has been our impression that people who spend any time living in Chicago feel enormous loyalty to the city, and often never leave. (Does Federated have any native Chicagoans in the executive suites? Just curious…)

    This is interesting to us since our son is transferring to Columbia College Chicago in the fall, where he’ll be studying filmmaking and acting. And we have the feeling he may never leave…

    MNB user Pat Ogborn agreed with our criticisms of Federated:

    You are Right On! Brand Recognition investments and Customer Acquisition costs don't seem to be a line-item in the 'total cost of Ownership' spreadsheet for Federated. (But then - I'm sure Macy's has a VERY LARGE EGO to feed... which. of course, justifies their current strategy.)




    We had a piece the other day about how the Norwegian pension fund has decided to sell all its Wal-Mart stock because of ethical concerns. We noted in our commentary that such a dramatic decision in the past had been reserved for companies that made things liked nuclear weapons…and wondered if it was really fair to lump Wal-Mart in with that group.

    MNB user Paul Barrett responded:

    You can quibble about the objectivity of the Norwegian Pension Fund Managers' decision making but I expect the process goes like this:
    • They want a balanced portfolio, with grocery retailing being an example of a solid, low-risk sector
    • When looking for investment targets within the sector, they look for companies that combine great returns with ethical behavior
    • Wal-Mart no longer made the cut on the second criteria
    So, if I'm right, which retailer(s) will they invest in instead? Ahold? Tesco?


    Well, it won’t be Ahold. As for Tesco, it probably depends on who you are talking to.




    In one of many stories about nutrition and health issues the other day, we wrote:

    Walter Willett, a professor at the Harvard School of Public Health, tells USA Today that it may be less important what kinds of food one eats than how much. ‘A number of studies strongly show that people who burn more calories than they consume are less likely to develop cancer,’ Willett says.

    To which MNB user Bobby Martyna responded:

    This is absolutely true -- anyone who regularly burns more calories than they consume will shortly die from starvation. So, cancer will not be a threat to them and Dr. Willett can lay claim to a very innovative cure.

    We’re not sure that’s exactly what Willett had in mind…




    Finally, we had a piece yesterday noting that former Wal-Mart CEO David Glass was stepping down from two company committees on which he serves, and we said we hoped this wouldn’t free him up to spend more time on the woeful Kansas City Royals, of which he is an owner.

    One MNB user wrote:

    You comment that if David Glass ran Wal-Mart like he runs the Royals.... what makes you think he's not? He has gone out and sourced the cheapest players in major league baseball- just as Wal-Mart uses cheap labor- and
    look at what it has gotten him. The problem with the supermarket industry is that there are more than 28 other 'teams' with better players. There is a world full of chain stores with equally under average players. Where Wal-Mart is getting beat by supermarkets, the other teams are better- not just because they pay more, but they pay for talent- and they have managers that can think and change the lineup daily.

    I don't know if David Glass knows how to 'buy' a player. He has never done it in his career at Wal-Mart or the Kansas City Royals.


    We get your point, though we’re not sure that we’d agree that Wal-Mart is being beaten by many supermarkets.

    And another MNB user disagreed with our entire premise:

    Glass does a better job running the Royals than George Steinbrenner
    does running the Yankees. Considering that in 2004 Glass actually made a $3
    million profit on the Royals while Steinbrenner lost close to $37 million on
    the Yankees.


    We’re no fan of Steinbrenner, let’s be clear. On the other hand, the point is to win…and the Royals stink.

    The team is ranked #25 out of 30 teams in terms of its valuation. And because it is a small market team, it gets money from teams like the Yankees that are paid in a luxury tax. Think that might account for the $3 million Glass made last year?

    That’s not a profit. It’s a handout.
    KC's View:

    Published on: June 9, 2006

    This morning, I thought I’d address two questions that tend to come up all the time, either in emails or when I’m on the road talking to and listening to retailers.

    1. How big is the MNB staff that puts the site together each morning?
    2. How do you decide which emails to use in Your Views?

    The answer to # 1, at least for the moment, is not very big.

    It’s me.

    Which probably explains a lot.

    It explains – though it does not excuse – the typos and mistakes that occasionally make it through to the final product. I’m working without a net here each morning…using Spell Check but not having anyone to proofread my stuff. I’ve always been grateful for the fact that when I make a mistake, you folks are understanding and patient with me.

    It also may explain why, while I try and have the site posted each morning by 8 am Eastern Time, there is a lot of give in that deadline. If there is a breaking story, or a lot of news on a given morning, it just slows down the process. (I try to start scanning the business sections of about 20 newspapers at about 5 am, and then start writing by 6:15 am.) If I’m traveling, depending on where I am, it also can have an impact on the MNB posting schedule. It also explains why I put the site on hiatus a few times each year…just to give myself a break. (And frankly, I think you probably can use a break from me, too…)

    To be honest, though, I feel a fair amount of pride in what I’ve been able to accomplish – even as a one-person show. (And maybe because I’m a one-person show.) For example, when Amazon.com decided to get into the grocery business in a big way, MNB had the story exclusively on Thursday, May 25…and the Daily Lead didn’t get around to reporting it until a week later.

    I don’t pretend to have every story out there, nor every answer to the problems and issues that plague the food retailing business. But I do think that MNB is a great forum for provocative ideas, expressed much of the time by people in the MNB community.

    The answer to # 2 is that I fly by the seat of my pants most of the time, and hope that I don’t crash into the side of a mountain.

    There are few policies or hard and fast rules governing what MNB does and doesn’t do. (One of the few corporate edicts we have is, “No long pants between Memorial Day & Labor Day.” Except, of course, when giving a speech...to the great relief of audiences spared a view of my legs.)

    When choosing emails to post – and I get hundreds every week – I try and choose the ones that are both responsible and provocative, or just capture my attention through clever writing. If they seem to move the site into an area where debate and discussion seem like a good idea, that’s when they get used. If they are specifically critical of me or my ideas, they get used first. The emails that suck up to me are appreciated, but I try not to use them too much.

    Anonymity is guaranteed if requested or if someone doesn’t put an official “signature” into the text (though I know where they came from). Sometimes, I provide anonymity even if someone doesn’t ask for it when I think that they may get fired for making a specific statement or providing an insight. (That won’t do them or me any good.)

    Finally, I do my best not to allow anyone to make personal or gratuitous attacks if they don’t want their names to be used…though there are exceptions, such as in the huge number of emails I’ve posted criticizing former Albertsons CEO Larry Johnston. Those emails seemed spot on, they came from people with inside knowledge, and, to be honest, they never seemed gratuitous.

    There’s only one person allowed to make gratuitous statements of any kind, and that’s me. My picture is on the site, my name is on the door, and my biases and agendas are in plain view for everyone to see.

    Make sense?

    Finally, there are two more questions that have come up lately that I’d like to answer:

    Can you provide text versions of the site’s radio commentaries?

    That’s a little easier said than done, because they’re not always written out. But I’ll work on it.

    Can you provide a compendium of all your wine and restaurant reviews on a dedicated page?

    And let Mrs. Content Guy know how much I eat and drink? You’ve got to be kidding! (Okay, I’ll try and work on it…though I may need to hire an intern for this particular task. Anyone out there want to work for a case of wine?)

    Which leads me into the week’s two wine recommendations:

    • A 2001 Solstone Pinot Noir from New Zealand’s Wairarapa Valley, an unbelievably smooth red that we had last week with grilled steak, baked potato and asparagus. Perfect!

    • A 2004 Barossa Valley Shiraz from Earthworks in Australia…which was absolutely spicy and delicious and, wouldn’t you know, came in a bottle with a screw cap.

    That’s it for this week. Have a great weekend, and I’ll see you Monday.

    Sláinte!
    KC's View: