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    Published on: July 11, 2006

    In the UK, The Independent reports on the continuing controversy over food labeling protocols, with some retailers (such as Tesco) resisting a national program that uses a traffic light format that says foods with a green light are good for you and foods with a red light are bad for you.

    “Many big industry players, including Tesco and Morrison's, are rejecting the system,” the Independent writes. “Tesco's scheme is based on how much each food contributes to calories, sugar, fat, saturated fat and salt as a percentage to an individual's GDA (Guideline Daily Allowance). The labels have colours but they do not change according to the levels of nutrients.”

    Tesco, for example, has argued that orange juice is healthy, but is given a red light because it is high in sugar – a label that in fact can be misleading.

    The problem for Tesco and Morrison, though, is that polling suggests that their programs are just confusing to consumers, while the red light/green light program created by the federal Food Standards Agency (FSA) is easy to understand. And the controversy seems to be tougher on Tesco, which is suffering the slings and arrows that come with being the UK’s dominant retailer, subject to criticism for its expansion plans, environmental standards and competitive strategies.
    KC's View:
    The problem, of course, is that the more complicated system advanced by retailers like Tesco and Morrison (and, quite naturally, preferred by many manufacturers) is full of nuance – and nuance is a word that doesn’t have a lot of fans in the world today.

    It’s a tough one, though. Retailers that fly in the face of the national traffic light labeling program are going to have to be very persuasive that their systems are better, because the conventional wisdom is for the moment pointing the other way. Conventional wisdom often isn’t very wise but is always conventional…but making the opposite argument can be like pushing boulders uphill in a rainstorm.

    Published on: July 11, 2006

    The Food Marketing Institute’s annual Supermarket Pharmacy Trends report suggests that while pharmacies run by supermarkets were able to maintain their financial stability last year, retailers also were able to meet regulatory challenges such as “preparing for Medicare Part D and complying with new laws restricting the sales of cold medicines containing pseudoephedrine, which can be used illegally to produce methamphetamine.”

    “It is most impressive to see more supermarket pharmacies reaching beyond the prescription counter to help consumers improve their health and well-being,” said Michael Sansolo, FMI senior vice president. “In addition, the findings from this year’s report are reassuring given the amount of regulatory change in pharmacy operations over the past 12 months.”

    Among the findings:

    • Median prescriptions filled per day remained unchanged from 2004, at 120.
    • Prescription revenues remained at 9 percent of total store sales.
    • The median cost of a prescription increased slightly from $53 to $55.
    • Only 2.3 percent of respondents thought consumers had a good understanding of the Medicare Part D program, while 97.6 percent felt consumers had a poor or fair understanding.
    • To help alleviate the confusion brought about by the new regulations and change in plans, 95.5 percent of supermarket pharmacies offered educational materials for their customers, although 57 percent of pharmacies believe the government should educate consumers about Medicare.
    • More than 73 percent of supermarket pharmacies are set up to accept e-prescriptions from physicians now — or will be by the end of 2006.
    • Two-thirds of all supermarket companies are using robotic prescription filling in at least one pharmacy.
    • Health seminars and health-focused recipes top the list of in-store services, with 54.3 percent of pharmacies offering each.
    • More than 52 percent give store tours, showing customers where to find healthful products.

    KC's View:
    Seems to us that one of the things that supermarkets have to focus on is everything that people put in their bodies, recognizing that the traditional boundaries between food and medicine are braking down. It is like the research that shows many people don’t differentiate between traditional and non-traditional medical treatments – they just want what works.

    Published on: July 11, 2006

    The Atlanta Journal-Constitution reports on an interview with Home Depot chairman/CEO Bob Nardelli, who came in for significant criticism when he appeared to be unresponsive and aloof during a recent annual meeting of shareholders.


    On the disastrous annual meeting: “I take full responsibility for the meeting. I tried a different format, and it didn't work. I think the criticism of me was fair, and that's why, within seven days, I agreed to go back to the old format. What's unfortunate is when it cascaded down to my associates and to my board. It's unfortunate if it created distraction or angst for the [store] associates who are out there every day. However, it's one event over five years. I think the company's record stands on its own as far as financial performance and as far as values. We have never withdrawn from transparency.”

    On managing to the stock price: “Look, there's no one more sensitive to the stock price than me — there's no one more aligned financially with the stock price than me. All I can do is continue to chart a strategic direction, deliver on that direction and hope the intrinsic value, the predictability and the confidence in our projections translate into a fair market price.”

    On his own, often-criticized compensation package: “The board has been very appreciative of the performance of this company, and I'm very grateful for the compensation they've awarded me, commensurate with the company's performance. They evaluate me on the things I can control, such as top-line growth, which has almost doubled; earnings, which have more than doubled; and other metrics like return on invested capital. I would expect if the performance isn't there, they'll be just as responsive the other way.

    “Secondly, more than 80 percent of my total compensation is in equity that is still with the company. Sixty percent of that 80 percent is in options that are underwater. So no one is more aligned with the stock price than me. If the stock price doesn't go up, I don't get any of that.”
    KC's View:
    Give Nardelli credit for at least confronting the criticism.

    He can help his credibility a little bit more if he’d toss Larry Johnston off his board of directors.

    Published on: July 11, 2006

    The Chicago Sun-Times reports that Federated Department Stores has added injury to insult in how it is treating Marshall Field’s shoppers already annoyed that it is changing the name of the venerable chain to Macy’s.

    Shoppers who hold Field’s credit cards are being sent Macy’s cards with a different number, but tied to the same account. However, Federated has said that any shopper who cancels the Macy’s account also will be canceling the Field’s account – even though it has pledged to keep taking the Field’s card at Macy’s stores.

    In addition, Federated said that its points reward program will be untied from the Field’s card as of August 1, with points only accumulated for purchases made using the Macy’s card.
    KC's View:
    We’re sure there are all sorts of good economic reasons to be making such moves, but we remain astounded as to how willing Federated seems to be to annoy longtime Field’s shoppers.

    Considering that the whole strategy allegedly is aimed at revitalizing the chain, the net effect seems to be to disenfranchise much of the customer base.


    Published on: July 11, 2006

    One year into its American expansion strategy, Japanese c-store operator Famima! has opened its sixth store in Southern California, this one on famed Hollywood Blvd. near Highland Avenue and the historic Egyptian Theater.

    "Our Hollywood store is in the heart of the historic area, near the Kodak Theater, and is a major draw for tourists as well as a busy area for commerce,” said Shiro Inoue, president/CEO. “We hope our products and services will bring satisfaction to consumers. At the same time, we want to become more familiar with the Hollywood community and develop a neighborhood together."

    The company’s previous stores were opened in West Hollywood, Westwood, Santa Monica, Pasadena and Torrance. Additional stores are planned for downtown Los Angeles, Glendale and Long Beach, and the company expects to have more than 20 opened by the end of the year and some 250 operating by 2009.

    Hardly a traditional convenience store, Famima! bills itself more as a specialty food store, with an emphasis on Asian foods that appeal both to Asian and non-Asian customers.
    KC's View:

    Published on: July 11, 2006

    • The Boston Business Journal reports that Ahold-owned Stop & Shop has been hit with a personal injury lawsuit, filed by a New Hampshire couple that charges their son was poisoned last year by beef purchased at one of the retailer’s stores that contained E. coli.

    Bloomberg reports that a US District Court in California has ruled that Safeway must be excluded from an antitrust lawsuit filed against it, as well as Albertsons and Kroger, by the state’s Attorney General Bill Lockyer.

    The suit charges that a mutual aid agreement developed by the three chains to share and lessen the pain during a lockout/strike more than two years ago was actually in violation of federal antitrust laws. The judge, while not ruling on the merits of the case, said that “"Safeway's liability under the currently articulated theory is not apparent” and that “the complaint does not give defendant Safeway adequate notice of its alleged role."
    KC's View:
    There ought to be a law against rulings that use phrases like “currently articulated theory.”

    Published on: July 11, 2006

    • News reports out of North Carolina says that the city of Rocky Mount wants to build something it will call BBQ Park, which would recognize Bob Melton’s Barbecue, the first sit-down restaurant to sell pork barbecue.

    However, an argument could be made that it shouldn’t be so much a park as a graveyard, since these same reports note that Rocky Mount once had such barbecue restaurants as Melton's, Buck Overton's, Brown's Chicken and Barbecue House and Gardner's Barbecue Restaurant – but now, only Gardner’s remains in business.
    KC's View:

    Published on: July 11, 2006

    Advertising Age reports that Mars has fired Martyn Wilks, a 20-year company veteran who has served as president of the company’s US snack food unit for the past 18 months. Ad Age says that the move came because of concerns that the snack food division was not hitting its numbers, and that Mars North America President Bob Gamgort is keeping everyone in the company on a short leash.
    KC's View:

    Published on: July 11, 2006

    • CVS Corp. reported that its June sales increased 23.1 percent to a record $4.3 billion, compared to $3.5 billion in the prior year period; the numbers included some 700 Sav-On and Osco drug stores acquired from Albertsons at the beginning of the month. Same-store sales ere up 8.4 percent.

    For the second quarter, total sales increased 15.8 percent to $10.6 billion, compared to $9.1 billion in the prior year period, with same-store sales up 8.8 percent.
    KC's View:

    Published on: July 11, 2006

    Responding to yesterday’s story about Tesco’s California plans, MNB user (and MNB fave) Glen Terbeek wrote:

    Since Tesco has experience with prepared foods, high quality private label, consumer direct, shopper data base marketing, world class logistics systems, and various formats around the world; look for the Express stores in the U S to be the true "moment of value" stores; localized to the market it is in. Stores that combine all of the above skills for a "hard to beat" shopping experience. There is no other U S retailer with the breadth of their experience in all of these areas. For sure, they will not enter the US with a same ol', same ol' format. In addition, Tesco is not encumbered by the current US industry model, just like Wal-Mart wasn't when it started. And Tesco's global presences will help them get the manufacturers attention in the U S, even though they are just starting; an advantage that Wal-Mart didn't have.

    What are "moment of value" stores? Think of stores with a strong prepared foods offering, great fresh products, and a "convenient" selection of core/necessary items. Stores that create value above and beyond distribution value. It's a fact; prices, margins, and return on space go up when the need is fulfilled immediately and easily. This offering would be embellished by a consumer direct offering of a very large assortment of core/staple items and niche items that can't economically be carried in stores. They would be preordered by shoppers for pick up at the Express stores on their next visit; as example, on their way home from work while they pick up their dinner. These items will be offered at very competitive prices, since many traditional costs have been removed. In fact, manufacturers might even put their items in the system on a contingent basis to make them immediately available to the Express shoppers, just like does. (What, no slotting allowances?) Think about new item introductions!

    Wow! This will be fun to watch! Since I live in Southern California, I can't wait.

    But wait a minute, wait a minute! This is unfair! The playing field is not level, again! The manufacturers are supporting an(other) alternative format! They can't do this! Don't they understand. We better work on logistics again! Here's a good idea, let's increase the slotting allowances! Let's form category teams! Let's consolidate! Let's.............

    Another MNB user wrote:

    They keep talking about the retail side of this operation, but have we heard any noise on what products they are going to sell in the them? In the UK they are very dependant on third party suppliers for fresh entrees, sandwiches, etc. Have they secured any alliances in this area in our country? If yes, with who?

    This was a fundamental flaw in the other British retail acquisitions on the east coast. I believe M&S, Sainsbury, etc over estimated the American supply chain in this area and later found it was not what they were accustomed to on their home turf. Will Tesco learn from their mistake?

    We think that Tesco learns from everything.

    On the subject of Wal-Mart’s dedication to environmental issues, illustrated by the fact that Al Gore is bringing his message about global warming – as portrayed in the hit documentary “An Inconvenient Truth” – to a company meeting in Bentonville, Arkansas, this week.

    MNB user Art Turock wrote:

    Count on Wal-Mart's sincerity in supporting sustainability. After watching the Annual Meeting in Fayetteville a few weeks ago, the major theme conveyed to about 18,000 associates was pride in company, and plenty of examples of sustainability. I don't think you proclaim a half-baked insincere gesture in front of shareholders and analysts.

    I was also leading a seminar with an ice cream supplier in April. One of their Wal-Mart Account Team members related a story, where he asked a buyer to leave a styrofoam container left behind on an earlier sampling session at the front desk to pick up. The buyer refused saying, "You won't see me carrying anything made of styrofoam in this building. Come to my office and pick it up."

    Lee Scott sees the connection between EDLC and sustainability and its becoming part of Wal-Mart best practices.

    One MNB user disagreed:

    I'm surprised you aren't more cynical. Yes, Wal-Mart may appear to be sincere now about environmental issues because it distracts the public from the negative press they have been receiving. However, it reeks of the "Made in America" campaign, which became obsolete when the new "Slashing Prices" campaign was invented so Smiley could mask the result of moving business overseas to reduce costs. When it becomes to expensive to remain conscientious about the environment, they'll drop it and find another button to push to appease the public.

    MNB user Randy Aszman offered the following thought:

    I haven’t seen “An Inconvenient Truth” either, and doubt I will, but in regards to the concerns voiced by Al Gore and others, I suggest viewing “The Real Eve”, a documentary produced by the Discovery Channel. It chronicles the migration of humans from Africa that basically spread the human race to Europe, Asia, Australia, and eventually the Americas 150,000 years ago. This migration was triggered by environmental changes, namely global warming. Our planet goes through cyclical changes that occur with or without the influence of the human population. And although we should be seriously concerned about and address the effluence we release into the air and our oceans, the shrinking ice caps most likely are part of our planets ever evolving growth and change. Now please excuse me while I go dig a foxhole to protect me from the tree huggers’ incoming wrath.

    Another MNB user wrote:

    I have not seen Gore’s movie, but as a student of life, I have delved into the debate, and read an extraordinary piece in the National Review (Snow Job-Jason Lee Steorts, 6/5/06), as well as “State of Fear” by Michael Crichton (great fiction, but the facts and citations at the end are incredible), and believe we just DO NOT KNOW ENOUGH to be so certain that global warming is as big an issue as it is being portrayed. Case in point, when I moved form the Midwest to the Southwest in 1977, all the talk was about the impending doom from the cooling and smog cover over major cities blocking out the sun. So, Southern California and Phoenix adopt stricter air quality standards, and today, a mere 29 years later, the air is cleaner in LA than in the 40’s-70’s (although much remains to be done), and we’re inundated with global warming hysteria! Point is, we all should be responsible stewards and live as lightly as we can through the choices we make, and Wal-Mart should be looking at this from a stewardship and what’s best for the business perspective.

    Now, what’s best for the business in this case may be a longer term horizon, but if they can start on projects and programs that allow them to do better their job – “lower prices, always”, and it takes a number of years to reap the benefits, then so be it – saving the economy money and increasing growth in the long term is what sustains societies. While the media has a major head rush because of this (WAL-MART SEES THE LIGHT!), each side is using each other to forward their agenda in the court of public opinion – nothing wrong with that, just be prepared for the consequences of using the press for this, they will turn tide.

    Another MNB user wrote:

    When was "An Inconvenient Truth" declared a 'hit'? Who declared it? What were the criteria?

    “An Inconvenient Truth” is the third highest grossing political documentary of all time, has been a critical success, and certainly is helping to create awareness and debate about the issue.

    Sounds like a hit to us.

    KC's View: