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    Published on: November 16, 2006

    To hear Kevin Coupe’s weekly radio commentary, click on the “MNB Radio” icon on the left hand side of the home page, or just go to:

    Or, to simply read the commentary in text form, continue below…

    MNB Radio Commentary – Text Version - 11/16/2006

    Hi, I’m Kevin Coupe, and this is MorningNewsBeat Radio, brought to you by Webstop, practitioners of the art of retail website design.

    Last week in my radio commentary, I wrote about “Fart’s Law,” which states that “the likelihood of an innovation succeeding increases exponentially with the number of old farts who refuse to endorse it.”

    I continue to believe that this is a pretty good rule of thumb in almost any business, but I have another one in mind today…and it would go sort of like this:

    “Pundit, Listen To Yourself.”

    I offer this up because I often have written and spoken about the need for retailers in the modern competitive environment to give customers what they want, where they want it, how they want it, when they want it and at a price consumers believe is appropriate. It is a rule that has grown out of consumer demand. It’s probably the ultimate golden rule for retailers, one that, if violated, will result in many consumers simply looking elsewhere for a retailer that will live up to these expectations.

    And I didn’t pay attention to it.

    When I started doing weekly MorningNewsBeat Radio commentaries earlier this year, I offered just an audio version…because that’s what I wanted. It never occurred to me to ask whether a text version might be a nice or even necessary offering, because I was so in love with the sound of my own voice that…well, it just didn’t occur to me.

    Then, last week, when writing my “Fart’s Law” radio commentary, something made me think about offering a text version and asking you if it was a good idea.

    The response was overwhelming. Close to a hundred email responses said “yes” in no uncertain terms…with people telling me that if they work in cubicles they can’t listen to the commentary, if their companies have removed their computer sound cards they can’t listen to the commentary, or if they read MNB on their PDA’s, they can’t listen to the commentary.

    Now, I may be slow and thick, but I’m not stupid. From now on, the MNB Radio commentary will be offered in both text and audio format. You’ll have it how you want it.

    I think we all make this mistake from time to time. We either love the idea of technology, or we simply focus on our own operational priorities, rather than pay attention to our consumers. And we miss opportunities to connect.

    It’s an important lesson. I’m glad I learned it, even if it took me a while. And once again, as it often does, the MNB community has taught me something I didn’t know or didn’t think about.

    I hope you’re all smart enough to think about this lesson when running your own businesses.

    For MorningNewsBeat Radio, I’m Kevin Coupe.
    KC's View:

    Published on: November 16, 2006

    Supervalu announced yesterday a $1 billion customized remodeling and new store development program that it has dubbed “Premium Fresh & Healthy,” which it says is “designed to enhance its customers' shopping experience.” The company says that the program “harnesses local market insight and corporate centers of excellence in Merchandising and Marketing to deliver the right store, the right offer and the right product mix to fit the neighborhood demographics of each store.”

    Duncan Mac Naughton, executive vice president of Merchandising & Marketing for Supervalu, told an investors meeting yesterday that the program “is all about surprising and delighting the customer. Our extensive research tells us that grocery retailing today should provide consumers with products that allow them to 'turn the dining room lights back on.' This program seeks to deliver compelling, timely and localized offers at the right price through combined scale, customer insight and market knowledge.”

    Among the modules available to new stores will be:

    • Expanded perishables, including produce, meat, seafood, bakery and deli departments.
    • Shop the World, an international foods destination department.
    • Wild Harvest, a store-within-a-store focused on natural and organic products.
    • Enhanced and expanded pharmacy and health and beauty care (HBC) departments to support healthy lifestyles.

    In a statement released yesterday, Supervalu said that “examples of stores leveraging the Premium Fresh & Healthy program include the Acme store in Doylestown, Pa., the Shaw's in East Hampton, Conn., and newly-opened Albertsons stores in Las Vegas and San Diego. As new stores open, they will incorporate the Premium Fresh & Healthy module, and the majority of major remodels and new stores in the next year will leverage the Premium Fresh & Healthy approach.”
    KC's View:
    The only negative we heard about this program yesterday was from independent retailers that are customers of Supervalu’s wholesale division…some of which feel like unwanted children.

    We have every confidence, though, that CEO Jeff Noddle will do what is necessary to make sure that these feelings do not persist.

    But it’ll be a challenge.

    Published on: November 16, 2006

    The Boston Globe this morning reports that The Sharper Image has begun selling a $90 pocket-sized device that detects whether meat is spoiled, even if appears to be fresh. The SensorfreshQ, which works by detecting high bacteria levels on meat and poultry, uses an “array of tiny sensors that generate an electrical current in the presence of biogenic amines. At the touch of a button, a tiny fan inside the device growls to life, blowing an air sample over the sensors. In about a minute, the machine delivers its reading through a set of colored lights.” Green means the meat is fresh, yellow means you should eat it within 48 hours and red means to eat it would be foolhardy.

    The sensor array has to be replaced at a cost of $9.95 every 200 uses.

    The manufacturer, Food Quality Sensor International Inc., says that the sensor will not work on fruits and vegetables, and emphasizes that the technology is testing for freshness, not for pathogens. The company does, however, hope to parlay consumer acceptance into a business model that would have meat suppliers and retailers using a cheaper version of the sensor in every package of meat.
    KC's View:
    It is a good thing that this company didn’t come up with a handheld sensor that would detect the presence of mad cow disease in meat. Because then the USDA would have had to ban it.

    Published on: November 16, 2006

    NYC Health Commissioner Thomas Frieden said yesterday that the city is considering revising a proposed ban on the use of trans fats by restaurants so that it is a little less onerous, according to a story posted this morning by CBS News.

    “Frieden said officials are giving serious attention to complaints that the timeline is unrealistic, especially for national restaurant chains,” CBS reports. “The original proposal gives eateries six months to replace their cooking oils and shortening and 18 months to eliminate trans fats altogether.” And, he said, “There are transition difficulties for some places and we're looking at a combination of timing issues, technical support issues and phasing issues that we think would help deal with that.”

    If the ban is implemented, it would affect every restaurant in the city, from four-star establishments to corner hot dog stands. While a number of chains – such as Wendy’s, Burger King and Kentucky Fried Chicken - have moved to reduce or eliminate trans fats from their cooking oils in advance of the NYC move, McDonald’s CEO Jim Skinner said this week that his company is making “good progress” in finding a replacement oil, but made no commitment on when it would make the shift; in addition, it was reported this week that McDonald’s was lining up legal representation to help it fight a ban implemented by the health department.
    KC's View:
    It simply doesn’t make sense for NYC to implement a ban that is almost impossible for major companies to comply with; it sets up confrontations that can and should be avoided. So for the city to trim its sails a bit to make things more reasonable for retailers, and to do so in a way that doesn’t really hurt consumers, just seems logical.

    Published on: November 16, 2006

    The Boston Globe this morning reports that Sen. Edward Kennedy (D-Massachusetts) plans to criticize the US Food and Drug Administration (FDA) for being more concerned with the priorities of drug manufacturers than those of consumers and patients.

    According to the story, Kennedy said yesterday that “Science has, too often, had to take a back seat at the very agency which should be setting the standard for objectivity and integrity.” And, he added, “There is also growing evidence that the dedicated professionals at the FDA have been pressured to trim their scientific views to the prevailing political winds. These are symptoms of a serious illness, and we should act without delay to provide the cure,"

    Kennedy will become chairman of the Senate Committee on Health, Education, Labor, and Pensions when the Congress reconvenes next January under Democratic control.

    However, the Globe reports that the committee is not waiting that long to hold hearings. There is, in fact, a session scheduled for today that will promote FDA reform legislation introduced by Kennedy and outgoing committee chairman Sen. Michael B. Enzi (R-Wyoming).
    KC's View:
    And the next step will be to take aim at the bureaucrats at USDA who seem to believe that mad cow disease is just a petty annoyance that has pretty much been taken care of, and that there is the statistical probability that there are only nine cases of BSE in the entire country.

    Published on: November 16, 2006

    The American Farm Bureau has released its annual informal survey of the basic items used for Thanksgiving Day dinner – including turkey, stuffing, sweet potatoes, rolls with butter, peas, cranberries, and pumpkin pie with whipped cream – said reported that to prepare this dinner for 10 people will cost an average of $38.10, up $1.32 from last’s year’s average of $36.78. More than half this increase comes in the cost of the turkey.

    According to the report, the survey “was first conducted in 1986 when the average cost of a Thanksgiving meal for a family of 10 was $28.74. This year’s average cost of $38.10 is equivalent to $18.99 in 1986 inflation adjusted dollars, which means the real cost of the Thanksgiving dinner has declined 34 percent in the last 20 years.”
    KC's View:
    Whipped cream on pumpkin pie? That’s sacrilege.

    Vanilla ice cream is far better, in our view.

    Published on: November 16, 2006

    The Oregonian reports that gluten-free Thanksgiving meals will be more popular than ever this year, as consumers “feast on quinoa rather than cornbread stuffing, root-thickened gravy in place of the usual flour-based sauce and rice-flour crust -- forget gluten-packed graham crackers -- rimming the pumpkin pie.

    “Gluten is among the latest ingredients that mainstream consumers are kicking to the curb. The wheat byproduct is taking its place in the hierarchy of foods with unhealthy reps, along with trans fats, carbohydrates, cholesterol and sugar. Market surveys show growth in sales of gluten-free goods -- even takeout meals for Thanksgiving at the Portland-based New Seasons Market chain -- reaching beyond the fringes.”
    KC's View:
    It’s interesting that this story seems to imply that eating gluten-free foods isn’t just for people with celiac disease anymore…that people are choosing such foods for health reasons.

    The Oregonian writes that “about one in 133 people are celiacs -- though many of those sufferers don't know it” and reports that the American Dietetic Association predicts that the number of people with celiac disease will grow in coming years.

    But our friends at the Hartman Group say that 99 percent of people who buy gluten-free products have not been diagnosed with a gluten allergy.

    Hard to imagine that this isn’t just a fad. But you never know.

    Published on: November 16, 2006

    • The Boston Globe this morning reports that “Wal-Mart Stores Inc. is expected to say today that it will begin selling $4 generic prescription drugs in its Massachusetts stores.”

    As noted in the Globe, “Wal-Mart has accelerated rollout of the program after launching it earlier this fall in Florida, and now offers it in 26 other states. The company said it sold 152,000 prescriptions in four days after it began offering $4 generics in 12 states as part of the program's initial expansion.”
    KC's View:

    Published on: November 16, 2006

    • The Iron Workers of Western Pennsylvania Pension Plan has filed a lawsuit in federal court in an attempt to halt the $20 billion merger of retailer CVS Corp. and pharmacy benefit manager Caremark Rx, saying that it has been structured “simply to avoid CVS having to pay a takeover premium for its acquisition of Caremark.”

    • The Chicago Sun Times reports that Target Corp. will once again ban the Salvation Army from having its bell ringers in front of its stores during the upcoming holiday season…though it is trying to compensate by donating $1 million to the organization.
    KC's View:

    Published on: November 16, 2006

    • Metro Inc., Canada's third-biggest supermarket chain, said that its fourth-quarter profit jumped 57 percent to the equivalent of $69.3 million (US), on sales that were up 37 percent to $2.3 billion (US). The company attributed the increases to conditions related to its acquisition of A&P and Dominion stores there.

    • Longs Drug Stores reports that its third quarter earnings were $12.7 million, up 42 percent from the same period a year ago. Q3 sales were up 9.7 percent to $1.23 billion.
    KC's View:

    Published on: November 16, 2006

    • Penn Traffic announced that its VP/general counsel, Francis D. Price Jr., has resigned. No reason was given for the resignation.

    However, Penn Traffic lost its accounting firm, Deloitte & Touche, earlier this year when the company said it could not trust representations made by Price about a probe into Penn Traffic’s accounting practices.

    • Loblaw announced that Peter McMahon, executive VP of supply chain, has decided to remain with the company, rescinding a resignation offered earlier this year.
    KC's View:

    Published on: November 16, 2006

    Responding to yesterday’s story about charges leveled by the Cornucopia Institute – an advocacy group that promotes the interests of small organic farmers – that Wal-Mart is guilty of mislabeling non-organic products as organic, one MNB user wrote:

    Is it really a surprise that they're not compliant with the USDA rule? It takes dedicated, trained staff to ensure that these standards are being upheld and this sort of thing should serve as a warning to other big retailers jumping on the fresh organic bandwagon - us smaller retailers just make it look easy!

    Another MNB user wrote:

    Everyone should look at every organic item in every supermarket they go to. They will find a number of “execution” errors at store level that cause this same problem everywhere. If this outfit was truly dedicated to protect organics they would check every where not just Wal-Mart.

    MNB user Missy Carducci wrote:

    I heard this report on CNBC this morning, where they were commenting that W-M is expanding their organics to lure in the upscale customer. Apparently, the strategy even has Whole Foods shaking in its metaphoric boots. All I could think of (sorry, call me a snob), is how could a WF customer and a W-M customer POSSIBLY shop in the same store??? Wal-Mart must have one helluva great flagship store in Texas, because the “Super” Wal-Mart in our neck of the woods is a little less than desirable, clientele-wise. So less than, I REFUSE to shop there after being ignored by one too many cashiers trash-talking over my head to someone else, who was NOT making a purchase.

    Let’s be real, I highly doubt the signage issues are totally inadvertent. You’d think their store ops people would be monitoring that pretty closely since it is such a big hairy deal to the FDA. Or are they conveniently handing it off to some infamously underpaid hourly worker who could care less where the signs end up?

    I know people don’t like whistle-blowers, but they do oftentimes pound on the table with a shoe for valid reasons. And, I think (despite Cornucopia’s obvious conflict-of-interest issues) Wal-Mart is being just a little too quick to start the finger-pointing. Can you spell obfuscation?

    Another MNB user wrote:

    The signage and handling problems at Wal-Mart are violations but not atypical ones – especially for stores that are new to the byzantine world of organic requirements. Mark Mulcahy, who is a produce consultant and a columnist for Natural Foods Merchandiser, sets up a “Spot The Organic Violations” display at All Things Organic/FMI every year and it’s VERY enlightening. Even people who have been selling organics for years get tripped up.

    Still another MNB user wrote:

    Here are several thoughts. One, most of the organic dairy products are going to be labeled as such by the processor. They want the USDA seal out in front. Organic consumers have to look for the symbol on the label; the operative word is look.

    Two, lots of consumers change their minds. They pickup an item in one location and just put it down next to the new object of their affection. You have to "patrol" the aisles constantly to look for strays. It is not surprising that open stock could get mixed in with organic...beyond the control of the staff.

    Three, one of the reasons organic milk for example has such a premium is inefficiency. The average organic herd is close to 25 head and certainly less than 50 and some with fewer than a dozen head. The herd produces about 25% less fluid milk per day. The tankers have about 50% further to travel to pickup a full load. The processor has substantial records, maintenance and segregation problems to overcome. But we still have fresh organic milk in the case everyday. If W-M and the market in general make the whole system more efficient then everyone seems to benefit.

    Stores, companies and industries try to do what the consumers want. Organics and naturals seem to be what consumers want; but we want the Cadillac quality for the Chevy price.

    And MNB user Karl Heink wrote:

    Giving any amount of space in your column to a story about the Cornucopia Institute only fuels their fire. I cannot believe that any educated person can believe anything they print. There are too many biases on their part to make anything they say believable. As an associate working for a competitor to Wal-Mart, I would almost seem happy to hear that Wal-Mart was being penalized. However, in reading about the complaint coming from Cornucopia, I can almost immediately discard this entire story. I would be more inclined to believe that store-level associates simply do not understand the demand 'to get things right' within the scope of labeling Organics. It is not that selling Organic Products is so difficult but that having knowledgeable associates that know their products would seem to be a tool that Wal-Mart lacks.

    While I am glad to read about Organics and the need to be properly handled, labeled, merchandised, and sold, giving Cornucopia Institute any credibility in your column lowers my respect for your efforts.

    Whoa! Ever hear the phrase, “Don’t shoot the messenger”?

    We thought and continue to think that this was a legitimate story to report, whether or not the Cornucopia complaint is legitimate. The sheer volume of email we got about it would suggest that we were right.

    As it always does this time of year, the “Merry Christmas/Happy Holidays” discussion has moved to the front burner…this year prompted by Wal-Mart’s decision to promote “Christmas” rather than the more generic end-of-year holidays. One MNB user wrote:

    The whole discussion of Happy Holidays/Merry Christmas has gotten a bit silly. I suppose there was a time when people forgot that there are other religions in this country, but now we all know better.

    I am Jewish. Sometimes all the Christmas hoopla seems a little overwhelming. I actually find it funny when a place that is covered in red and green, trees, lights and Santa images says “Happy Holidays” or “Seasons Greetings.” Honestly, who do they think they are fooling? It is our differences (and the freedom to express those differences) that make the US a great land of freedom.

    But none of that matters, what is important is this: No one ever wished me a “Merry Christmas” because they were mean or ignorant or trying to hurt my feelings…They are just enjoying their holiday and wishing me the same.

    That’s nothing to get upset about. I am choking as I type this, but Wal-Mart is doing the right thing…celebrating the season with those that care about it.

    We reported yesterday that Donald Wildmon, chairman of the Mississippi-based American Family Association, is urging supporters to boycott Wal-Mart during the Thanksgiving weekend as a way of protesting Wal-Mart’s offer to pay a commission to a small nonprofit gay organization for sending buyers its way.

    To which one MNB user responded:

    Donald Wildmon…is just pissed off that he and his group weren't smart enough to sign up for the same 5% deal the gay group is receiving.

    And another MNB user wrote:

    What was (Wal-Mart) thinking?... Everyone knows anyone with taste probably shops at Target (wink).

    On the subject of the NYC trans fat ban proposal, we questioned yesterday whether McDonald’s would take a PR hit by fighting the ban in the courts.

    One MNB user responded:

    I don't think they will take a PR hit. People in general are tired of government regulation. If they mess with the taste of their fries, they would take a much bigger hit in lost customers. That is the one product that distinguishes them from the other junk food outlets, although I personally prefer Burger King fries.

    MNB user Terry Pyles wrote:

    While I applaud the likes of Wendy's, Burger King and KFC for their decision to eliminate trans fats from their cooking processes, I also support McDonalds' decision to stand and fight yet another case of government intrusion. Pardon my cynicism, but I would be a little more supportive of the NYC government's (and others considering such a ban) position if they weren't so transparently disingenuous. I mean they want to ban this awful, terrible substance in the name of protecting consumer health, yet they have no problem with that consumer going to the store and buying cigarettes, the only consumer product that, when used according to directions, will kill you. How ridiculous is that? I would hope that one day McDonalds will make the decision to do the right thing. But it should be their decision to make, based on consumer demand. Not based on some grandstanding politicians once again sticking their noses where they don't belong. Next thing you know they will decide it's not the trans fat, it's the French fry. A world without French fries? Perish the thought.

    A world without trans fats does not necessarily mean a world without French fries. We love the frozen French fries made by Alexia – all of which have no trans fats. Baked and sprinkled with a little Emeril’s Essence, these things are fantastic. And no trans fats.

    MNB user Al Kober wrote:

    What evidence do we have that accurately determines that trans fats are the issue the media has made out of them. Not convinced. Just like a lot of other things, global warming for one. Not that the temperatures does not fluctuate, but who or what is causing it. Sounds like more "situation ethics" Government, get out of my face.

    Sorry, Al, but we have to disagree with you on this one.

    You can question the science all you want, or suspect that this is all just a media creation. And discussions of these issues, even by scientists, will always be tinged by political agendas…because to deal with them requires political action of some kind.

    But it seems to us that we can choose to be stewards of our earth and stewards of our own bodies, or we can choose not to be.

    But the science seems pretty clear in both cases.

    We reported yesterday about how Safeway, through its Blackhawk division, has decided to begin selling McDonald’s prepaid “Arch cards” in all of its US locations. Arch cards come in denominations of $5, $10, $25 and $50, can be refilled at the restaurants and don't have an expiration date.

    Our view: We’re sure that Safeway made this decision believing that the cards could generate bottom line revenue. But would Safeway sell prepaid cards that would encourage people to shop, say, at Bristol Farms? Or Albertsons? Or Giant?

    This is more a philosophical question than a judgment. Shouldn’t Safeway (and other supermarket chains) see McDonald’s as the enemy and do absolutely nothing to drive consumers into its arms?

    MNB user Shawn Ravitz responded:

    The Safeway/Blackhawk business model has been in place for years. They have been selling "restaurant" gift cards for years. The real philosophical question is why do the major supermarket chains continue to support a profit center for Safeway? Kudos to Safeway for creating a niche business, but the cynic in me says that they will find a way to screw it up... just give them time!

    MNB user David J. Livingston wrote:

    This was probably a bottom line decision. Each company negotiates its own card deals with other companies. Companies desperate to drive sales will offer huge discounts on the cards, hoping that in the long run, not all of the value gets used. This is a win-win for both companies.

    Giant Eagle was pushing Home Depot and Sears gift cards last summer when they were basically giving away a tank of gas with a $750 purchase. If you were a contractor and were going to spend $15,000 at Home Depot anyway, you might as well get 20 free tanks of gas courtesy of Giant Eagle. I'm not sure how retailers treat the sale of gift cards and if they actually count them toward retail sales, but the numbers could be huge depending on the type of promotions they are tied in with.

    Another MNB user chimed in:

    Just my opinion, but I wanted to say "get real" to anyone that thinks that Safeway, or Wegmans, or Kroger, or even HEB Central Market has any prayer of taking significant business away from McDonalds, or that they are really fighting for the same dollar.

    There is a tremendous number of constituencies represented in the client base of today's supermarkets - delivery drivers, people passing through on their way to work, retail marketing consultants, high-school and college kids, working moms, non-working moms & dads and so and so and so forth – who would gladly use these cards and have absolutely no intention (or even ability) to purchase something from the deli/prepared foods area of the store, let alone actually buy something to cook at home.

    By selling these cards, which McDonalds does pay for, Safeway is pulling dollars out of the enemy's pocket, not driving consumers into their arms - they are headed there anyway.

    Our question stands: Shouldn’t supermarkets see fast food chains as the enemy?

    MNB user Jeremy Shultz wrote:

    I don’t see what the fuss is about. They also sell Olive Garden, Pizza Hut, Red Lobster and Starbucks. These cards are a destination product. People who purchase gift cards at a grocery chain will, most of the time, buy more than just gift cards. Safeway is probably getting a nice commission too.

    But every lobster that someone buys at Red Lobster, and every pizza that someone buys at Pizza Hut, means that there is a lobster and a pizza in a Safeway that isn’t being sold.

    MNB user David Farnam wrote:

    Ahh, I think somebody at Safeway had “New Math” in grade school and is trying to strut their stuff.

    It is a legitimate revenue stream after all. With the proven success of this endeavor I’m sure they will want to expand to providing their busy shoppers with gift cards to the ever-growing meal preparation companies?

    Genius! Don’t you think?


    Another MNB user wrote:

    So much for the re-branding of Safeway. At the end of the day, they're still behaving like a traditional retailer, still looking to make a buck in any way possible whether or not it supports their core business.

    MNB user Tom Devlin wrote:

    Safeway selling McDonald’s prepaid cards makes absolutely no sense. It is the business belief that who ever sells a product that fits the needs of the consumer you are trying to reach is a competitor. Whether it be snacks foods at the gas station, a fast food chain or another supermarket. In today’s world a person getting out of work will have a decision to go to the store and grab dinner, whether they are cooking or going to that very profitable hot prepared food bar in the grocery store. There is a good chance they will decide to use the McDonald’s card and get home early for a change. You not only have more of a chance of losing a customer but you are not going to get new ones having them eat somewhere else…

    KC's View: