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    Published on: December 5, 2006

    The Wall Street Journal writes this morning that “a growing number of companies in recent years have sought to cut medical costs by integrating so-called wellness programs into their health-care coverage. Though many programs are still in their early stages, a number of them are starting to show some positive results -- both in terms of cost savings for employers and improved health for employees.”

    These programs can take the form of free or low-cost health screenings. “Some companies have installed on-site medical clinics to encourage workers to seek preventive care,” the Journal writes. “Other companies require that workers undergo health-risk assessments in order to qualify for medical coverage. Employees deemed at risk, for conditions such as diabetes, heart disease and obesity, might then receive a phone call from a nurse suggesting follow-up action.”

    What’s intriguing about this trend is that it marks a departure from recent history, when companies actually sought to control costs by limiting access to specific doctors and facilities…a move that seemed not to be working since even as they did so, many of these same companies were complaining about the rising cost of health care. Fresh evidence – by no means complete, but compelling – suggests that “early detection and intervention will save money in the long run, especially for chronic diseases such as cancer and heart disease.”
    KC's View:
    We think that companies that pay people good salaries and/or expect them to work hard and smart have every right to expect that these people take care of themselves…and would be wise to help them do so easily, rather than make it harder for them.

    After all, we always argue that companies should treat their employees like an investment rather than as a cost – but this cuts both ways. If a company invests in an employee, that also means it has every right to expect both a short-term and a long-term return.

    We suggested a long time ago that Wal-Mart, for example, ought to try the “Northern Exposure” approach to employee health care – put a bunch of people through medical school in exchange for several years of service taking care of employees throughout its retail system.

    Published on: December 5, 2006

    The New York Times reports this morning that “at least 39 people in central New Jersey and on Long Island were infected, two of them critically, with E. coli bacteria in an outbreak of food poisoning last month that has been traced to the Taco Bell restaurant chain.” The outbreak is described by health officials as “the nation’s most serious outbreak of E. coli toxins since mid-September, when the same strain of the bacteria, linked to packages of contaminated spinach grown in California, killed three people and infected more than 200 in 26 states.”

    Nine units have been closed as a precaution, though investigators have not yet found the source of the contamination. Taco Bell reportedly is cooperating with health officials.
    KC's View:
    There is some controversy about the way the outbreak has been publicized, with questions raised about why any announcement was delayed for several days. Some say the delay was so the public would not overreact…but we’re wondering exactly what an overreaction would be in such a case. Deciding not to eat at Taco Bell?

    And some say that the delay actually made it harder to track the cause of the contamination…which would be unforgivable.

    It sounds to us like commerce was put first and public safety was put second. Which in the end, means that the company’s commercial credibility may be hurt in the long run.

    Published on: December 5, 2006

    USA Today reports this morning on a new Consumer Reports study saying that found that “83% of 525 chickens it tested were infected with either campylobacter or salmonella bacteria or both. The chickens were purchased from supermarkets, bulk retailers, gourmet shops and natural food stores in 23 states. Both bacteria can cause diarrhea, cramping, fever, nausea and vomiting, and life-threatening infections in the elderly, babies and people with impaired immune systems.”

    The National Chicken Council responded to the study by saying the figures are “greatly exaggerated,” and the US Department of Agriculture (USDA) said that the sample was so small as to be inconclusive.

    However, Consumer Reports maintains that the level of contamination has doubled since it last conducted a study in 2003, and calls for government intervention to reduce what is says is an alarming problem.

    According to USA Today, while Consumer Reports did not test cooked fast food chickens, its report is raising concerns about whether these restaurants are cooking their chickens to the point where the contamination is being destroyed.
    KC's View:
    Between this story and the Taco Bell story, we are reminded of the email we got from an MNB user a couple of years ago, pointing out that he was afraid to eat meat because of mad cow disease, afraid to eat chicken because of salmonella, afraid to eat seafood because of mercury, and couldn’t eat pork because he was Jewish. He said that he’d only eat salad except that it probably was contaminated because of acid rain – and this was before the whole spinach problem.

    He was kidding – at least, mostly kidding – but the point is a serious one. On the one hand, you have to sort of get past all the scares and live your life. But on the other, it doesn’t make sense to ignore all the stories.

    So, while we try to not be too affected by scare-mongering, we’ll be avoiding Taco Bell for the foreseeable future (not that this is a problem) and we’re not sure when we’ll next be buying chicken.

    Published on: December 5, 2006

    In El Segundo, California, yesterday, UK-based Tesco officially opened its US headquarters as it prepares to open hundreds of stores in California, Arizona and Nevada. The company currently has 150 employees in the US, but anticipates having as many as 2,500 US workers in fairly short order.

    "Our company has enjoyed strong success in countries throughout Europe and Asia _ and we are excited to now bring that success to America," Tesco USA Chief Executive Officer Tim Mason said in a prepared statement.

    The Los Angeles Times this morning reports that Tesco is “eyeing sites for 300 small grocery stores in Southern California, Las Vegas and Phoenix and was prepared to spend as much as $2 billion over five years on its launch.” Mason said that while 300 sites are being negotiated for, “not all will get opened.”

    The first units – each one about 15,000 square feet, with about two-thirds of the footage devoted to the sales floor - are scheduled to be opened during the second half of 2007, and Mason said the long-term possibilities are near limitless: “If this is successful, this is a very big country.”

    Mason described the stores as "smaller, simpler grocery stores" that, according to the Times, “would allow shoppers to quickly pick up what they need without having to make multiple trips to a variety of stores, including packaged goods and packaged prepared meals. He also said that Tesco plans to open stores in urban neighborhoods that need to be "re-energized.”
    KC's View:
    Colonization will never seem so sweet, we suspect.

    Published on: December 5, 2006

    Good interview in the Wall Street Journal< with Whole Foods CEO John Mackey, who addresses the challenges facing the company as it tries top regain the levels of sales growth that it was used to.


    On whether organic and natural food is a fad… “Something that's been going on for 30 years is hardly a fad. For people who are really interested and committed to an organic-food lifestyle, it's not a fad for them any more than Christianity is a fad for Christians, or Judaism is for Jewish people. It's a value system, a belief system. It's penetrating into the mainstream. I don't see that disappearing anytime soon.”

    On slowing same-store sales… “Same-store sales are lower for a multiplicity of reasons. Greater competition. There's cannibalization. I read about the slowdown with the consumer, they're spending less. Is there saturation? Certainly, some of our markets have more stores than others. We've had three consecutive years of double-digit same-store sales growth and our sales per square foot are $900. It's harder to raise the bar if you keep raising it. You can't compound at the same rate. No retailer ever does.”

    On Wal-Mart’s organic initiatives… “So far, we haven't seen much impact from Wal-Mart, where we've gone head to head against one of their Supercenters that has a lot of organic. It hasn't affected us that much. There isn't a team of people in Austin trying to figure out what to do. We have this empowered, decentralized culture, and a high percentage of them are trying to figure out how to make their stores better, how to improve the customer experience.”

    On price… “We're being more aggressive on price. If [a competitor carries] the exact same product, then we're going to sell it at a matching or lower price. Those are decisions being made locally. We've got 189 stores. They're all faced with their own unique competitive environments. It's not necessary for me to know everything that's going on everywhere. I could find out, if there's a reason.”

    On investor influence… “Investors are participating in the business, so they have the right to express their opinions, and the legal right to fire management if they're unhappy with their performance. It's not an issue of who controls the business. The stockholders should ultimately control the business. The mistake people make is equating the power to hire and fire with the power to set purpose. Purpose is created or discovered by the entrepreneurs who create the business.”
    KC's View:
    That’s an interesting notion – that in the long run, purpose is more important than power.

    It takes a somewhat evolved sensibility to understand that.

    Published on: December 5, 2006

    A new study by market research firm Retail Forward reports that “Target will approach $100 billion in sales in 2010, nearly doubling its current size and becoming an even bigger competitive force.” Some 600 new stores are expected to be opened in the next five years, Retail Forward suggests, but to meet its goals it also will have to “grow sales at existing stores, get more from existing customers and generate more sales from its online business.”

    In addition the study says that “Target will need to look beyond the biggest metro areas for growth. This means exploring more mid-sized markets, and possibly new formats and global opportunities in markets such as Canada and Asia.”
    KC's View:
    All good points. But at the risk of annoying our friends at Retail Forward, it seems fairly obvious that for any retailer to grow requires building new stores, growing same-store sales, selling more stuff to existing customers, generating more online business and maybe even going into new markets.

    The real challenge will be doing all these things while the rest of the competition – especially Wal-Mart - tries to do much of the same stuff.

    Published on: December 5, 2006

    ACNielsen reports this morning that with all the recent stories about the health benefits of resveratrol in red wine, sales in the category are up.

    “Red Wines accounted for a recent high of 52.4% of Table Wine dollar sales in U.S. Food, Drug and Liquor stores over the 4 weeks ending Nov. 18, 2006, compared to just less than 50% in the immediately preceding 4-week period, and 51% in the comparable year ago timeframe,” ACNielsen reports. “Red Wine volume sales had been growing at +3.3% for the full year ending just prior to the recent favorable press, they then sprinted ahead by almost double that, to a growth rate of +8.3% for the most recent 4-week period vs. last year, and over +11% in dollar gains.

    “The overall surge in Red Wine sales led to a very strong increase in sales for the entire Table Wine category – up by +4.3% in volume and +8.4% in dollars, representing an increase of almost $50 million in retail sales vs. the same period last year across U.S. Food, Drug, and Liquor stores.”
    KC's View:
    Proud to say we’re doing our share.

    Published on: December 5, 2006

    The American Academy of Pediatrics (AAP) has issued a call for marketers to cut back on the marketing of consumer products to children, saying that the more than 40,000 commercials shown each year on television contribute to the nation’s rising childhood obesity rates, poor nutritional profiles, and even tobacco and alcohol abuse. AAP is calling not just for reduced marketing to children, but also for a concerted effort to educate children about the difference between marketing messages and reality.

    Among the specific recommendations being made by AAP:

    • Children should be limited to no more than two hours of non-educational screen time each day.

    • School-based advertising should be banned or curtailed.

    • Congress should implement restrictions on commercial advertising on children’s programming.

    • All tobacco advertising in all media should be banned, and alcohol advertising should be limited so that only the product is shown.

    • Erectile dysfunction drugs should only be advertised on television after 10 pm.

    “We're pleading with pediatricians and parents to become aware that consumeristic tendencies are being fed right from birth," said Dr. Donald Shifrin, chairman of the AAP Committee on Communications. "We have to understand that youngsters under a certain age cannot differentiate between a commercial and a program. To them, it's real. There should be some effort on the part of parents to point out that this is a commercial."

    And David Jernigan, executive director of the Center on Alcohol Marketing and Youth at Georgetown University, said, "It's so important that pediatricians and parents be aware of the pressure that kids are under, and for professional groups such as this one to keep putting pressure on industry.”

    However, industry special interest groups responded to the proposals with skepticism.

    Beer Institute President Jeff Becker said, “The key to preventing illegal underage drinking is preventing youth access to alcohol, not restrictive measures or censorship." And the Pharmaceutical Research and Manufacturers of America called the proposals “particularly weak,” saying that ED ads are voluntarily limited to programming where 80 percent of the audience is adult.

    And, the Grocery Manufacturers Association (GMA) also challenged the proposals, saying that its members “have always been committed to communicating with consumers, especially children, in ways that accurately portray their products, their intended uses and the benefits they deliver.”
    KC's View:
    Speaking as a parent, we think that any marketer who claims not to be trying to sell to children is being disingenuous. One of the rules of marketing is to try to appeal to the people most likely to be influenced…and children fall squarely into that category. And sometimes – or often times – the products being sold aren’t particularly healthy or good for them.

    Now, we’re not sure that governmental intrusion is called for, since it usually results in things being more screwed up, not less. But we’re also not sure that industry can be left to do things on its own, since the profit motive and the clarion call of Wall Street often outweigh the better angels of an executive’s nature.

    What will work is for parents to taken firm control of the television set and the remote control, to make sure that kids’ time watching television is limited. It isn’t just commercials, by the way, that can be inappropriate for children. It doesn’t matter if erectile dysfunction drug ads are banned until after 10 pm if on an 8 pm show like “How I Met Your Mother” there are constant references to lap dances and “getting laid.” We don’t mind the jokes. Some are even funny. But the time slot is all wrong.

    Whatever happened to the old “Family Hour,” anyway?

    Published on: December 5, 2006

    • The Wall Street Journal reports this morning that the “free shipping” carrot dangled by many online retailers in past years is a little less available for the 2006 holiday season. It’ is being offered, “but the offers come loaded with conditions and often have a shorter and earlier time frame.”

    Some companies, such as LL Bean, have eliminated the offer completely. Others have moved the deadline, making it earlier than last year…though this may be more a function of Christmas falling on a Monday this year than anything else.

    At least one online retailer is sticking to its guns, no matter what analysts say. “Amazon offers Amazon Prime, a free-shipping program that for $79 a year gives families free two-day shipping on products sold by and by some of its merchants,” the Journal writes.
    KC's View:
    As a customer, we have to say that Amazon Prime is one of the best offers made by that company – because it essentially is a program that rewards us for using it more than more often. Pay the $79 and only order once, and that shipment cost you a whopping $79. Pay the same fee and place 50 orders with Amazon – no matter what their size – and the two-day shipping on each one cost $1.58. And groceries are included…even though they could potentially be the heaviest things shipped.

    Our travel schedule is going to be a little nuts this month, and Amazon and its prime shipping program are going to be lifesavers.

    Published on: December 5, 2006

    The Wall Street Journal reports this morning that the New York City Board of Health is expected “to make New York the nation's first city to outlaw the unhealthy oils, though it's expected to give restaurants a slight break by relaxing what had been considered a tight deadline for compliance.”

    The original plan, expected to be eased somewhat, was to “give eateries six months to replace cooking oils and shortening and 18 months to phase out the ingredients altogether.”

    According to the Journal, “Fast-food restaurants and other major chains are particularly interested in the board's decision on Tuesday because a trans-fat ban wouldn't just involve substituting one ingredient for another. In addition to overhauling recipes, they would have to disrupt nationwide supply operations and try to convince customers that the new french fries and doughnuts will taste just as good as the originals.”

    KC's View:

    Published on: December 5, 2006

    Good interview in The Times of London with AG Lafley, CEO of Procter & Gamble, in which he comments about the success of the Fusion razor, which has supplanted the old two-blade razor. “Sometimes it goes beyond ‘need’, to being something you just want,” he says.

    Other excerpts:

    • “I don’t think size matters. Leadership matters, but big’s never been good for its own sake.”

    • “Tesco is successful because it is responsive to consumers — you have more choice, you are more demanding and your standards keep rising.”

    • “What can happen to well-meaning environmental causes is that they become one-issue orientated. We want to look at cradle-to-grave impact…We want to touch your life in ways that are meaningful and that’s where I think issues of sustainability and the environment are good ones. We can do our part.”

    As for what keeps him awake at night, Lafley has a simple response: “Disruptive technology — if someone finds an alternative to solution chemistry for laundering clothes, that’s a $10 billion sector in jeopardy.”
    KC's View:

    Published on: December 5, 2006

    • The Business Journal of Milwaukee reports that Roundy’s Supermarkets “has added organic products including soy milk, frozen fruit, pizza and peanut butter to its line of private label offerings at its stores because research showed customer demand for such items.” The move is part of Roundy’s strategy of adding more than 300 items to its private label selection, and of being more cognizant of consumer health trends.

    • Published reports say that Winn-Dixie, just out of bankruptcy, plans to open a remodeled store in New Orleans next summer, in an area that remains devastated by Hurricane Katrina and underserved by traditional supermarkets.

    • The Orlando Business Journal reports that Publix Super Markets is scheduled to open three in-store medical clinics, in units located in Tampa, St. Petersburg and Lutz. These clinics “will be staffed by nurse practitioners who write prescriptions, provide diagnosis and treatment of common ailments and minor injuries, and offer wellness care with physicals, screenings and vaccinations.”

    KC's View:

    Published on: December 5, 2006

    • Tesco announced that its third quarter total sales were up 9.6 percent, with same-store sales up 5.6 percent, down a full percentage point from last year’s third quarter growth.

    In the company’s home UK market, third quarter sales were up 8.5 percent and same-store sales were up 5.6 percent.

    • Ingles Markets reported that its fiscal 2006 net income increased 60.3 percent to a record $42.6 million, driven by a 14.9 percent increase in sales to a record $2.61 billion.

    • Walgreen Co. said that November sales were up 16.2 percent to $4.36 billion, with same-store sales up 9.3 percent.
    KC's View:

    Published on: December 5, 2006

    The Seattle Times has a story saying that one of eight people who shops at Starbucks probably pays for his or her purchase with a Starbucks Card. The cards generated almost $170 million in sales last year.

    The Times reports, “About 96 million Starbucks cards have been activated in the United States and Canada since November 2001, and customers have reloaded their cards about 38.6 million times, bringing in $2.17 billion in revenue.”
    KC's View:
    We have one in our wallet all the time, and we try to make sure there’s always at least $20 loaded onto it. Sort of like a security blanket. If caught in a strange city without cash, the odds are pretty good we’ll be able to find a latte.

    Published on: December 5, 2006

    The Center for Science in the Public Interest (CSPI) formally petitioned the US Food and Drug Administration (FDA) last week, calling on the agency “to design a national set of symbols to help consumers quickly identify healthier foods.”

    One MNB user responded:

    The problem with CSPI's suggestion is that it reinforces the good food/bad food cop-out instead of focusing on the real problem of bad diets.

    How would you deal with a simple product such as orange juice? Orange juice is considered to be healthy by most people, and it is healthy in a calorically balanced diet. But if you take in too many calories you would need to consider that orange juice is fairly calorie dense -- about as much so as soda.

    Or take a food such as fettuccini alfredo . We know that CSPI considers this to be "a heart attack on a plate" -- but is eating something with cream sauce a few times per year really a death sentence in an otherwise balanced diet?

    Forget fettuccini alfredo. What would life be without the occasional bowl of spaghetti carbonara?

    We carried excerpts from an interview with former Staples CEO Tom Stemberg yesterday, which prompted MNB user Bob Warzecha to write:

    In my previous life I was a portfolio manager at a large insurance company. I was once given the opportunity to purchase Staples stock during its IPO. I turned it down stating "This is a stupid idea, no one is going to buy their office supplies at a store dedicated to this category". Oops!

    Watching Tom Stemberg's career after Staples, I continue to be in awe of his ideas and strategies. Someone should ghost write a book about his thoughts on retailing. I have a perfect title for the book: "From the Finast [supermarkets] to the Best: Memoirs of a Retailing Visionary".

    We wrote yesterday that “McDonald’s often blamed for childhood obesity, is testing high-tech mini-gyms for kids at seven stores in California, Illinois, Colorado and Oklahoma. The gyms have gizmos for kids ages 4 to 12, from stationary bikes with kid-friendly video screens to hoops courts that electronically cheer players.” If they are successful, the company says it will roll the concept out to a “significant” number of locations.

    MNB user Brenda White objected to our saying that McDonald’s is “often blamed for childhood obesity”:

    Oh, right, it isn't the parents that bring their kids to McDonalds that are responsible for their fat kids, it is McDonalds fault. What a crock.

    Perhaps people should take responsibility for their choices and stop placing blame on everyone else. This is what is wrong with America today. I suppose it is also the credit card companies' and all retailers' fault that people are in credit card debt.

    Doesn’t mean that McDonald’s doesn’t have some culpability…even if not ultimate responsibility.

    We commented yesterday that it is a lot easier to buy a few jungle jims and stationary bikes than it is to do something really significant, like changing the trans fat-laden oil that the company cooks with every days.

    We wonder how much money Mickey D’s is putting into its janitorial budget – because if kids start exercising after eating all that crap, they’re probably going to be throwing up a lot.

    Hey, wait a minute. If the kids eat the junk food and then throw up….maybe they won’t be so obese.

    Could this be Mickey D’s hidden agenda for solving the nation’s childhood obesity epidemic?

    One MNB user responded:

    Did you have a bad night ...all the throw up talk.

    As to McDonalds, why not give them some credit for being independent and not rolling over with the other wimps?

    Because we think that the only thing that’s stand-up about McDonald’s are the arteries of the people who eat there.

    MNB user Kimberly Coiner-Moyle also thought we were over the top:

    Oh my… there is sarcasm, and then there is the abyss of cynicism… I think you may have fallen in on that one! Yikes...

    Probably guilty as charged.

    Finally, in an email that ran yesterday about so-called “husband parking zones,” a female MNB user wrote:

    Poor iddle boysies - do you think it's any more interesting for women hanging around while their men choose clothes? How many of you are sufficiently self-sufficient to go all by yourselves? And how many of you are so manly that you delegate the decision making and wait to see what your woman brings home for you? My heart truly bleeds.

    To which MNB user Kerry Baker responded:

    Your unnamed female correspondent must really have some unresolved personal issues.

    What an offensive comment! And I'm quite surprised that you would provide a venue for her to spew her vitriol - but I guess that in our 'PC' society, one particular group can get slammed by just about anyone with impunity. A negative remark like this really doesn't belong in your otherwise fine newsletter.

    Ah, but who among us does not have at least one unresolved personal issue?

    And if we can’t use MNB as a place for people to work them out – albeit in front of a community of more than 18,000 people – then what’s the point?

    We’re here for you.
    KC's View:

    Published on: December 5, 2006

    The Philadelphia Eagles scratched out a win against the Carolina Panthers, defeating them 27-24 in Monday Night Football action.
    KC's View: