retail news in context, analysis with attitude

MNB Archive Search

Please Note: Some MNB articles contain special formatting characters, and may cause your search to produce fewer results than expected.

    Published on: January 25, 2007

    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:

    http://www.morningnewsbeat.com/Radio/Radio_Listen_S.las

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


    Hi, I’m Kevin Coupe and this is MorningNewsBeat Radio, brought to you by Webstop, your first stop for retail website design.

    I am recording this from the annual Food Marketing Institute Midwinter Executive Conference in Orlando, Florida, where I’ve just spent a couple of days listening to a number of presentations. This is an event at which senior, c-level executives gather every year to discuss issues of change and leadership. If you’ve been reading my coverage the last few days, you’ll know that I’ve given many of the presenters good marks, with an A+ for Safeway’s Steve Burd, who blew me away with his speech about solving the national healthcare crisis.

    At the risk of sounding cynical, I’d like to step back from the conference and note some of the major themes that were sounded:

    • The food industry needs to pay better attention to the health and wellness of its employees and customers. In doing so, it is better if companies work together than separately.

    • The most important challenge facing the industry is nurturing management talent, and senior executives have to embrace this responsibility if they are to develop organizations that are productive and people who have transformational leadership skills. To settle for less is to put their companies at risk.

    • Because Americans are starting to pay more attention to the subject of sustainability – however this word is defined, and it can defined in many ways – retailers and manufacturers have to pay attention to it as well.

    • Ethical behavior is better than non-ethical behavior.

    • Stores should be laid out so that they are good for the customer, not good for the retailer and/or manufacturer.

    • Finally, because women still do most of the shopping in America’s supermarkets, companies need to do a better job of leveraging the talents and insights that their female employees bring to the table.

    I think it is fair to say that put in such stark and basic terms, none of these themes strike me as a take-your-breath away revelation. And while I’m certainly simplifying them, these were, in fact, the lessons that senior executives were meant to learn this week.

    What worries me is that some of the companies represented in the room may actually have seen one or two of these as a breakthrough concept that needed to be examined and implemented by their people. With the possible exception of sustainability – which is pretty much a new concept here in the US, even though the notions of ethical sourcing and environmental conservation should be bedrock principles, not new-age theories – every one of these points should be foundational values on which the industry is built, and that serve as a launching pad from which to explore and cater to the 21st century consumer.

    The question, I think, is whether the food industry is a 21st century industry. Not just in its use of technology, but in its willingness to reinvent the business model, to revolutionize its organizations, and to take the kind of chances necessary to succeed in 2007 and beyond.

    We have to dream larger dreams, think bigger thoughts, and make a greater reality.

    For MorningNewsBeat Radio, I’m Kevin Coupe.

    KC's View:

    Published on: January 25, 2007

    Julie Roehm, the former Wal-Mart marketing executive who was fired by the company and accused of ethically questionable behavior and of having an inappropriate relationship with another executive, has filed a lawsuit against the retailer accusing it of breach of contract and of smearing her reputation in the media.

    Roehm charges that Wal-Mart "made false and malicious statements to the media." She has denied that there was any sort of inappropriate relationship with Sean Womack, VP-communications architecture, who was fired at the same time she was.

    Other charges that circulated about Roehm’s behavior included the allegation that she allowed a potential vendor to pay for her dinner at a business meeting/social event.

    Roehm joined Wal-Mart a year ago as senior VP-marketing communications, and agreed to a compensation package that reportedly included base pay of $325,000, a signing bonus of $250,000, annual incentive-based payments and restricted stock worth up to $300,000.

    While she engineered a review of Wal-Mart’s marketing functions during her short tenure there, hiring a new ad agency to revamp the company’s image, the results have not been as successful as Wal-Mart would have liked. When Wal-Mart fired Roehm and Womack, it also fired the new agency, had another review and hired yet another agency.

    According to Advertising Age, “Roehm says she was notified of her termination by Wal-Mart's chief financial officer ‘ostensibly because [she] hasn't been fulfilling the expectations of an officer of the company.’ But she claims Wal-Mart ‘provided no specific examples of any conduct ... which did not fulfill the expectations of an officer of the company, because no such conduct exists.’” Roehm also “is looking to retrieve items left in her office at the Bentonville, Ark., headquarters. She's demanding the return of her media exchange files, material from presentations and work she did prior to joining Wal-Mart, and copies of her Microsoft Outlook folders, including her personal contacts.”

    In a meeting with reporters at an unrelated event yesterday, Roehm reportedly said that leaving Wal-Mart has been “very free and liberating,” and she said that wherever she goes next, it will be “anyplace that doesn't end in –ville.”
    KC's View:
    Wal-Mart better have incriminating pictures of Roehm and Womack if it is going to make some of those accusations stick.

    We suspect that this lawsuit is going to end up in some sort of settlement, the details of which won’t be revealed.

    Published on: January 25, 2007

    The New York Times reports that South Beach Diet founder Dr. Arthur Agatston, a Florida-based cardiologist, has a practice that is so focused on preventive medicine that only three of his patients had heart attacks last year. This reflects a broader trend, that “we now know an enormous amount about how to prevent heart attacks, with powerful drugs like statins, smoking cessation, exercise and diet. With the right preventive care, people can cut their risk of a heart attack by up to 80 percent, cardiologists estimate.”

    The problem, according to the Times, is that Agatson’s practice is losing money, because “preventive medicine just doesn’t pay in the current American medical system.”

    The Times writes that “lack of insurance is only one of the two huge problems with health care. The other is the perverse system of incentives that nudges doctors and patients toward expensive tests and procedures when cheaper preventive measures might actually produce better results. Partly as a result, costs are rising rapidly for the 250 million people who do have insurance.”

    In a separate story, the Times notes that corporate executives throughout America are starting to look seriously at trying to solve the health care problem, that because “not taking action was no longer an option for American companies as they compete with foreign businesses whose governments shouldered medical and hospital costs.”

    One of the examples cited by the Times: Steven Burd of Safeway, whose efforts to fix his company’s healthcare issues were documented on MNB yesterday:

    http://www.morningnewsbeat.com/Home/Home_S.las?Date=2007-01-24#A24902
    KC's View:
    We mentioned yesterday in this space that we thought that either FMI or Safeway should post Burd’s speech online for everyone to see…that the points he makes are serious and credible enough that they need to be aired far and wide.

    In response, we got dozens of emails from MNB users asking for such a link.

    Hopefully, we’ll have one soon. Because this issue isn’t going away.

    Published on: January 25, 2007

    Wal-Mart confirmed yesterday that, as expected, John Fleming, its chief marketing officer, will move over to become the company’s chief merchandising officer. Simultaneously, Stephen Quinn, Wal-Mart’s senior VP of marketing, will succeed Fleming, having been promoted to be executive VP and chief marketing officer.

    Business Week has an interesting piece providing some background on the marketing issues affecting the company, noting that there was “a divide with Wal-Mart's powerful merchandising division, the unit responsible for buying and displaying goods within stores, company insiders say. Before Fleming became marketing head, the marketing department played second fiddle to merchandising and was jokingly referred to as the place Wal-Mart employees went to retire. It didn't even have a consumer research arm.

    “Fleming went to work expanding the department, adding consumer research and marketing strategy staffs, and creating a branding unit to define how Wal-Mart should position itself with consumers. Fleming called the department ‘a startup in the world's biggest turnaround.’

    “Fleming aimed to have the ascendant marketing department use its consumer research to help guide the merchant's product choices. But Wal-Mart's merchandising division wasn't accustomed to taking direction from marketing and the two departments didn't work together effectively, people familiar with the situation say. The merchants were slow to follow marketing's lead on product direction. For example, marketing had pushed denim for fall, but the theme wasn't apparent in stores.”
    KC's View:
    Wow. They have silos in Bentonville, too.

    Not sure if it is a relief or a worry to find out that the Bentonville Behemoth has a lot of the same issues that other retailers have.

    Published on: January 25, 2007

    Wal-Mart confirmed yesterday that, as expected, John Fleming, its chief marketing officer, will move over to become the company’s chief merchandising officer. Simultaneously, Stephen Quinn, Wal-Mart’s senior VP of marketing, will succeed Fleming, having been promoted to be executive VP and chief marketing officer.

    Business Week has an interesting piece providing some background on the marketing issues affecting the company, noting that there was “a divide with Wal-Mart's powerful merchandising division, the unit responsible for buying and displaying goods within stores, company insiders say. Before Fleming became marketing head, the marketing department played second fiddle to merchandising and was jokingly referred to as the place Wal-Mart employees went to retire. It didn't even have a consumer research arm.

    “Fleming went to work expanding the department, adding consumer research and marketing strategy staffs, and creating a branding unit to define how Wal-Mart should position itself with consumers. Fleming called the department ‘a startup in the world's biggest turnaround.’

    “Fleming aimed to have the ascendant marketing department use its consumer research to help guide the merchant's product choices. But Wal-Mart's merchandising division wasn't accustomed to taking direction from marketing and the two departments didn't work together effectively, people familiar with the situation say. The merchants were slow to follow marketing's lead on product direction. For example, marketing had pushed denim for fall, but the theme wasn't apparent in stores.”
    KC's View:
    Wow. They have silos in Bentonville, too.

    Not sure if it is a relief or a worry to find out that the Bentonville Behemoth has a lot of the same issues that other retailers have.

    Published on: January 25, 2007

    Tesco CEO Sir Terry Leahy said this week that he was pleased that the UK’s Competition Commission has not been able to come up with any evidence that the presence of four enormous retailers in the UK is decreasing competition and therefore is unfair to suppliers. "The commission appears to have made some progress on dispelling the myths surrounding our industry, particularly in their early work on suppliers where they have found no problems with the economic viability of manufacturers, processors or wholesalers,” he said.

    However, he also said he was surprised that the report had a “lack of focus on consumers.” Leahy urged the commission to ensure that (consumers) are top of the list for the remainder of the inquiry. I believe passionately that consumers have benefited in so many ways from the intense competitive rivalry in this industry.”

    The Competition Commission issued a report that indicated its “Emerging Thinking” in an ongoing study of the country’s retailers and their competitive policies.

    Leahy said, "The Commission will investigate all of the issues further and I am very confident that once they look at all of the evidence they will find, as they have in previous years, that our industry is competitive and good for consumers and will remain so in the future.”
    KC's View:
    Sure, Tesco is in business to make money. But we have to say that when we hear Terry Leahy talk about the primacy of the consumer, we believe him…because Tesco walks the walk.

    Published on: January 25, 2007

    A new study by ACNielsen Global Services reports that beverages supporting healthy diets are among the world’s fastest-growing food and beverage categories, and that drinkable yogurts in particular was the fastest-growing food and beverage category purchased by consumers worldwide.

    In total, nine product categories grew by double digits compared to 2005, with drinkable yogurts topping the list. In six of the nine categories, followed by fresh fish and seafood, alcoholic cider, fresh ready-to-eat salad, baby formula, and dairy-based drinks.

    “Around the world, consumers are balancing health and nutrition concerns with a desire for convenience and value,” said Jane Perrin, senior vice president, managing director for ACNielsen Global Services.
    KC's View:
    None of this is surprising, except for the sales boon being experienced by alcoholic cider.

    Who the hell drinks that much alcoholic cider?

    Published on: January 25, 2007

    According to the Wines & Vines Directory/Buyer's Guide, there has been an “explosive” growth in new wineries around the country, led by California which got 465 new wineries last year for a 28 percent increase. The five states showing the highest percentage increase were South Carolina (75 percent increase), Hawaii (67 percent increase), Nevada (67 percent increase), Oklahoma (48 percent increase) and Colorado (46 percent increase).

    By actual winery count, other than California, the biggest growth was seen by Washington (65 new wineries, a 22 percent increase); Oregon (49 new wineries, a 22 percent increase); Texas (24 new wineries, a 32 percent increase); Colorado (22 new wineries, a 46 percent increase); New York (21 new wineries, a 12 percent increase); Virginia (20 new wineries, a 24 percent increase); North Carolina (18 new wineries, a 44 percent increase); Pennsylvania (18 new wineries, a 22 percent increase); and Michigan (15 new wineries, a 26 percent increase).

    Canada reportedly got 128 new wineries, a 102 percent jump over the previous year.
    KC's View:
    We’ve never heard of a mainstream supermarket doing this, but wouldn’t it be interesting if such a retailer created an alliance with a winery that allowed them to open a satellite location within the walls of a supermarket. There are probably legal problems with such an arrangement in a number of states, but it could be an interesting idea. One of the best jobs we ever had was in a winery tasting room while we were working our way through college – not just because we learned something about wine (some of which we actually remember), but because the tasting room was a great way to create and build community. (In college, of course, “building community” meant “meeting girls.” But you get the idea.)

    Published on: January 25, 2007

    The Los Angeles Times reports that J.M. Smucker Co. is changing the formula for Crisco to eliminate trans fats.

    According to the Times the move “shows how times have changed. When it debuted in 1911, the queen of trans fat products was hailed as a healthful alternative to butter and lard.”
    KC's View:

    Published on: January 25, 2007

    • PepsiCo reportedly is rolling out a new product, Aquafina Alive," described as "low calorie, vitamin-enhanced water beverage” that comes in three flavors.

    • The St. Louis Post-Dispatch reports that Supervalu-owned Save-A-Lot, which currently has more than 30 stores in Texas, plans to open five more within the month – two in Houston, and one each in Brownsville, Harlingen and Victoria.
    KC's View:

    Published on: January 25, 2007

    • Metro Canada announced that its first quarter earnings were up a whopping 112.2 percent – largely because of the company’s acquisition of A&P Canada – to the equivalent of $59.8 million (US). Q1 sales were down 0.3 percent to $2.2 billion (US), while same-store sales were up 2.3 percent.

    • McDonald’s Corp. reported that its fourth quarter profit was $1.2 billion, up from $608.5 million during the same period a year ago, largely because of its sale of the Chipotle burrito chain. Q4 sales grew 11 percent to $5.6 billion, from $5.01 billion during the year-ago period. US same-store sales were up 5.9 percent for the quarter, while Q4 European same-store sales were up 5.8 percent.
    KC's View:

    Published on: January 25, 2007

    • Steven C. Anderson has been named the new president/CEO of the National Association of Chain Drug Stores (NACDS). Anderson, the former president/CEO of the National Restaurant Association (NRA), succeeds Robert Hannan, who has been serving in an interim capacity since the resignation last year of Craig Fuller.

    Fuller resigned under fire, reportedly blamed by his constituency for taking a conciliatory approach to Medicare reform, which some believed hurt community pharmacies disproportionately.
    KC's View:

    Published on: January 25, 2007

    Lots of reactions to Safeway CEO Steve Burd’s healthcare comments, reported yesterday on MNB.

    One MNB user wrote:

    I actually was CEO of a health insurer so I speak with some knowledge and Burd’s plan is interesting with some great effects but he attributes the spiraling health care problem to just a few reasons. Here are a few facts.

    First, all providers inflate the cost of the “uninsured” because they use “list prices” to estimate the cost. However, no one actually pays list prices. The actual cost to the providers is way below what they estimate. Why? Because the high list price keeps the pressure on to raise reimbursement rates. The providers need increases to cover their cost increases but the uninsured are not the reason. A hospital may charge $3300 for a night but check what they get reimbursed - $800. I know - I was just in the hospital for 3 days. Total charges on the bill - $200,000. Actual reimbursement $21,000. It is a game the providers play and the insurers encourage.

    Second, we spend way too much on services. State mandates that require certain services to be included in all health policies are a major issue. Here is an example. Chiropractic care is included but if we gave the consumer a choice would all buy it, particularly if the cost was known? We do not all buy satellite radios for our cars why should we all have to buy chiropractic care? I do not want it but it is included in the cost even if I do not use it.

    Third, the federal government and its Medicare reimbursement do not fully cover providers’ costs and therefore others have to foot the bill. It is an indirect tax and people do not realize it. This problem will only get worse as more people go on Medicare.

    Fourth, we are increasing the “intensity” of the practice of medicine with new drugs, new tests, etc, etc. We in the U.S. expect the best in health care, no matter the cost and we get it. You should have seen the machines and procedures done on me and the costs compared to the previous methods. Probably costs three times as much as the former procedures!

    Spiraling health care costs is a complex problem and Burd is not explaining it fully

    Medicaid also fails to cover the cot of care in most states so the difference is shifted to the backs of private payers as with Medicare. The drop Burd has seen at Safeway is with management employees who are better educated and more interested in the topic so they respond better than union workers who are used to full reimbursement. While Burd has seen improvement I will bet big money it is one time and nest year costs begin rising again as the overall "trend" in health care costs has not been "upset" by the changes Safeway has implemented.


    Another MNB user wrote:

    I saw this quote today:

    "Wise men talk because they have something to say; fools, because they have to say something." –Plato

    Sometimes I think (and perhaps you think) I fall in that latter classification, but while I do not have the same knowledge base as Mr. Burd I do have a few of comments on Mr. Burd's presentation and the issues of medical insurance and costs that I believe are relevant.

    1. Increasing the deductible by $1,250 and putting $1,000 in a HRA doesn't seem to me to be an economic benefit for the employer. In my 27 years of corporate employment I probably would have pocketed 23,000 of that $27,000 HRA. There must be many employees whose annual medical costs are less than $1,000 a year.

    2. While preventive medicine and wellness programs are the right thing to do I would guess the jury is still out on whether that will be of economic benefit to the employer. Moreover, a lot of these wellness programs are a joke - as was the case with the diabetic education classes which cost my wife's insurer $250.

    3. While Burd mentioned the cost impact on us "regular folks" of medical care providers having to recoup the losses from care of uninsured and underinsured, he should have emphasized the impact of significant cost shifting that occurs because Medicare and Medicaid pays providers well below the actual costs of their services.

    4. The idea of insurance is to spread the risk. Particularly when buying an individual policy one of the problems of affordability is that the insurance industry actuaries now have the ability to predict risk with such uncanny certainty that a great many people just cannot afford the premium they ask for their particular risk category.

    5. Then there is the politically sensitive issue of rationing health care. None of us are going to live forever and many of these end of life medical care expenditures just do not make sense. I knew a 90+ year old woman in poor health confined to a nursing home that never refused a medical treatment or procedure. I am 64. If ten years from now I was told that I needed a heart transplant I am pretty sure I would say "no thanks".

    6. Congress is often part of the problem - for example, the HIPPA provisions on patient confidentiality added a lot of costs with minimal real benefits to 99% of us.


    MNB user Rush S. Dickson III wrote:

    I agree with Mr. Burd - market driven, individual responsibility…The unions will resist because they are myopic about holding onto power, even at risk of their own demise. That's really smart isn't it? Speaking of business models that need revision.

    I agree with Steve Burd's assessment. Who is going to get the health care providers on board? When preventative care becomes as accepted (and paid for) as acute care through our health care provider we can then believe we are finally on the right track as a nation. Unfortunately, current healthcare practices and policies promote band-aids at this time. Mammograms are readily available to almost every woman, even if from a clinic. Not getting them is not taking responsibility for your own life. Unfortunately, preventative screenings and care for other major killers are not as readily available and approved by health care providers and usually quite expensive for the average person to take on without health care participation (e.g., colonoscopies). Yes, education is critical. Yes, people need to take responsibility for their own health by taking on a healthier lifestyle and be proactive in screening for diseases early.

    Unfortunately, without some respite on the costs and availability of these screenings, we will continue to lag in this critical aspect of improving the health of our nation.

    And don't get me started on how poorly we take care of the elderly and the
    cost of prescription drugs…


    Let the dialogue continue.




    We had a story the other day about how the US Food and Drug Administration (FDA) is recommending that voluntary standards be established for the first time covering the gluten-free sector of the food business. A story about this in the Wall Street Journal quoted Jane Andrews, a registered dietitian at Wegmans, as saying that “she's surprised the FDA proposed to make it misbranding if companies label naturally gluten-free products gluten free. Wegmans has done that with products such as pasta sauce because many consumers demand to know, she said.”

    There was a lot of discussion about this on MNB yesterday, with some questioning whether Andrews was right or not.

    Well, yesterday we received the following email from Jane Andrews:

    I’m only too aware of FDA’s regulations regarding claims on foods that are naturally “fat free” or “low in sodium” and should have expected a similar restraint on claims for gluten free foods. Wegmans practice has been to simply drop off claims from foods that are naturally low in fat since the extra words required as in “Bread, a low fat food” spoil our simple labeling system of front panel icons that we call Wellness Keys. We only use the icons on foods with more than one ingredient. In our case (and I suspect other retailers with similar programs) we are not specifically processing food to be gluten free. Rather, our labeling system lets consumers readily see the hundreds of Wegmans Brand foods that are gluten free just as they are.

    Why is this important? Most people have no clue which foods contain gluten and which don’t. They might think that “buckwheat” contains gluten (it doesn’t) or that “spelt” doesn’t (it does). And they have no idea how to decipher an ingredient statement that may never say the word “gluten” and yet be loaded with it. Imagine yourself as newly diagnosed or maybe you’ve invited someone with Celiac Disease to dinner. You start to understand how a simple icon with the words “gluten free” has created so many passionate advocates among our shoppers. We’ve even gotten an award from the Columbia University Celiac Disease Center for the help we provide to shoppers seeking gluten-free foods.

    We believe that this aspect of FDA food labeling regulations could have an unintended consequence. If FDA makes it easier for companies to make claims on the more heavily processed foods, should we be surprised when consumers think “SnackWell” rather than “applesauce” when looking for a fat free snack?

    You better believe that we will be commenting to FDA. And we’ll encourage consumers and other retailers to do so as well.

    (And thanks for creating the forum that lets retail nutrition nerds like me debate the potential impact of these regulations.)


    We have a general rule about stuff like this: We trust the folks from Wegmans to do the right thing more than almost anyone else. And certainly more than the bureaucrats from FDA.

    KC's View: