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    Published on: February 20, 2007

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    KC's View:

    Published on: February 20, 2007

    What are the keys to finding the best executives?

    Relationships. Access. Commitment. And an intimate understanding of retailing and manufacturing.

    That’s why when Sun Capital needed a new CEO for Marsh Supermarkets, it turned to Samuel J. Associates – the best kept secret in the executive search business.

    Food industry companies looking for thought leaders at virtually all levels turn to Samuel J. Associates. Companies such as Price Chopper, Weis Markets, Lowes Foods, and Roundy’s. And so should you.

    Samuel J. Associates’ consultants are food industry executives who manage each assignment personally, and who have fostered relationships that go beyond the “placement process”.

    ”We don’t just place “titles” – we place PEOPLE.”

    THE BEST EXECUTIVES ARE THOUGHT LEADERS.

    TO FIND THE BEST LEADERS FOR YOUR COMPANY,TURN TO A SEARCH FIRM THAT KNOWS HOW TO FIND THEM.


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    KC's View:

    Published on: February 20, 2007

    The University of Michigan’s annual American Customer Satisfaction Index (ACSI) is being released today, and it will show that “customer satisfaction with the goods and services that Americans buy reached an all-time high in the fourth quarter of 2006,” and that “satisfied consumers will continue to prop up the economy, driving consumer spending growth of between 3.5% and 4.1% for the first quarter of 2007.”

    According to a statement released by the university, the index has climbed “to 74.9 on the ACSI’s 100-point scale, up 0.7 percent from the previous quarter, and up almost two percent from the previous year. This is the highest score the Index has had since its first measure in 1994 (74.8).”

    In retail specific segments examined by the study:

    • “Supermarkets improve slightly, up 1 percent in aggregate to 75. Publix reaches a new high, improving 2.5 percent to 83. The company is partly employee-owned and has a reputation for good customer service and a family-friendly atmosphere. Supervalu drops 4 percent to 74 as it absorbs some Albertson’s stores in an acquisition. Albertson’s had been a poor performer before being acquired, and its less satisfied customers surely have impacted Supervalu’s score.”

    • “The drug store industry is up 2.6 percent from its first measurement last year. CVS makes a big jump of 5.4 percent to 78, and Rite Aid is up 4.2 percent to 75. Both companies have been adding more outlets, defying the convention that mergers compromise customer service. CVS has more locations nationwide than any other company in the industry. New computer technologies help drug stores keep highly interconnected and allowing prescriptions to be refilled at any store. More locations mean greater convenience.”

    • “The specialty retail stores industry improves 1.4 percent to 75. Leading the industry once again is Costco, which rose 2.5 percent to 81, its highest score ever and one of the highest in all of ACSI. The biggest gain in the retail trade goes to Best Buy. The company’s score rises 7 percent to 76. Top-line products and extensive service offerings are helping the retailer to improve customer satisfaction, even while it has added many stores over the last year.”

    • “E-commerce improves for the second year in a row, and at 80 is less than a point off of its all-time high (80.8 in 2003). The e-commerce sector includes e-retail, online auctions, online brokerages, and online travel. Online retail is one of the highest-scoring industries of ACSI, and this quarter improves 2.5 percent to 83. Barnesandnoble.com (+1% to 88) continues to lead the industry, followed closely by Amazon.com (87).”

    According to the statement, “ACSI has consistently predicted future consumer spending and is an indicator of financial performance at both the company and industry level.”
    KC's View:
    Maybe. But we’re not completely buying into these results….mostly because we think that the country’s economy is built on a house of cards that might not withstand a serious attack, and therefore customer satisfaction today doesn’t necessarily mean much in term of short-term or long-term prognostication. We heard someone on one of the Sunday morning news programs refer to an “investment bubble,” that there are concerns even among those who are doing well that things are almost too good to be true.

    People may be satisfied with the customer experiences they are having on a day to day basis, but that doesn’t mean that it predicts anything. Not at this point in history.

    Sometimes, consumer satisfaction is a kind of self-fulfilling prophecy. They want things to be good, so they behave as if things are good…but ring up substantial debt in the process.

    And sometimes, things just change. As an example, there was a piece in the Wall Street Journal over the weekend that read, in part:

    “In a reversal that strikes at a cornerstone of pro-sports finances -- and of the way corporate America entertains -- teams around the country are ripping out luxury suites. These perches have been used to justify billions of dollars in stadium construction over the past two decades. But in many cities, they are losing luster with surprising speed, partly the result of factors that couldn't have predicted five or 10 years ago, from changes in tax laws to scandal-driven reforms on corporate entertaining.”

    So much for predictions.

    Ironically, the University of Michigan’s monthly consumer sentiment index also has been released, showing a decline to 93.3 from 96.9 in January, attributed to "concerns about potential increases in unemployment, especially among lower income households and among residents of the Midwest," according to a statement.

    The survey's gauge of current economic conditions dipped to 108.3 in February after 111.3 in January, while its measure of consumer expectations slipped to 83.7 from 87.6 in January.

    No surprise here. People are worried about the war…about the conduct and future of government…global warming…terrorism…food safety…health care issues…their own jobs…and about corporate behavior and executive compensation issues. And that’s just a partial list.

    Don’t mean to sound like Chicken Little, but there are too many ways in which things can go wrong, and too many ways in which consumer confidence can be immediately and profoundly shaken, for us to be convinced that the ACSI numbers are much more than illusory when it comes to their predictive nature. We hope not. But we are unconvinced.

    Published on: February 20, 2007

    Sen. Tom Harkin (D-Iowa) has introduced the “Play Every Day Bill,” which, if passed and signed by President Bush, would “require federal agencies to support the development of a measurement tool to assist communities in identifying strengths and gaps in policies and programs for physical activity for children and youth,” according to a prepared statement. “The bill would also authorize federal agencies to fund model communities of play to develop action plans that promote increased opportunities for quality play, spaces for play and voices for play.”

    The bill is being advocated by The Partnership for Play Every Day, which describes itself as “a newly-founded public-private-non-profit sector collaboration.”

    As Harkin introduced the new legislation, the Partnership released a new study by the Stanford University School of Medicine that directly addresses the issue of childhood inactivity and its direct relationship to the nation’s burgeoning childhood obesity rate.

    Subsequent to the issuance of the report, the Grocery Manufacturers/Food Products Association (GMA/FPA) issued a statement that read, in part: “The report issued today will be an invaluable resource for government, industry and all stakeholders to learn more about the effect physical inactivity is having on the health of our children and what we can do as a community to help make children in this country be more physically active.

    “This report underscores the fact that reversing the trend towards obesity in this country, especially among children, is a complex issue requiring a comprehensive approach and the involvement of stakeholders at every level including industry, government, schools, community organizations, local businesses, and families.”
    KC's View:
    We’re just not sure that legislation is going to solve what clearly is a cultural problem.

    But they’re right about one thing. You can’t solve obesity just by eliminating trans fats or the like. You also have to get up off the couch and get some exercise.

    Published on: February 20, 2007

    Forbes.com carries an interesting piece by Mike Griswold of AMR Research in which he addresses what retailers need to do to do in order to prepare for the rival of Tesco in the Southern California, Arizona and Nevada markets later this year:

    1. Understanding what your customers buy from you, whether through syndicated data or loyalty marketing programs. But Griswold also suggests that retailer executives need to be in the stores, seeing what customers are doing, hearing what they are saying, and doing whatever is necessary to get a sense of the customer experience. (And not just at their own stores; it also is critical to be in competitors’ stores.)

    2. Protect the company’s key assets – store managers. “Savvy retailers should target high performers now and map a comprehensive career path for those individuals,” Griswold writes. “Communicate the value of these associates, make them feel appreciated, and engage in-store managers with focus groups to gain insight into what is happening in the stores.” Because if you don’t, Tesco will.

    3. Review your assortment – especially because in most stores, five percent of the merchandise accounts for 85 percent of the sales.

    4. Develop a “land bank.” One of Tesco’s biggest advantages in its home UK market is its “land bank,” secured but undeveloped sites that in essence shut out the competition. In markets where Tesco may be looking for sites, do the same thing to Tesco before it does it to you.

    5. Griswold suggests that retailers need to “identify and develop an operational excellence model that will help differentiate” and “develop meaningful key performance indicators, and ensure not only robust reporting on performance but nimble processes for reacting to business demands.”

    6. And finally, Griswold writes, “Tesco's entry into the U.S. will change the retailing paradigm by providing the look and feel of a full service grocery store in a compressed footprint. It is time to think outside the box and create new and innovative ways to service the customer” and perhaps even “revisit initiatives that may have been before their time.” One example – Internet shopping, which has been a huge strength for Tesco in the UK. Griswold writes: “You can be sure that Tesco will leverage its home shopping expertise to drive volume growth, leverage existing infrastructure and meet a latent customer need.”
    KC's View:
    We get emails every once in a while from folks in the MNB community who suggest that Tesco is overrated, and it can’t be very good because it is taking so long for the company to open stores and establish a presence. We concur with Griswold on this one – he notes that “Tesco's record for entering new markets is 11-to-2--it only stumbled in France and Taiwan.”

    We’ve seen enough Tesco stores and know enough Tesco people to make us believe that it will be successful in the US, and that the worst thing people can do is underestimate its potential. (We guarantee you, by the way, that Wal-Mart isn’t underestimating Tesco…and if Wal-Mart is vigilant, you should be, too.)

    Griswold quotes Teddy Roosevelt: "In any moment of decision the best thing you can do is the right thing, the next best thing is the wrong thing, and the worst thing you can do is nothing."

    Both Griswold and Roosevelt are right. Doing nothing is not an option.

    Or, as we like to say here on MNB: “Compete is a verb.”

    Published on: February 20, 2007

    The Los Angeles Times this morning reports that Gelson’s has signed a contract with the United Food and Commercial Workers (UFCW), simultaneously alleviating any possibility of a strike that could affect its stores and ratcheting up the pressure on Safeway, Kroger and Supervalu’s Albertsons to come to a labor agreement before the exiting contract expires on March 5.

    It was just a strike, combined with a lockout, that ravaged the Southern California market three years ago. Gelson’s is the second regional chain to get a deal with the UFCW; Stater Bros. signed a contract last month.

    While neither management nor labor were discussing the specifics of the Gelson’s deal, sources were telling the Times that it eliminates some of the tiered pay and health care provisions that were put in place three years ago. The last time around, Gelson’s and Stater Bros. agreed to accept whatever deal was made by the UFCW and the big three grocers; when pickets disrupted business at Albertsons, Safeway’s Vons and Kroger’s Ralphs, Stater Bros. and Gelson’s saw enormous sales increases.

    This time, the smaller retailers appear to be staying ahead of the wave.
    KC's View:
    First of all – and our thinking has evolved on this one – we believe firmly that any agreement that does not integrate Safeway CEO Steve Burd’s thinking on health care would be a foolish deal…because it will not grapple with the most serious problem facing both these companies and their employees.

    Secondly, we would be shocked if there is a labor problem in Southern California…because with Tesco coming to town, it would not be wise for any of the food retailers there to be dealing with pickets and discord.

    Published on: February 20, 2007

    Fascinating profile in Business Week of Jim Hagedorn, CEO of Scotts Miracle-Gro Co., who is fighting the high cost of health care by forcing employees to take responsibility for their own wellness.

    “Scotts is in the vanguard of companies seeking to monitor and change employee behavior,” Business Week writes. “The company's outlier status reflects the born-again zeal of its CEO. Hagedorn is a reformed nicotine addict himself. He smoked two packs a day for 20 years—until his mother, also a heavy smoker, died of lung cancer. Hagedorn quit the same day.”

    Scotts banned smoking by company employees and has made the fight against obesity a major priority, and in doing so, adopted a carrot-and-stick approach. The company did its best to convince employees that they would be better off if they paid closer attention to their health, but also was willing to fire people if they did not adopt behaviors that would help them live longer and help the company drive down costs. One example:

    “Hagedorn built a soup-to-nuts medical and fitness center across the street from headquarters. Operated by Whole Health, the 24,000-square-foot facility cost $5 million and can meet pretty much any health-related need an employee might have, including a drive-thru for free prescription drugs. The clinic employs two full-time doctors, five nurses, a dietician, counselor, and two physical therapists. A team of fitness coaches provides personal training sessions for $30 an hour.

    “Scotts employees are now urged to take exhaustive health-risk assessments. Those who balk pay $40 a month more in premiums. Using data-mining software, Whole Health analysts scour the physical, mental, and family health histories of nearly every employee and cross-reference that information with insurance-claims data. Health coaches identify which employees are at moderate to high risk. All of them are assigned a health coach who draws up an action plan. Those who don't comply pay $67 a month on top of the $40.”

    Business Week writes that “so far, the company says, more than 70% of headquarters staff belongs to the fitness center. The smoking-cessation program has already had a 30% success rate. The wellness program, which costs $4 million a year to run, is a financial drain. But the company expects it to pay for itself in three to four years.”

    That’s not to say there aren’t challenges. At least one lawsuit has been filed against the company by a dismissed employee (who says that he was fired for smoking), and if it is successful, it seems likely that the lawyers will be lining up to take a crack at Scotts’ policies.

    But there also are success stories about people who have changed their lives because Scotts forced them to be more vigilant about their own health.
    KC's View:
    There’s no question that the edges of propriety are being flirted with here, that legitimate questions can be raised about how involved a company should be in terms of the personal behaviors of its employees. One lawyer uses the “slippery slope” argument, suggesting that once the company is able to ban smoking and force employees to deal with obesity issues, it won’t be long before it can stop them from “eating processed sugars, owning dangerous pets, flying private aircraft, mountain climbing, downhill ski racing, single-handed sailing, or spreading toxic chemicals on lawns.”

    On the other hand, it can be fairly argued that these people are killing themselves and asking for the company to foot the bill once they fall ill. Which also isn’t fair.

    The one thing we would say about the Scotts approach is that the company isn’t just making up rules and enforcing them. It is working hard to be a participant in the process and supportive of people working hard to change their lives.

    Good for them.

    Published on: February 20, 2007

    The Associated Press reports that “unlike other critical infrastructure sectors like water, energy and health care, the food industry isn't getting much help from state and federal governments when it comes to disaster planning” for a possible avian flu pandemic. “That puts the burden on individual supermarket chains and wholesalers to deal with a potentially large number of sick workers that could affect store operations and disrupt the food supply.”

    One of the challenges facing the food business in the case of a pandemic would be that the supply chain could get tied up in knots while absenteeism increase – and yet at the same time, people would be far more likely to want to eat at home, putting greater pressure on supermarkets to perform.

    “The industry is actively thinking through contingency plans, so if it should happen, our members would be well prepared to deal with it," Tim Hammonds, president of the Food Marketing Institute (FMI), tells the AP, noting that FMI is “urging wholesalers and retailers to talk with their suppliers about alternative sources for their products and to anticipate what products will be in high demand in a pandemic situation, such as medicines and food staples.”
    KC's View:
    Let us get this straight.

    The US Congress is going to have time to debate a “Play Every Day” bill, but the federal government isn’t helping the food industry enough with its disaster planning?

    Our tax dollars at work.

    Published on: February 20, 2007

    The US Food and Drug Administration (FDA) reportedly is calling for consumers to throw out any Peter Pan peanut butter bought since May 2006, broadening the warnings it issued last week when salmonella-contaminated peanut butter was found to have sickened more than 290 people in 39 states.

    ConAgra, maker of the Peter Pan brand, said last week that it was trying to determine what caused the contamination, and speculation seems to be fixed on dirty equipment.

    The salmonella also was found in some jars of Wal-Mart’s Great Value private label peanut butter, also made by ConAgra.
    KC's View:

    Published on: February 20, 2007

    The Dole Fresh Fruit Co. has recalled several thousand cartons of cantaloupes imported from Costa Rica after they tested positive for salmonella.

    According to Dole, the recall covers roughly 6,104 cartons of cantaloupes distributed to wholesalers in the Eastern United States and Quebec between Feb. 5 and Feb. 8. No illnesses connected to the cantaloupes have been reported.

    This is the second report of salmonella contamination in a week. Late last week, ConAgra Foods recalled its Peter Pan brand and certain batches of Wal-Mart’s Great Value house brand of peanut butter after they were linked to a salmonella outbreak that’s sickened nearly 300 people in 39 states.
    KC's View:

    Published on: February 20, 2007

    Good interview in USA Today with Procter & Gamble CEO A.G. Lafley, in which he discusses his leadership style. Excerpts:

    On what makes him a strong leader…”One of my most important jobs is to build an outstanding team. I've been a change agent. I'm pretty courageous. I'm a builder and I think a lot about the greater good, the long term and whether what we're building today will last 10, 20, 50 years. I'm a thinker, but I'm action- and results-oriented. Finally, I'm a low-ego guy. I don't have problems putting the greater good of the company or the P&G brands way ahead of any personal aspirations or achievements.”

    On his weaknesses… “I'm impatient. I have high standards and high expectations, and I expect everybody to be as committed as I am. I have a terrible habit of not being on time, especially for meetings. I want the record to show it is improving, but I believe in managing by walking around. That makes me late….Some people on the other end of the conversation think I'm overly demanding, but I don't think my personality or my tonality is mean-spirited. If I'm in the game, I want to compete to be the best.

    On his people skills… “I hold people accountable. If they fall way short, it's the end of their career at P&G. That happens every year. This is not a ‘one strike and you're out.’ All failure is learning. We just want the learning to occur early, fast and cheap, not after billions of dollars are invested…I wouldn't say I'm nice. I don't like the word ‘nice.’ But I would say I care about people, even people who fail. Failure just means that they have to decide what they're going to do next.”

    On what distinguishes top leaders… “One is uncompromising integrity. I mean that in the moral sense, but I also mean it in the sense of thinking integrity and action integrity. They think with discipline and honesty. They sort through flattery, through politics, and see things as they are, come to grips with reality, and then bring incredible integrity to the decision and the action. Second is courage. What separates talented people in the end is the courage to make the really hard call. A lot of hard calls are not tough because they are hard to figure out. They are tough because they have short-term sacrifice or emotional content that people don't want to deal with. It's human nature to avoid that kind of pain.”
    KC's View:

    Published on: February 20, 2007

    The Wall Street Journal reports that Kraft Foods CEO Irene B. Rosenfeld plans to lay out her new strategy for the company today at an investors’ conference, and offers a preview:

    • “Instead of just selling meal components, Kraft will make more complete meals like prepackaged salads and ready-made sandwiches with its Oscar Mayer meats and Planters nuts,” the Journal reports.

    • “We are about to take this great portfolio of ours in a new direction that's more consistent with the reality of consumers' lives today,” Rosenfeld tells the WSJ. “We have all kinds of capabilities in terms of manufacturing and selling and distribution. We've got complementary products that go together: cheese and crackers, ham and cheese, coffee and cookies. Our challenge is, how do we leverage those assets to accelerate our growth?”

    She adds, “I'm excited about this new product we just launched in January called Deli Creations. These are hot sandwiches that are made with our high-quality ingredients like Oscar Mayer meats, Kraft cheese and A1 and Grey Poupon sauces. But what's so cool about them is you stick them in your microwave, it takes 60 seconds and it tastes freshly baked.”

    • Rosenfeld also says there will be a greater emphasis on healthier foods: “We have technologies and research and development ideas that will allow us to meet the needs for healthier foods without having to give up on quality. If you were to eat our sugar free Jell-O pudding, for example, it's indistinguishable from our base pudding. I feel very confident that we not only can do it but that it's a key piece of our strategy going forward.”

    • Rosenfeld also suggests how the supermarket needs to change: “We ought to see together the kinds of things that go together. Today if you want to make a salad, you have to go to the produce to get your lettuce, you have to go to the meat and cheese sections -- which are in two different places -- to get your meat and cheese, and then you have to go to a third section to get your salad dressing. So increasingly I think a big part of what we'll see in the future is better thinking about how to organize the store.”
    KC's View:

    Published on: February 20, 2007

    • Published reports over the weekend offer two snippets of information about Tesco’s planned small-store Fresh & Easy format that it will begin rolling out later this year in Southern California, Arizona and Nevada – they will not have gasoline pumps, and they will not sell any tobacco products.
    KC's View:
    And while Tesco may have described its US plans as being focused on “convenience stores,” we think that this may have been a typo. It meant “convenient stores” – and that, in many ways, these will be unlike any traditional c-store that we’ve ever seen.

    Published on: February 20, 2007

    Employees at Ahold-owned Stop & Shop supermarkets in Massachusetts, Rhode Island and Connecticut reportedly have agreed to postpone a strike and continue negotiating a new contract, even though the old deal expired last weekend.
    KC's View:

    Published on: February 20, 2007

    • The Wall Street Journal reports that as Wal-Mart prepares to announce its four quarter results today, the retailer “is going back to basics. At the company's annual gathering of managers two weeks ago, Wal-Mart gave store managers marching orders to present customers with cleaner stores, faster checkouts and friendlier employees. That the company -- which has some 4,000 U.S. stores and 2,700 internationally – needs to lure customers back is a sign that it has a lot more work left to do. It continues to overhaul management, appointing a new chief marketing officer and head of U.S. business strategy in recent days.”

    Making life even more difficult than usual for Wal-Mart – this year’s first quarter has eight fewer days prior to Easter than last year, which reduces important selling time; home décor and clothing sales continue to be a drag on the company; and analysts believe that it could start facing negative judgments in the class action gender discrimination suit later this year.

    • Wal-Mart announced yesterday that it plans to open nine stores in areas of the country where unemployment is high and there is a strong need for economic revitalization, and will work with local business leaders and even smaller retailers and minority-owned companies to help build an economic infrastructure.

    The Wall Street Journal this morning reports that Wal-Mart will provide supply chain management and technology services in the joint venture that it has established in India with Bharti Enterprises, which itself will invest $2.5 billion (US) in new stores over the next eight years.
    KC's View:

    Published on: February 20, 2007

    The Boston Globe reports that Ahold-owned Stop & Shop is working with federal investigators “to determine how many consumers may have had their credit and debit card data stolen by high-tech thieves who apparently broke into checkout-line card readers and planted the equivalent of bugs to steal information. Personal information reportedly was stolen from at least a half-dozen stores, though the company said there have been no reports of any transactions using pilfered credit or debit cards.

    According to the Globe, “Customers who used credit or debit cards at the six Stop & Shop stores were being advised by the company to check their bank and credit card statements carefully for suspicious transactions.”

    KC's View:

    Published on: February 20, 2007

    A new study by the National Institutes of Health (NIH) suggests that pregnant women who eat fish more than three times a week were not at risk for having children who score low in IQ tests, contrary to warnings issued in 2004 by the US Department of Health and Human Services (HHS) and the Environmental Protection Agency (EPA). There is “no evidence to lend support to the warnings,” according to the new study, which even goes so far as to “lend support to the popular opinion that fish is brain food.”
    KC's View:

    Published on: February 20, 2007

    • The Dallas Morning News reports that The Container Store, the store-and-organization retailer that is much lauded as being one of the best places to work in America, “has hired financial advisers to "explore strategic alternatives including a potential sale of the company.”

    According to the story, even if The Container Store is sold, its four senior executives – co-founder and chairman Garrett Boone, co-founder and CEO Kip Tindell, chief merchandising officer Sharon Tindell, and president Melissa Reiff, all say they would like to remain with the company.

    Business Week reports that “the supply of organic milk is expected to spike in 2007 due to a one-year grace period on a federal rule change that mandates dairy farmers use 100 percent organic feed. For years, farmers looking to move to organic milk have been able to feed cows 80 percent organic feed and 20 percent conventional feed in the year before they become certified as organic farmers -- an allowance that brought transition costs down since organic feed can be 40 to 50 percent more expensive.” The 100 percent rule goes into effect later this year.
    KC's View:
    We have to admit that we don’t completely understand the rationale behind a rule that says that, even temporarily, organic milk doesn’t have to come from cows fed 100 percent organic feed. And we’d be willing to bet that most customers wouldn’t understand that, either.

    Published on: February 20, 2007

    • Seiyu, the Japanese subsidiary 53 percent owned by Wal-Mart, reported an annual net loss that was the equivalent of $468.8 million (US), more than triple to loss reported during the retailer’s last fiscal year. At the same time, annual sales were down 3.6 percent to the equivalent of $8.07 billion (US), though same stores sales were up for the first time in 15 years, by 0.6 percent.

    "It was a year where we saw significant change," Seiyu CEO Ed Kolodzieski told a news conference. "Unfortunately, we fell short of both our sales target and our profit target for the year."

    Wal-Mart has so far invested more than $1 billion (US) in Seiyu, and Kolodzeiski projected that the Japanese chain will become profitable during the current fiscal year.

    • Campbell Soup reported second quarter earnings of $284 million, up 18.8 percent from $239 million during the same period a year ago. Q2 sales were $2.52 billion, up 4.3 percent from the second quarter of fiscal 2006 when sales were $2.16 billion.

    Ironically, the company noted, sales and profits were driven by strong demand for foods like Godiva candy, Goldfish crackers, and chocolate chip cookies, not the healthier products that the company has been introducing.

    KC's View:

    Published on: February 20, 2007

    • Seiyu, the Japanese subsidiary 53 percent owned by Wal-Mart, reported an annual net loss that was the equivalent of $468.8 million (US), more than triple to loss reported during the retailer’s last fiscal year. At the same time, annual sales were down 3.6 percent to the equivalent of $8.07 billion (US), though same stores sales were up for the first time in 15 years, by 0.6 percent.

    "It was a year where we saw significant change," Seiyu CEO Ed Kolodzieski told a news conference. "Unfortunately, we fell short of both our sales target and our profit target for the year."

    Wal-Mart has so far invested more than $1 billion (US) in Seiyu, and Kolodzeiski projected that the Japanese chain will become profitable during the current fiscal year.

    • Campbell Soup reported second quarter earnings of $284 million, up 18.8 percent from $239 million during the same period a year ago. Q2 sales were $2.52 billion, up 4.3 percent from the second quarter of fiscal 2006 when sales were $2.16 billion.

    Ironically, the company noted, sales and profits were driven by strong demand for foods like Godiva candy, Goldfish crackers, and chocolate chip cookies, not the healthier products that the company has been introducing.

    KC's View:

    Published on: February 20, 2007

    • Safeway announced the appointment of Des Hague as president/general manager, Perishables. He succeeds Rojon Hasker, who will now dedicate herself exclusively to her role as president/general manager, Lifestyle.

    Hasker was previously responsible for both Perishables and Lifestyle.

    Hague is the former chairman/president/CEO of Hot Stuff Foods (formerly Orion Food Systems), an international food franchiser, as well as the former as vice president, Fresh Food Merchandising, for at 7-Eleven.

    • ConAgra announced that Joan Chow, the former chief marketing officer at Sears, has joined the company as executive vice president and chief marketing officer.

    KC's View:

    Published on: February 20, 2007

    Last week, MNB reported on an new Nielsen study saying that affluent households with annual incomes of more than $100,000 made their food shopping decisions based on both value and quality, patronizing “club stores like Costco and Sam’s Club and upscale mass merchandisers like Target in search of a deal, as well as national and higher-end grocery chains that meet their need for fresh produce, meat, poultry and seafood, along with a great deli section and alcoholic beverage aisle.”

    In our commentary, we wrote: “It isn’t exactly surprising to find out that affluent consumers have both the time and the money to exercise levels of choice that may not be available to people with less time and money. It doesn’t necessarily mean that wealthier shoppers are smarter shoppers, just that more affluent shoppers are willing to go out of their way for a bargain – that’s part of how they got to be wealthier shoppers.”

    MNB user Dennis Zegar responded:

    Your comments re: affluent shoppers are basically correct. However, the primary predictor in eating well and healthy is education. Income is highly correlated with education. "Knowing" what is best for you to eat is why affluent shoppers are willing to go elsewhere for what they want. Lower income correlates highly with lower education levels thereby mitigating the "Knowing" factor. With today's urban sprawl you don't have to travel far to shop at any number of mass merchandisers or specialty stores to eat "smart". Case in point are chains like Food Lion opening store formats such as Blooms that target middle income shoppers.

    MNB user Dave Tuchler observed:

    Interesting study. In this case, though, seems that comparing incomes of >$100k/yr with those at the extremely low (poverty) level of <$20k/yr seems less appropriate for understanding affluent behavior than understanding the limitations of low-income households who are struggling to cover the basics and have little/no discretionary income:

    - Low cash flow limits ability to pay membership fees or afford higher at-the-register cost of stocking up.
    - Lower car ownership makes it tougher to get to these locations or cart groceries home - a problem exacerbated because low-income neighborhoods are not where these retailers locate.
    - Highly processed calories are more affordable than protein or fresh vegetables/deli when you need food on the table.
    - 'Value' is relative. At Costco, what is better value than a grocery store will still be out of reach for many ("wow! organic fair trade coffee for only $4/lb"!)

    Collectively there are probably resources that could be pooled among lower income HHs to enable better selection/value, but overcoming cash flow barrier would require a coordination of demand and a way to bring supply closer to the consumers.


    MNB user Glen Terbeek wrote:

    Let's face it, affluent shoppers have both the financial capacity to buy a month’s worth of "core" items and the storage capacity to store a month worth of "core" items after they buy them. They go to clubs so they don't have to spend their time on these non-value shopping experience items day to day. Remember "core" items are items used all of the time, and are the same everywhere they are sold. The fact that these "core" items are cheaper at clubs and the fact that there is always a surprise impulse item or two of interest at a club is a plus. This gives the affluent even more time than others to shop for the quality and other non-core items of value in a variety of stores and Internet sites.

    In contrast, shoppers with lower incomes live more on a day to day basis and don't have the luxury of time, excess money, or storage to shop in many different venues, often paying much more for "core" items than the affluent. Maybe that is why supercenters are doing well.


    MNB user Chris Esposito offered a personal perspective:

    Totally agree with this. We typically shop Target for our basics, non-perishables (paper, HBA, etc) while going out of our way (25 miles) to shop Wegmans for their selection of meats, cheeses, breads, produce, etc. And we use the local ShopRite for the in-between necessities. I think this article hits it right on the head. When you get down to it, Scott Paper is Scott Paper, regardless of if I get it at Target, ShopRite or Wegmans. But, if I want a Black Truffle, fresh monkfish, a nice Prime Cut of Beef or just a selection of cheeses for a wine & cheese party, I can't find that stuff in Target, and I know the quality and selection at Wegmans will be superior.




    We reported last week about how peanut butter has been linked to a salmonella outbreak, which led MNB user Dennis Stienstra to write:

    I find it mystifying that whenever a story about BSE comes out you relish to opportunity to blast the Beef Industry and the USDA, but when a true food safety problems occurs one where people actually get sick you remain remarkably quiet.

    Well, it’s not like we’re on the payroll of the peanut butter lobby!

    Actually, you make a good point. We thought about it after reading your email, and concluded that we didn’t make a big deal about it because the source of the salmonella seems to have been determined and a recall has been instituted. In the case of BSE, our reaction is stronger because we think that the issue isn’t being treated right by the federal government.

    You probably didn’t think we did enough on cantaloupes, either. But we’re not sure what else there was to say.




    We reported Friday that Wal-Mart Watch sent out an email to its subscriber list looking to raise funds to help Al Norman, founder of the Sprawl-Busters anti-Wal-Mart activist group, raise money to fight yet another Wal-Mart going up in his Massachusetts back yard.

    One MNB user responded:

    I appreciate you being neutral on the subject of Al Norman, mouth piece and puppet for Wal-Mart Watch. However, I think you have it all wrong. The question is not which network or cable TV station will show up first. The question is how long Samson can keep Goliath at bay.

    Actually, we think that Al Norman was around long before Wal-Mart Watch…but maybe that’s beside the point.

    We actually debated Al Norman years ago at a conference where he was brought in to explain to retailers how they could effectively fight to building of supercenters and big box stores in their communities. And we argued that while it is all well and good for citizens to raise objections and use every means possible to fight retail sprawl, that was not how retailers should be spending their time and money – that they’d be better off figuring out how to actually be competitive.

    And MNB user David Farnam wrote:

    Al must be getting pretty desperate to be asking a hydrogeologist for expert testimony to block development. Al must have a deep-seated environmental concern about all the contamination of storm water from the oil and antifreeze dripping from the all the cars that will likely be parked outside.

    Valid environmental concern but it is off limits by the EPA and is just the sort of “problem” tax hungry city councils are interested in…smart development.





    We wrote last week about how some restaurants are working with a hospital to offer reduced-portion menus to people just having undergone gastric bypass surgery. One MNB user responded:

    As someone who recently had gastric bypass this is actually a very positive thing and will actually help several of these restaurants gain more customers. Most people who have this surgery are founding members of the clean plate club. We grew up and our parents beat it into us that kids were starving in China so clean your plate. Part of the healing process is the realization that if it is wasted on you it is still wasted. So normal sized restaurant meals, which result in leftovers sometimes work, but often do not
    if you are heading anywhere but straight home - it spoils in the car. A typical restaurant meal is 4 or 5 meals for a gastric bypass patient. The pouch created is only 1/2 oz to an 1 oz in size. Unless you go right home or eat it for the next several meals or split it with family members, the food goes to waste. Why waste the food? Let people order portion sizes they can eat so there is no waste. The customer feels better because they don't feel they are wasting food or money and is more likely to go to that restaurant and bring their families and friends. I know I would and do and I'm usually the one paying. Restaurants have catered to Lo-Carb dieters, low fat dieters, etc. So the restaurants have the choice of losing customers or allowing people to order in sizes they can eat. As long as they are not cheating the system (ordering a kids meal and taking stuff off the buffet - which gastric bypass patients would have a very hard time doing anyway), why not offer meals at a size and shape that customers can eat?

    Our family frequents restaurants now where we know we can order a-la-carte only or where we can do very small portions simply because we don't want to waste the food. For me, it's not so much about the money as the waste.

    This surgery was a life saver for me. Truly was. I've lost 87 lbs as of today and have plenty more to go. I went from being diabetic, high cholesterol, high blood pressure, increased stroke and cancer risk to where I am today in about 3 1/2 months. All diabetes meds gone in 5 weeks after 8 years on them, cholesterol dropped to 162 in 8 weeks, triglycerides down from 437 to 187 in 8 weeks. Before this surgery I had lost 400 lbs in yo-yo diets over the years...problem is I gained back 500 lbs in the same time.

    This surgery saved my life and is saving the lives of many people and growing very fast. It's a tool only for helping with life-change. While restaurants continue to get lambasted by their unhealthy menus, trans fats, portion sizes, etc. Restaurants would be wise to reach out to this growing demographic much the same way they reach out to boy scouts, schools, churches, etc.

    KC's View:

    Published on: February 20, 2007

    • Safeway announced the appointment of Des Hague as president/general manager, Perishables. He succeeds Rojon Hasker, who will now dedicate herself exclusively to her role as president/general manager, Lifestyle.

    Hasker was previously responsible for both Perishables and Lifestyle.

    Hague is the former chairman/president/CEO of Hot Stuff Foods (formerly Orion Food Systems), an international food franchiser, as well as the former as vice president, Fresh Food Merchandising, for at 7-Eleven.

    • ConAgra announced that Joan Chow, the former chief marketing officer at Sears, has joined the company as executive vice president and chief marketing officer.
    KC's View:

    Published on: February 20, 2007

    Last week, MNB reported on an new Nielsen study saying that affluent households with annual incomes of more than $100,000 made their food shopping decisions based on both value and quality, patronizing “club stores like Costco and Sam’s Club and upscale mass merchandisers like Target in search of a deal, as well as national and higher-end grocery chains that meet their need for fresh produce, meat, poultry and seafood, along with a great deli section and alcoholic beverage aisle.”

    In our commentary, we wrote: “It isn’t exactly surprising to find out that affluent consumers have both the time and the money to exercise levels of choice that may not be available to people with less time and money. It doesn’t necessarily mean that wealthier shoppers are smarter shoppers, just that more affluent shoppers are willing to go out of their way for a bargain – that’s part of how they got to be wealthier shoppers.”

    MNB user Dennis Zegar responded:

    Your comments re: affluent shoppers are basically correct. However, the primary predictor in eating well and healthy is education. Income is highly correlated with education. "Knowing" what is best for you to eat is why affluent shoppers are willing to go elsewhere for what they want. Lower income correlates highly with lower education levels thereby mitigating the "Knowing" factor. With today's urban sprawl you don't have to travel far to shop at any number of mass merchandisers or specialty stores to eat "smart". Case in point are chains like Food Lion opening store formats such as Blooms that target middle income shoppers.

    MNB user Dave Tuchler observed:

    Interesting study. In this case, though, seems that comparing incomes of >$100k/yr with those at the extremely low (poverty) level of <$20k/yr seems less appropriate for understanding affluent behavior than understanding the limitations of low-income households who are struggling to cover the basics and have little/no discretionary income:

    - Low cash flow limits ability to pay membership fees or afford higher at-the-register cost of stocking up.
    - Lower car ownership makes it tougher to get to these locations or cart groceries home - a problem exacerbated because low-income neighborhoods are not where these retailers locate.
    - Highly processed calories are more affordable than protein or fresh vegetables/deli when you need food on the table.
    - 'Value' is relative. At Costco, what is better value than a grocery store will still be out of reach for many ("wow! organic fair trade coffee for only $4/lb"!)

    Collectively there are probably resources that could be pooled among lower income HHs to enable better selection/value, but overcoming cash flow barrier would require a coordination of demand and a way to bring supply closer to the consumers.


    MNB user Glen Terbeek wrote:

    Let's face it, affluent shoppers have both the financial capacity to buy a month’s worth of "core" items and the storage capacity to store a month worth of "core" items after they buy them. They go to clubs so they don't have to spend their time on these non-value shopping experience items day to day. Remember "core" items are items used all of the time, and are the same everywhere they are sold. The fact that these "core" items are cheaper at clubs and the fact that there is always a surprise impulse item or two of interest at a club is a plus. This gives the affluent even more time than others to shop for the quality and other non-core items of value in a variety of stores and Internet sites.

    In contrast, shoppers with lower incomes live more on a day to day basis and don't have the luxury of time, excess money, or storage to shop in many different venues, often paying much more for "core" items than the affluent. Maybe that is why supercenters are doing well.


    MNB user Chris Esposito offered a personal perspective:

    Totally agree with this. We typically shop Target for our basics, non-perishables (paper, HBA, etc) while going out of our way (25 miles) to shop Wegmans for their selection of meats, cheeses, breads, produce, etc. And we use the local ShopRite for the in-between necessities. I think this article hits it right on the head. When you get down to it, Scott Paper is Scott Paper, regardless of if I get it at Target, ShopRite or Wegmans. But, if I want a Black Truffle, fresh monkfish, a nice Prime Cut of Beef or just a selection of cheeses for a wine & cheese party, I can't find that stuff in Target, and I know the quality and selection at Wegmans will be superior.




    We reported last week about how peanut butter has been linked to a salmonella outbreak, which led MNB user Dennis Stienstra to write:

    I find it mystifying that whenever a story about BSE comes out you relish to opportunity to blast the Beef Industry and the USDA, but when a true food safety problems occurs one where people actually get sick you remain remarkably quiet.

    Well, it’s not like we’re on the payroll of the peanut butter lobby!

    Actually, you make a good point. We thought about it after reading your email, and concluded that we didn’t make a big deal about it because the source of the salmonella seems to have been determined and a recall has been instituted. In the case of BSE, our reaction is stronger because we think that the issue isn’t being treated right by the federal government.

    You probably didn’t think we did enough on cantaloupes, either. But we’re not sure what else there was to say.




    We reported Friday that Wal-Mart Watch sent out an email to its subscriber list looking to raise funds to help Al Norman, founder of the Sprawl-Busters anti-Wal-Mart activist group, raise money to fight yet another Wal-Mart going up in his Massachusetts back yard.

    One MNB user responded:

    I appreciate you being neutral on the subject of Al Norman, mouth piece and puppet for Wal-Mart Watch. However, I think you have it all wrong. The question is not which network or cable TV station will show up first. The question is how long Samson can keep Goliath at bay.

    Actually, we think that Al Norman was around long before Wal-Mart Watch…but maybe that’s beside the point.

    We actually debated Al Norman years ago at a conference where he was brought in to explain to retailers how they could effectively fight to building of supercenters and big box stores in their communities. And we argued that while it is all well and good for citizens to raise objections and use every means possible to fight retail sprawl, that was not how retailers should be spending their time and money – that they’d be better off figuring out how to actually be competitive.

    And MNB user David Farnam wrote:

    Al must be getting pretty desperate to be asking a hydrogeologist for expert testimony to block development. Al must have a deep-seated environmental concern about all the contamination of storm water from the oil and antifreeze dripping from the all the cars that will likely be parked outside.

    Valid environmental concern but it is off limits by the EPA and is just the sort of “problem” tax hungry city councils are interested in…smart development.





    We wrote last week about how some restaurants are working with a hospital to offer reduced-portion menus to people just having undergone gastric bypass surgery. One MNB user responded:

    As someone who recently had gastric bypass this is actually a very positive thing and will actually help several of these restaurants gain more customers. Most people who have this surgery are founding members of the clean plate club. We grew up and our parents beat it into us that kids were starving in China so clean your plate. Part of the healing process is the realization that if it is wasted on you it is still wasted. So normal sized restaurant meals, which result in leftovers sometimes work, but often do not
    if you are heading anywhere but straight home - it spoils in the car. A typical restaurant meal is 4 or 5 meals for a gastric bypass patient. The pouch created is only 1/2 oz to an 1 oz in size. Unless you go right home or eat it for the next several meals or split it with family members, the food goes to waste. Why waste the food? Let people order portion sizes they can eat so there is no waste. The customer feels better because they don't feel they are wasting food or money and is more likely to go to that restaurant and bring their families and friends. I know I would and do and I'm usually the one paying. Restaurants have catered to Lo-Carb dieters, low fat dieters, etc. So the restaurants have the choice of losing customers or allowing people to order in sizes they can eat. As long as they are not cheating the system (ordering a kids meal and taking stuff off the buffet - which gastric bypass patients would have a very hard time doing anyway), why not offer meals at a size and shape that customers can eat?

    Our family frequents restaurants now where we know we can order a-la-carte only or where we can do very small portions simply because we don't want to waste the food. For me, it's not so much about the money as the waste.

    This surgery was a life saver for me. Truly was. I've lost 87 lbs as of today and have plenty more to go. I went from being diabetic, high cholesterol, high blood pressure, increased stroke and cancer risk to where I am today in about 3 1/2 months. All diabetes meds gone in 5 weeks after 8 years on them, cholesterol dropped to 162 in 8 weeks, triglycerides down from 437 to 187 in 8 weeks. Before this surgery I had lost 400 lbs in yo-yo diets over the years...problem is I gained back 500 lbs in the same time.

    This surgery saved my life and is saving the lives of many people and growing very fast. It's a tool only for helping with life-change. While restaurants continue to get lambasted by their unhealthy menus, trans fats, portion sizes, etc. Restaurants would be wise to reach out to this growing demographic much the same way they reach out to boy scouts, schools, churches, etc.

    KC's View: