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    Published on: May 10, 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, experts in the art of retail website design services.

    I’ve been covering this industry for a lot of years, but every once in a while I read something that reminds me that not only do I not know everything, I actually am only about half as smart as I think I am. My kids tell me that I’m also only about half as funny as I think I am, but that’s a different story.

    Anyway, I was thumbing through an actual paper copy of the New York Times the other day, and came upon a story about Zingerman’s Delicatessen, an Ann Arbor, Michigan-based business that, to be honest, I’d never heard of before. I guess I just wasn’t paying attention, because since then I’ve spoken to a number of people who have looked at me in stark disbelief at my ignorance. But there it is.

    Zingerman’s, according to the story, started off as just a simple deli doing about six million dollars a year in sales. Six years ago, the owners sat down and started thinking about how they wanted to grow the business…a conversation that many of us should have, but often don’t because we’re so busy making sure today’s business is taken care of and that all the fires are being put out.

    This year, as the business celebrates its 25th anniversary, the deli has some company. As the Times notes, customers who visit the store can “taste bread from Zingerman’s Bakehouse, barbecued pork from Zingerman’s Roadhouse, fresh goat cheese from the Zingerman’s Creamery and coffee that Zingerman’s roasts itself.”

    In fact, the company already has achieved everything it wanted to get done by 2009…and so now the owners are thinking about 2015, and, the Times reports, “weighing ventures like a microbrewery, a small hotel, fish and meat-smoking business and a publishing house.”

    What Zingerman’s seems to have done is a couple of things. First, and most important, ownership doesn’t stop thinking about tomorrow, to quote the old Fleetwood Mac song. That’s incredibly important, because the pace of consumer evolution is so fast that it no longer is good enough to be reactive. I think it is important to lead.

    Which brings me to my second point. Analysts say, and I agree, that Zingerman’s has become a transformational business because it has become an arbiter of good taste, a depended upon and reliable source of both products and, implicitly, information about the food that people eat. Again, a critical factor, because it establishes an unusual level of trust between retailer and consumer and creates for the business a differential and unassailable advantage.

    Except that, of course, no advantage is unassailable. Even the greatest of advantages are only temporary, which is why Zingerman’s isn’t resting on its laurels and plaudits, but rather continues to look for new worlds to conquer, new spaces to occupy, new products to sell and new customers to romance.

    Ownership also keeps net margins low so it can pay its people well, make sure that local producers are making a sustainable profit, and contribute to the community. And there’s no interest in franchising the concept, no matter how many offers management gets – they have no intention of taking the money and running.

    No wonder it’s a legendary business. I just can’t figure out why I hadn’t heard of it before.

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

    Published on: May 10, 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, experts in the art of retail website design services.

    I’ve been covering this industry for a lot of years, but every once in a while I read something that reminds me that not only do I not know everything, I actually am only about half as smart as I think I am. My kids tell me that I’m also only about half as funny as I think I am, but that’s a different story.

    Anyway, I was thumbing through an actual paper copy of the New York Times the other day, and came upon a story about Zingerman’s Delicatessen, an Ann Arbor, Michigan-based business that, to be honest, I’d never heard of before. I guess I just wasn’t paying attention, because since then I’ve spoken to a number of people who have looked at me in stark disbelief at my ignorance. But there it is.

    Zingerman’s, according to the story, started off as just a simple deli doing about six million dollars a year in sales. Six years ago, the owners sat down and started thinking about how they wanted to grow the business…a conversation that many of us should have, but often don’t because we’re so busy making sure today’s business is taken care of and that all the fires are being put out.

    This year, as the business celebrates its 25th anniversary, the deli has some company. As the Times notes, customers who visit the store can “taste bread from Zingerman’s Bakehouse, barbecued pork from Zingerman’s Roadhouse, fresh goat cheese from the Zingerman’s Creamery and coffee that Zingerman’s roasts itself.”

    In fact, the company already has achieved everything it wanted to get done by 2009…and so now the owners are thinking about 2015, and, the Times reports, “weighing ventures like a microbrewery, a small hotel, fish and meat-smoking business and a publishing house.”

    What Zingerman’s seems to have done is a couple of things. First, and most important, ownership doesn’t stop thinking about tomorrow, to quote the old Fleetwood Mac song. That’s incredibly important, because the pace of consumer evolution is so fast that it no longer is good enough to be reactive. I think it is important to lead.

    Which brings me to my second point. Analysts say, and I agree, that Zingerman’s has become a transformational business because it has become an arbiter of good taste, a depended upon and reliable source of both products and, implicitly, information about the food that people eat. Again, a critical factor, because it establishes an unusual level of trust between retailer and consumer and creates for the business a differential and unassailable advantage.

    Except that, of course, no advantage is unassailable. Even the greatest of advantages are only temporary, which is why Zingerman’s isn’t resting on its laurels and plaudits, but rather continues to look for new worlds to conquer, new spaces to occupy, new products to sell and new customers to romance.

    Ownership also keeps net margins low so it can pay its people well, make sure that local producers are making a sustainable profit, and contribute to the community. And there’s no interest in franchising the concept, no matter how many offers management gets – they have no intention of taking the money and running.

    No wonder it’s a legendary business. I just can’t figure out why I hadn’t heard of it before.

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

    Published on: May 10, 2007

    Numerous reports say that the United Food and Commercial Workers (UFCW) has decided to return to the bargaining table and resume contract talks with Southern California’s three major supermarket chains.

    "We decided that we're not going to call for an end to the contract negotiations," said union spokesman Mike Shimpock. "We don't think that their mistake and misjudgment merits canceling the contract, and either having a strike or a lockout."

    As reported in MNB yesterday, UFCW negotiators for 65,000 Southern California supermarket employees of Ralphs, Safeway and Vons walked out of contract talks earlier this week, terming the chains’ latest offer an insult. The move seemed to bring the two sides close to an impasse that could result in a work stoppage, which would be the second in little more than three years; now, however, it may be that the union has stepped back from the abyss.

    Health care has been a major sticking point. The Los Angeles Times reports this morning that “before the talks broke off, the union and the employers were close to an agreement to allow second-tier employees to work their way into a higher level of benefits after some still-to-be-determined period of service. This step up in benefits, however, would still be less generous than what the 32,000 veteran employees — the ‘first-tier’ workers — now receive.”

    The last contract – which was arrived at after a more than four month strike/lockout three years ago – expired on March 5, though there have been two extensions while the two sides continued negotiating. At the present time, it is automatically renewed on a daily basis, and either side has to give 72 hours notice before calling a strike or instituting a lockout.
    KC's View:

    Published on: May 10, 2007

    The Toronto Globe and Mail reports that the Chinese government has “announced a nationwide crackdown on the food industry, arrested the managers of two food exporters and admitted that the two companies had illegally added a chemical to food products that eventually caused the deaths of thousands of household pets in North America.”
    KC's View:
    This is just a small step in what has to be a comprehensive and global approach to knowing what is in the food products that circle the globe. We know that pet food has been contaminated by toxic compounds included in ingredients sourced from China. We know that there are allegations that farmed fish, chicken and pigs may also have eaten contaminated feed, and that it is believed that some of these animals have made it into the human food supply.

    A crackdown on Chinese suppliers is just the beginning. There are too many other blind spots in the food safety system for this to make us feel reassured.

    Published on: May 10, 2007

    There are reports out of Europe this morning that Delhaize CFO Craig Owens is trying to show the speculation that the sale of US Foodservice by Ahold to a financial equity group makes the company more attractive as an acquisition target.

    The heightened speculation stems from a comment Owens made earlier this year saying that such a divestiture would make Ahold more “complementary” to the Delhaize’s operations.

    Now, however, he is saying that the comment was taken out of context, and that he was only saying that getting rid of US Foodservice would make the two companies more similar.

    Delhaize CEO Pierre-Olivier Beckers has said that while he is open to acquisitions, his priority is “fill-in” purchases that will strengthen Delhaize in markets where it already operates.
    KC's View:
    Maybe it would be a big “fill-in” buy, but wouldn’t Ahold’s US operations strengthen Delhaize’s existing operations here?

    We still think that in the current environment, where so many companies are consolidating, a Delhaize-Ahold deal makes sense…at least here in the US. We’re just guessing here, but if such a deal took place, we suspect that one of the first things that Delhaize might do is restore to Giant of Landover some of the local autonomy that it used to have and that used to give it such cachet in the Washington-Baltimore marketplace.

    Published on: May 10, 2007

    The Palm Beach Post reports that Publix plans to build Publix GreenWise markets in Palm Beach and Boca Raton, expanding the concept from being just a section of traditional Publix stores to a format all its own. These will be the first two GreenWise stores, and Publix says that they will carry both the GreenWise private label organic and natural products, but also national and regional brands.

    Two other GreenWise stores are expected to be built in Vero Beach and Tampa.

    The stores are positioned as being competitive to Whole Foods, but at better prices.
    KC's View:
    Smart move. Multiple formats for a diversity of shoppers simply makes sense.

    Published on: May 10, 2007

    The East Bay Business Times reports that Brian Cornell, Safeway’s chief marketing officer, has resigned from the retailer after a three-year tenure. The resignation is effective June 1, and Cornell said he will be looking for a job.

    Upon Cornell's departure, and until a successor is named, the marketing organization will report directly to Steve Burd.
    KC's View:

    Published on: May 10, 2007

    Great story in the Wall Street Journal this morning about how the community of Somerville, Massachusetts, has developed a holistic approach to fighting obesity.

    “This town of 78,000 has undergone a subtle yet dramatic transformation in the past five years,” the Journal writes. “Restaurants have switched to low-fat milk and smaller portion sizes. The school district has nearly doubled the amount of fresh fruit at lunch. The town, just outside Boston, has repainted crosswalks to get more people walking to work or school.

    “The numbers suggest it works. During the 2003-04 school year, Somerville schoolchildren gained less weight than children in two nearby communities used as a control group, according to a report published today in the medical journal Obesity. The difference was statistically significant and translates into preventing about a pound of excess weight gain among children who lean toward the heavy side, the report says.”

    According to the story, the Somerville approach has been remarkably comprehensive. Kids are being educated in the schools about health and nutrition while they are seeing more nutritious choices in the cafeteria. Restaurants that meet certain criteria are given a kind of seal of approval by the town. And the local government is looking for every possible way – not necessarily expensive – to encourage people to get exercise.
    KC's View:
    Somerville happens to be the community where Steve Herrell founded the first Steve’s Ice Cream in 1973, a place that pretty much pioneered the “mixins” concept now being exploited by chains such as Cold Stone Creamery.

    Coincidence? We think not.

    We remember taking a long, long hike in Somerville once. It was the late seventies, and we were at a friend’s house there. A bunch of us had gathered for a feast that essentially was made up of Indian food and martinis, and when the evening was over, we all walked for what then seemed an interminable distance (it was probably two or three blocks) for some Steve’s ice cream.

    The evening didn’t dampen our enthusiasm for exercise, Indian food or ice cream. But we’ve never had another martini.

    Published on: May 10, 2007

    • Wal-Mart reportedly has issued updated guidelines to its store employees, responding to complaints that some foods in its stores were being inaccurately labeled as organic. However, the company also suggested in a statement that its in-store signs should not be taken as the last word as to whether a product is organic or not.

    "Our green organic signing is for additional consumer convenience to show that an organic alternative is available. It is not a label," the company said. "The USDA (U.S. Department of Agriculture) certification label is featured on the packaging of the organic selections we offer and consumers should always rely on this USDA certification label for proper organic verification."

    • The International Herald Tribune reports that “Wal-Mart has promised to become ‘packaging neutral’ by 2025. That means that, through recycling, reusing or perhaps even composting, Wal-Mart will try to recover as much material as was used in the packaging that flows through its stores.”

    However, while “environmentalists applaud the Wal-Mart approach…they want more. Environmental Defense, for example, wants Wal-Mart to give greater consideration to the greenhouse gases emitted when the paper, plastic or other packaging material is made - and to methane emitted from landfills if the final package is dumped.”
    KC's View:

    Published on: May 10, 2007

    The Wall Street Journal reports this morning that “the classic American hot dog, mired in a long sales slump fueled by health concerns and changing tastes, is having an identity crisis. Some purveyors are trying to engineer a comeback by appealing to consumers' growing appetite for the fresh and trendy.

    “Hot-dog emporiums with names like Dogma Grill are eschewing mustard, ketchup and sauerkraut in favor of wasabi mayonnaise, guacamole and provolone. Others are pushing the limits of what it means to be a dog, incorporating ingredients like peanut butter and even foie gras. Applegate Farms of Bridgewater, N.J., is selling the Great Organic Hot Dog, a nitrite-free dog made from grass-fed beef. At Franktitude, which features hardwood floors and light-wood chairs, the menu board lists dressed-up dogs like Weird Frank, topped with hummus, cucumbers and olives, and Unique Frank, served with avocados, tomatoes, wasabi mayonnaise and banana chips.”
    KC's View:
    We’re looking for a word here…

    Oh, yes. We found it.

    Yuck.

    As has been well established here, we’ll eat almost anything. And we suppose that if we found ourselves in one of these establishments, we’d probably we’d try one of these concoctions.

    But what these guys haven’t learned is what Walter’s, in Mamaroneck, NY, has known for years. Fry the suckers in butter, and people will line up by the dozen to buy them.

    Published on: May 10, 2007

    MarketWatch reports this morning that Tesco has pretty much decided not to launch a bid for Coles Group in Australia. Speculation is that once it hired an investment banker to advise it on a possible offer, Tesco decided that the enormous investment did not make sense.
    KC's View:

    Published on: May 10, 2007

    • Meijer, expanding its Chicago-area presence, has opened a new, 210,000-square-foot store in Oswego, Illinois, giving it 11 stores in the region.
    KC's View:

    Published on: May 10, 2007

    • Costco Wholesale Corporation reported April net sales of $4.94 billion, an increase of 12 percent from $4.43 billion in the same four-week period last year. Same-store sales in the US were up six percent, while international same-store sales were up 10 percent.

    • Whole Foods, citing high store opening costs, reported that its second quarter net income fell 11 percent to $46 million, from $51.8 million in the year-ago period. Revenue rose 12 percent to $1.46 billion from $1.31 billion. Same-store sales rose 6 percent in the period.
    KC's View:
    MNB user Michael Denk wrote us the following email yesterday…

    From my experience reading your newsletter (which I thoroughly enjoy, by the way), I have noticed a fairly consistent, but not necessarily threatening, bias on your part that tends to characterize those of us who work in finance as being mere visor wearing, green lampshade using bean counters, without an ounce of creativity in our left-brain oriented minds and bodies. So perhaps I am reinforcing that stereotype by asking the following question, but I can't resist....

    Why do you call the segment of MNB in which you summarize financial earnings announcements "The Balance Sheet" when technically all of the figures you reference: sales/revenues, earnings/income, profits, etc. are line items from a "P&L" or "Income Statement", not a balance sheet?


    Because when we started out five and a half years ago, that was the best we could come up with.

    But we see an opportunity here – another T-shirt contest!

    We’re happy to use another name for this section, so we’re inviting reader submissions and suggestions. Make it pithy, funny, pointed, sardonic…whatever. Just make it unique. Send us an email. And the winner will get a limited edition MNB T-shirt.

    One other thing. We must not be too threatening to the CFO community. Because in about a week, we’ll have the privilege of speaking at the annual Food Marketing Institute (FMI) Financial Executives Conference in Savannah.

    Published on: May 10, 2007

    We wrote yesterday about how Portland State University students being interviewed onstage at the Food Marketing Institute (FMI) Show made three things very clear: : a) when they look for jobs, they are taking companies’ cultural, social, environmental and sustainability positions into account, b) they want work-life balance, and have the perception that this may not be an acceptable notion in retailing, and c) they are interviewing the companies they speak to as much as the companies are interviewing them.

    MNB user Randy Aszman responded:

    Interesting and inspiring news from the PSU students on the FMI stage regarding their prerequisites of prospective employers. It’s all well and good that they demand these things from management. It’s another thing to retain and espouse those beliefs and attitudes once they reach the middle or senior management level and still deliver profit and growth. One can certainly hope…

    There are two kinds of people in the world. People who quickly abandon the attitudes, values and priorities of youth as they get older and more successful, and people who do their best to retain those youthful values. This is sort of a corollary to the other “two kinds of people in the world” rule – that there are people who think the sixties were a bad time in American history and those who believe it was a good thing for America.

    We hope those students retain and espouse their beliefs as they get older, too.

    Also regarding the FMI Show, one MNB user wrote:

    One thing I notice at FMI each year is what I think is the mistreatment of the female demonstrators. They are obviously picked for their visual presentation assets. I know having a job like this is similar to working at Hooters. However they don't look like they are having much fun. Some wore high heels that looked incredibly painful, standing hours on end asking us ordinary folk if we wanted to try the latest junk food. Some were barely clothed to the point of being distasteful. I realize that this is traditional at conventions, particularly with the beer companies. Personally I could do without it.

    Odd how acceptable it is at the FMI show, but if a retailer dressed up his female employees like this they would get crucified in the press.


    Gosh, you should have seen it in the old days. But the point is worth making.




    Regarding the travails of A&P, which keeps blaming “unsatisfactory operating trends,” MNB user George Butterfield wrote:

    I’ve wanted to send you a link to the recently opened Papa Joe’s market in my home Rochester, MI. www.papajoesmarket.com. Mostly because of the fantastic wine sampling kiosks that allow customers to try a 1, 3, or 6 ounce pour of over 56 wines in their store after one establishes a balance on a Papa Joe’s wine card. The wine sampling is just but one of many interesting parts to the store (they even have a Maserati dealership attached).

    What strikes me as sad is just across the street is what was at one time an A&P, that became a Farmer Jack, that later became a “Food Emporium”. These changes on the banner were only that, a change of the outside sign hardly doing anything to update or differentiate. Papa Joe’s is a local independent that has adjusted to the needs and wants of the community they serve.

    The “unsatisfactory operating trends” have to have their origins in Montvale, NJ.





    MNB user Len Abeyta had some thoughts about the Southern California labor talks:

    Well I must admit your latest take on the so-cal grocery talks was a little more balanced than previous reports. However I seriously doubt that the unions would risk another strike if the main contention over health care is the so called being more healthy plan that Mr. Burd is calling for. From what I understand he is calling for things like making smokers take more responsibility for the cost of their care and the like. The local I belong to doesn't seem to have an issue in that, at least on the surface. So that leads me to believe that this is more of a monetary thing than anything. Heaven forbid the chains do the right thing and tap into their billion dollar profits to insure the people that grew their companies and made those profits are taken care of.

    To be fair I am not happy that the so-cal unions decided to break the media blackout, that certainly doesn't do either side any good, but at this point if the companies are not willing to move at all on the issues I can't blame them(the unions) for walking out of the talks, but they should have done it with a "no comment" answer and moved on.





    On the subject of the food safety crisis, one MNB user wrote:

    In your article, you mention a possible solution is to have more regulatory authority. Granted that can help.

    However…what does this situation really say about the incoming quality control processes of the food processors and possibly the decisions made involving tradeoffs in quality vs. profit - which we all know take place.. . In this day of Enron, WorldCom and other major ethics compromises by individuals at the head of Institutions, where does the line get drawn regarding selling for a price - and the quality of the product presented to the market.... I see more "to hell with quality - give me price" in the business I am in today.. I'm getting the sense that the low price point rules....Sad.. I'm angry that the drive for a buck might be overriding the sense of personal responsibility and integrity...In the food area - this is dangerous.


    MNB user Karen Labenz wrote:

    With all due respect, I disagree with you. I think it is the food industry's responsibility to self-regulate and ensure food safety before seeking out and pushing for greater government regulation. I'm all for government oversight, but it should be just that - oversight. It is OUR responsibility to produce safe food products for animals and humans.

    As Jake Barnes once said in a different context, “Isn’t it pretty to think so?”

    And MNB user Lisa Malmarowski made the following observation:

    How to raise consumer confidence in the foods your store offers...

    • Offer an alternative...
    • Choose local.
    • Know your sources.
    • Build relationships with your suppliers and visit them to verify.

    It's a simple plan, but one that is notoriously hard to implement especially for large store selling commercial convenience products.

    We can't guarantee that the wheat gluten in the big brand cookies we offer is 'clean', but we do know our supplier for wheat flour.


    In the end, this may be an enormous differential advantage.
    KC's View:

    Published on: May 10, 2007

    The Buffalo News this morning reports that retail consultant Burt Flickinger III, a managing director with Strategic Resource Group, is both advising and participating in a consortium of investors looking to acquire Buffalo-based, 72-unit Tops Markets from Ahold USA.

    Terms of the proposed deal have not been disclosed. Flickinger declines to identify the other members of the group, except to tell the News that it is “a group that’s been very active in the acquisition sector and very interested in keeping the Tops team intact.”

    He also says, according to the News, that “the group he is part of supports Tops’ local management team, as well as maintaining its unionized work force. He said the group wants to bring the chain back to its homegrown roots as a company with close local connections.”

    Flickinger is a Buffalo native.
    KC's View:
    We’ve always enjoyed Flickinger, both as a person and a savvy commentator about the industry. And now, we have to say we admire his guts. Because our greatest fear is that someday we might actually have to try to implement some of the ideas we espouse, in which case we’ll probably be exposed as a complete fraud.

    Flickinger obviously is willing to put his money where his mouth is.