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    Published on: August 23, 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:

    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 services.

    As you listen to this, Mrs. Content Guy and I are north of Columbus, Ohio, helping our second son unpack his things for his first year of college at Ohio Wesleyan University. I’m participating in the process with mixed emotions; while he’s a terrific young man and I’m excited for him as he begins a whole new phase of his life, I’m going to miss him. A lot.

    This summer, we’ve tried to find time for each other. Actually, to be honest, he’s been pretty indulgent with the old man, willing to spare a few hours here and there for me. One of the things we’ve done is to pick out some movies to watch at home together, movies we’ve talked about watching but never found the time for. Like “Saving Private Ryan,” which was poignant because we both visited Normandy this summer and saw where D-Day actually took place. And “Apocalypse Now,” which I’ve always felt is the best movie about the war that shaped my generation, Vietnam, and is one of my favorite films directed by Francis Ford Coppola.

    But we also watched a movie this summer which wasn’t particularly great, but that I found I had an emotional attachment to – “Rocky Balboa,” which was last winter’s surprise hit, a final installment of the Rocky movies that started out so strong in the seventies and ended up being parodies of themselves. I really liked this new one, though – in part because it was about personal redemption, about being true to oneself and one’s nature. It also had a subplot about Rocky’s relationship with his son, which, though occasionally troubled, was ultimately secure because there was so much love between father and son. That kind of story will bring a tear to my eye anytime. What can I say? I’m a softie.

    Watching “Rocky Balboa” gave me the chance to tell my son a story from my youth. Since this is my last radio commentary of the summer, I think I’ll take advantage of the moment and share it with you, too.

    Back when I was a senior and a film major at Loyola Marymount University in late 1976, I was taking a film criticism class that met one night a week. We would regularly be shown a movie that had not yet been released, we could get a chance to listen to and ask questions of someone connected to the film, and then were required to write a series of essays about what we’d learned. I loved that class – it was everything I loved to do, and I actually got college credit for it.

    One of the ongoing challenges was to find out what the film would be before showing up for class. The professors tried to keep it a secret, but inevitably word would leak out. One night, as we showed up for class, it would be fair to say that we weren’t thrilled about the possibilities. All we knew was that we were going to see a boxing movie starring some guy named Sylvester.

    The movie, of course, was “Rocky.” And we were the first audience to see a finished print. We had no expectations, no preconceptions. And to say we were blown away would be an understatement.

    I can even find a message in here for retailers: never underestimate the importance of surprise. I’m not sure how many retailers say to themselves, “Let’s find a way to surprise the customer today.” But I think it is always worth doing.

    To this day, I cannot ever remember being in a movie theater and being part of an audience having such a visceral response to a motion picture. During the climactic fight scene against Apollo Creed, we were all on our feet, cheering and shouting. It might as well have been a real boxing match. When it was over, we all were crying and exhausted and completely enthralled by the experience – and then Sylvester Stallone walked in to take our questions, and the place erupted all over again. This was before he was Stallone the icon – he was a little shy, a little amazed and completely in the moment. Remember, he was a nobody who had written this script, and the studios had offered him megabucks for the script so they could cast Burt Reynolds, James Caan or Ryan O’Neal as Rocky. But Stallone said no, said he’d take almost no money for the script if they’d let him star in it, and the movie was made for under a million dollars on the back streets of Philadelphia.

    College moments like that happen to a lot of people, though they don’t always have to do with Oscar-winning movies. That’s one of the pleasures of college – you get to discover things you’ve never experienced before, and enjoy so many “first time” thrills.

    I hope my son has a lot of those. It’ll almost make up for the fact that I’m going to miss him so much.

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

    Published on: August 23, 2007

    The Wall Street Journal reports that the wrongful termination suit filed by former Wal-Mart marketing executive Julie Roehm against the retailer in a Michigan state court has been dismissed by a judge there.

    The reason: the judge said that the suit should have been filed in Wal-Mart’s home state of Arkansas.

    No word yet on whether Roehm plans to refile the suit in Arkansas. However, she told the Journal in an interview that “it feels this has gone on for too long … It makes all the sense in the world to resolve this in a way that doesn't involve litigation."
    KC's View:
    It certainly makes sense to avoid litigation when the first result in the process doesn’t go your way. But I would agree that this soap opera has gone for too long – what with allegations that Roehm was cheating on her husband with a subordinate and inappropriately taking gifts from vendors, and her countercharges that she was just doing business the same way that CEO Lee Scott was.

    Wait a minute. What am I saying?

    In my business, this kind of soap opera can’t go on too long.

    Let the filings and counter-filings and allegations continue!

    In this case, I’d like to use the old Don Imus line when talking to the two sides of the continuing soap opera:

    “I’m not happy until you’re not happy.”

    Published on: August 23, 2007

    The International Business Times reports that executives at Nestle SA expect the next few months to be healthy for the bottled water business – in part because prices are remaining healthy because there is no price war (unlike one that apparently hurt the industry last year), and in part because there is an expectations that a greater number of hurricanes this year than last year will lead to greater consumption because of disaster-related demand.
    KC's View:
    I’m not sure if Nestle Waters North America CEO Kim Jeffery volunteered the “disaster related demand” perspective, or was led in that direction by some nefarious journalist. But I’m thinking that even if Nestle is thinking this way, these are sentiments better left unsaid. There are still lot of raw nerves in this country because of the damage caused – and in many cases, remaining – because of Hurricane Katrina.

    One other thing. Jeffery notes in the interview that Nestle plans a number of line extensions – probably in the functional or enhanced water category – in 2009 and beyond. I find this interesting ... especially because MNB had a story just the other day about what seems to be a growing distaste for bottled water in the US on environmental grounds – people are more and more concerned about the impact of making and disposing of all those plastic bottles.

    Maybe Nestle isn’t reading the same studies, or maybe Nestle thinks this is just a momentary concern that eventually will subside. But I’m not sure I’d agree with the latter reading of the tea leaves.

    Published on: August 23, 2007

    Seattle-based PCC Natural Markets said yesterday that as of October 1, it will stop using plastic shopping bags and will encourage shoppers to reuse their own bags by offering its selection of reusable totes at cost, while continuing to provide paper bags at no charge.

    According to Tracy Wolpert, CEO, “While this decision to eliminate plastic shopping bags will entail some additional cost, it’s simply the right thing to do. We have studied the environmental impact of paper versus plastic and believe that paper is the more sustainable choice, while bag reuse is the best choice of all.”
    KC's View:
    It isn’t going to happen overnight, but I can’t help but think that this is just the first of a number of stories like this that are going to be reported in the near future.

    In this case, the move is consistent with PCC’s broader mission. But there’s no reason that most, if not all, companies should not start acting more responsibly about the environment.

    Published on: August 23, 2007

    Interesting story in Business Week, as the magazine goes to a number of Wal-Mart store managers to find out what they think the retailer ought to do to solve its ongoing sales and profit woes. Not everybody asked to participate agreed to speak, but a number did. Business Week writes, “These managers care deeply about the retailer. Clearly, the company's future is central to their lives and their professional prospects. Beyond that, they truly believe in what has long been the quintessential American success story. These managers have a wealth of knowledge gleaned from spending so much time at Wal-Mart.”

    According to the story, “There are plenty of radical ideas lurking in the minds of Wal-Mart's best and brightest. Many believe the company's relentless focus on whittling down costs — for products and workers — is beginning to have a negative impact on the overall operation. Others take issue with the command-and-control approach currently in vogue at headquarters,” and believe that the company has become less customer-focused sand responsive than it as when founder Sam Walton was in charge.

    Other examples cited:

    • Chocolate doughnuts. “Freshly baked doughnuts and muffins don't make much money for stores, and managing an in-store bakery can be a hassle because it requires a more skilled staff and different hours. That's why headquarters has been cutting back on such operations. But talk to store managers and they shake their heads. The point, they say, is that chocolate doughnuts get people into a Wal-Mart, often every day. Then they buy other stuff — profitable stuff like a cup of coffee or a bottle of water. Competitors such as Safeway and Kroger see the logic. That's why they're increasing their fresh bakery offerings just as Wal-Mart is cutting back. They're also starting to regain market share in key areas of the country.”

    • Penny-pinching. “Managers say the focus on costs, taken to extremes, can lead to broader errors. For example, while top brass wants to cut back on low- and no-margin products such as guns and live fish, managers say that has been a mistake in some cases.

    “Why? If you don't sell fish, it's difficult to sell the high-margin fish tanks and cleaning supplies that go with them. And if you don't sell guns, it's harder to sell all the extras people want with them.”

    • “The same penny-pinching mentality has hurt the workforce — and by extension, managers say, the company's service. While many outsiders have criticized Wal-Mart for the wages and benefits it provides workers, what has received much less attention is how these policies are affecting Wal-Mart stores internally. Consider Wal-Mart's decision to transform its workforce to 40 percent part-timers, up from 25 percent to 30 percent now, to trim costs. Many store managers are finding it difficult to hire people under those conditions, especially because Wal-Mart requires part-timers to be available for different shifts from week to week.”
    KC's View:

    The clear message of this story is that Wal-Mart may be sacrificing effectiveness for efficiency, and in doing so is being less responsive to shoppers and to the managers who may know best about how the stores work.

    I’m certain that there will be people within the company who will believe that these managers are being disloyal in speaking with Business Week, but I don’t think that’s the case here. It may be that they spoke to the magazine because they felt that nobody else was listening and that they needed to take dramatic steps to get their points across. I believe that these people are, as the magazine suggests, both emotionally and financially invested in the success of Wal-Mart.

    Attention should be paid.

    Published on: August 23, 2007

    The Wall Street Journal reports that attorneys general from 28 states, Guam and the District of Columbia are urging the federal Alcohol and Tobacco Tax and Trade Bureau to crack down on manufacturers of energy drinks that contain alcohol and caffeine, saying that the beverages are being targeted inappropriately at young people for whom they can pose health and safety risks.

    According to Connecticut Attorney General Richard Blumenthal, the main sin being committed by the manufacturers – which include companies such SABMiller and Anheuser-Busch – is that they are suggesting that the drinks are healthy. "Combining alcohol with caffeine hardly seems healthy -- and that false claim is what we seek to halt," Blumenthal tells the Journal.

    "Nonalcoholic energy drinks are very popular with today's youth," Oregon Attorney General Hardy Myers adds. "Beverage companies are unconscionably appealing to young drinkers with claims about the stimulating properties of alcoholic energy drinks."

    The companies being targeted by the states say that their labeling, claims and products have been approved by regulators, and that they are careful to meet all federal guidelines.

    In addition, the journal reports, “The attorneys general also requested a federal investigation into the makeup of alcoholic energy drinks and other flavored malt beverages to determine whether, based on the percentage of distilled spirits contained in the drinks, they are properly classified as malt beverages under federal law. The malt beverage classification, in many states, enables cheaper and broader sale of these drinks, making them more readily available to young people than distilled spirits.”
    KC's View:
    I’ve said here before that I think that energy drinks are a disaster waiting to happen – that it just seems inevitable that some sort of health problem related to their over-consumption by young people is going to end up in the news. The companies may be staying within the letter of the law, but it may not matter in terms of public perception.

    Every once in a while, I see my older kids drinking this stuff, and it just makes me nervous. I don’t know how many other parents feel the same way, but there it is.

    Published on: August 23, 2007

    The Washington Post reports that even as Chinese manufacturers reel from a series of safety issues that have prompted a variety of food and nonfood recalls and threatened that nation’s export status, the Chinese government “has accused the United States of exporting substandard soybeans,” saying that “harmful weeds and contaminated dirt had been found among the beans, which could threaten China's agricultural and forestry production and ecological safety.”

    Chinese regulators say that because of the new discovery, they will be watching imports from the US much more carefully.
    KC's View:
    Interestingly, nobody quoted in the Post story denies that the soybeans may have been substandard. Rather, the general feeling seems to be that these things happen, and that the Chinese just need to find some way to fight back against the growing feeling that “made in China” has become a warning label.

    Still, there are some concerns, since China is the world’s largest soy importer – and any major disruption of trade could have a significant economic impact. Wouldn’t it be ironic if China decided to implement its own version of Country of Origin Labeling (COOL)?

    At the very least, I expect that this game is going to continue for some time … especially because no matter how China tries to counter both perceptions and realities, I’m guessing that safety problems with its exported products are going to continue to emerge.

    Published on: August 23, 2007

    Connecticut-based Stew Leonard’s will introduce next week a new own-label line of all-natural meat called Naked Beef, made from 100% Black Angus cattle that have never been given hormones, antibiotics or steroids, and are fed completely on grass and grain.

    The launch follows the company’s highly successful introduction of a line of all-natural Naked Chicken products.

    According to the company, Naked Beef will be available in strip steaks, rib eyes, porterhouse, tenderloin and sirloin cuts, as well as freshly ground. “In blind taste-tests conducted by Stew Leonard’s butchers and chefs, Naked Beef was the overwhelming hands-down winner, scoring the highest among national natural beef brands in terms of tenderness, juiciness, flavor and overall quality,” the company said.
    KC's View:
    I haven’t had a chance to taste the Naked Beef yet, but I can vouch for the Naked Chicken line.

    But Stew’s makes a broader point here about marketing and branding. The company isn’t selling somebody else’s brand, but rather is making a distinct and individual statement about its own differential advantages. You can’t get this anywhere else, and if you like the product, it becomes just one more reason to walk in the front door.

    And I say this as someone who has been walking in that front door almost weekly for something like 24 years.

    Published on: August 23, 2007

    • The Arizona Daily Star reports that Safeway is converting its entire truck fleet to B20 biodiesel fuel, which according to the company will reduce Safeway's carbon dioxide gas output by 3,603 metric tons — equivalent to 780 passenger cars not being driven for one year.
    KC's View:

    Published on: August 23, 2007

    As has become a tradition at this time of year, I’m going to take off for a few days before Labor Day … it is the end of the summer, there tends not to be a lot of news, and it gives me a little break before the busy fall months kick in. (I can hang out with my daughter, take my eldest son to the theater, do some serious marathon training, clean up the disaster that is my office, etc…)

    So this will be my last MNB until Tuesday, September 4, at which point I’ll be back…tanned, rested and ready.

    Have a great weekend…a great week…and I’ll see you on September 4.

    KC's View:

    Published on: August 23, 2007

    Regarding Country of Origin Labeling (COOL), MNB user Al Kober had some thoughts:

    It continues to amaze me how poorly COOL is understood. Especially when reviewing the surveys ask about COOL. 90% of those who responded to the survey want COOL because they want safer food. COOL is perceived to provide some measure of Food Safety. It may emotionally but not scientifically. Knowing the country of origin says nothing about the food safety of the product. It may be perceived that product from the USA is safer than product from some other country, but there is nothing in COOL that can support this.

    COOL is and has always been nothing more than a marketing tool. Many states have tried to use "State Of Origin Labeling" (SOOL) as a marketing tool with little success. If COOL had any added value to consumers, some one would be using it now to sell their products.

    My biggest concern is that consumers will get a very misguided feeling of food safety security by knowing the country of origin, that will in reality have no true basis. This legislation will burden the retail industry to spend a lot of money, a lot of time, which will produce a lot more confusion and misunderstanding, then the perceived benefits it will produce.

    The road block will be at store level. The number of different labels that go onto different packages of meat and making sure they are all on the right packages in the meat department, will be a nightmare. The only solution will be for the retailer will be to have the distributor or the packer, only ship the meat that will allow them to use just one label. This will shift the burden onto the packer, who will transfer that responsibility on to the producer. Adding this burden to the already complexities in the producer segment of the beef industry will make it almost impossible to be sure of the accuracy of the labeling that will on the final meat package in the retailers meat case.

    In other words, it won't work. Yes there will be COO labels on meat packages and the consumers will feel a non-supported level of food safety, and the industry will be spending tons of money, with no real value, other than a lot of people will FEEL good. Maybe that is where we have come. Junk the real science and as long as people feel good, that is all that matters.

    I don’t think that COOL makes food safer, nor that all consumers will really understand the labels and what they mean. But I do think that consumers demand transparency … and that the industry has to live up to that standard.

    Commenting on yesterday’s story about Jungle Jim’s winning a “best rest rooms” award, one MNB user wrote:

    The condition and maintained of the rest room does tell more about that store and most store owners realize.

    True. Very true.

    Another MNB user wrote:

    A couple of years ago I was in Branson MO for a business meeting (client likes Jurassic Rock) and saw a good example of creating a competitive advantage with plumbing. There were nearly 100 theaters with various acts and attractions. The challenge is how to differentiate . One performer ... a fellow with a Japanese name I won’t try to spell...was always packed and had a week or two wait for tickets. Other theaters were discounting heavily for that night’s performance. The music was average and he sang in Japanese in the middle of the Ozarks ! His secret ? He made the following claim ...” World’s largest ladies wait or the show is free”. He clearly understood who makes the entertainment decision in most families.

    Weighing in on the continuing saga of Whole Foods, Wild Oats and the FTC, MNB user Elizabeth Archerd wrote:

    (Whole Foods CEO John) Mackey should resign. He is damaging his company. If he had stated the obvious, which is probably what he meant anyway, he would not be in any trouble: "The reason to do the merger is to become more competitive." The FTC is being strangely literal in this case. Mackey's thought processes and word selection do not have any bearing on whether or not the merger increases the competition in the industry.

    I wish they would give me a call. When Whole Foods moved in to the Twin Cities markets all the local grocery stores, cooperative natural food stores and conventionals, got busy with upgrades and price-structure reviews. In other words, we all got better. Consumer wins.

    MNB user Tim O'Connor wrote:

    It appears the judge ruled on the facts and chose to ignore that Mackey perhaps wrongly thinks that it would reduce competition in the grander scheme of things. Nice to know someone in this escapade is being rational. Mackey can be forgiven for overstatement from excitement and passion for his business. What’s the FTC’s excuse for their stupidity?

    And another MNB user wrote:

    The natural foods industry used to be a small niche within the food industry with great potential for growth. Whole Foods did the best job of tapping into that growth. Although the supermarket industry would always looks for margin categories, they didn’t see mass appeal in natural foods. Specialty and natural foods sustained higher margins for the most part because of limited availability compared to the mainstream. Higher margins became the standard within that industry and supported many small players for many years. And yet the industry looked the other way. Natural, was viewed as an industry that attracted a fringe consumer – the college crowd, the tree huggers, the anti-establishment, the health geeks. All in all, the industry was clearly apart from the mainstream. The supermarket industry saw this as marginal competition and one where slotting revenue was difficult to come by, with product movement slow by their standards, hence not really worth their time and effort.

    Whole Foods was one of the first to sell the attractiveness of this venue to a broader segment of consumers. Where the supermarket industry was very traditional and staid, Whole Foods saw the opportunity to create an experience for shoppers interested in food. Many of the traditional department store merchandising techniques were applied to the food industry. Décor became important. Lighting became something to enhance food as it did to clothing. Departments became something that didn’t have to be in long singular aisles. Produce became art. Meat stressed quality over price. Cheese became a department in itself, with product tastings offering customers a chance to experience a new sensation. Wine sections became boutiques stressing premium wines, not jugs. Classes about health and food and cooking became something that set them apart and helped build strong loyalty. Each department had knowledgeable staff who became Whole Foods ambassadors with each consumer -- definitely out of the norm for the food industry.

    Whole Foods was not the first, however, but they were the leaders. They were well capitalized and able to acquire excellent regional players that in some cases were better than they, but whose skills improved the whole. This all happened within a relatively short period of time, and occurred because the traditional food industry didn’t have the foresight to grab it for themselves, instead tried to fight it out with the competition using the same rules – hi-low, EDLP - that had been used for years. Tried and true. But now they play catch-up in this area – some, however, doing an excellent job, and destined to take advantage of Whole Foods if they slip.

    To say that the acquisition of Wild Oats will hurt the consumer because of higher prices could be a true statement in the short run. It is also conceivable that Whole Foods could take the same path of the majors by cutting costs first – usually labor. After all it is the quickest return aside from price hikes. But aside from corporate consolidation, I doubt it – that will hurt the package that they’ve worked so hard to build. It is conceivable that they will continue down the same path that made them successful. Their prices are already high, but they’re still the leader. But if they cross the line and even higher prices result, it will open the floodgates for increased competition – and not just from Wal-Mart, Safeway, Kroger and others. It most likely will occur from individuals out there that are doing what Whole Foods did years ago. There are retailers that do look for advantageous differences between themselves and the giants of the industry, and it’s these individual retailers who apart from the mainstream are the creative, the entrepreneurs, the risk takers, and the next up and coming competitors. To be the same is safe, but tough with so much competition. To be able to read the trends and go down a different path can have great rewards as Whole Foods has done before. This industry has broadened tremendously this past decade, and will grow even more with the aging baby boomers and the heightened emphasis on health. Food can be art. Food can appeal to the senses. Food can make us feel good for it nourishes the soul. Some people understand that and take advantage of it – I look forward to the outcome.

    Finally, MNB user Jeff Davis had something to say about yesterday’s guest column by Art Turock about his experience at a USC football fantasy camp and what it taught him about business:

    One of the all time great one-liners came from John McKay when he was the head coach of the then hapless Tampa Bay Buccaneers. After yet another loss McKay was asked what he thought about his teams execution.

    His answer? "I think it’s a good idea."

    KC's View: