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    Published on: December 3, 2007

    USA Today reports this morning on a new report that “delivers a scathing review of the state of the FDA, which regulates 80% of the nation's food, its drugs, vaccines and medical devices, saying that “the Food and Drug Administration is so underfunded and understaffed that it's putting U.S. consumers at risk in terms of food and drug safety.”

    The report, which was put together by a group of experts from government, industry and academia, suggests that the FDA does inadequate inspections of manufacturers, has a system of inspecting imported foods that is “badly broken,” has obsolete IT systems, and has a depleted staff with a “dearth” of scientists who understand emerging technologies.

    According to USA Today, “The FDA declined to comment on the report, which will be discussed today at a meeting of the full science advisory board, of which the subcommittee that wrote the report is part. The FDA has said it won't make any immediate changes based on the report. In addition to advocating for increased funding, the report recommends that the FDA, among other things, invest in IT, centralize science programs, create new science directors and hire more high-quality talent.”

    KC's View:
    Your tax dollars at work.

    When the report talks about the FDA not having enough money and personnel, you can say that it may be the victim of misplaced political priorities … and that, in some way, we are all responsible because we have empowered the government that has set these priorities.

    But when I read this sentence – “The FDA has said it won't make any immediate changes based on the report” – I don't think about priorities. I think about incompetence.

    And if this story doesn’t make you want to push back from the dinner table, here’s another one…

    USA Today reports this morning on an analysis of meat recall data that was provided by the US Department of Agriculture (USDA) shows that “most recalled meat is never recovered.” The paper writes, “For 73 meat recalls this year and last, recovery rates per recall averaged 44%, the analysis shows. But for five recalls that followed reports of consumer illness, recovery rates per recall averaged just 20%.

    “Recovery rates vary for several reasons, including how quickly meat gets to market and the number of days between production and when problems are detected.”

    If consumer illnesses aren’t reported as being the result of such contaminated meats, the analysis suggests, it is because months can go by between recalls and consumption, and the links aren’t being made by consumers and health care professionals.

    Mangia!

    Published on: December 3, 2007

    Interesting piece in the Los Angeles Times evaluating the new Whole Foods Market in Pasadena, which is described as being “dedicated first and foremost to excess,” and that it “is all about indulgence, sprinkled liberally with a sense of self satisfaction for patronizing such an ostensibly ‘green’ business.”

    And, the Times writes, “It seems almost as if Whole Foods is looking to none other than Wal-Mart Stores Inc. and its armada of discount superstores for inspiration.

    “The big difference, though, is that Wal-Mart uses its volume-driven market clout to bring lower prices to customers. Whole Foods, catering to a more affluent demographic, is focused instead on making people more comfortable while they shop for pricey produce and additive-free fare.

    “For a chain predicated on the notion that healthy ingredients make for healthy meals, Whole Foods also seems determined to get people out of the kitchen and eating the company's costlier prepared foods.

    “It's telling that more space is devoted to prepared foods and other goodies at the Pasadena store than to produce.”

    KC's View:
    It is interesting that some of the Times article seems preoccupied with the idea that somehow Whole Foods is being hypocritical, that it is an expensive, indulgence-driven wolf dressed in the sheep’s clothing of healthy living.

    Not sure if this is fair. Whole Foods has reshaped its end of the business by emphasizing the idea that better-for-you food can taste good…can even be indulgent. It isn’t that long ago that when a lot of people thought about “health food,” they probably figured that it would taste like cardboard. Whole Foods did a lot to change that. Doesn’t strike me as hypocrisy … just a very specific approach to the food business.

    There also is a suggestion in the piece that Whole Foods, as well as companies such as Bristol Farms and Gelsons, are going to occupy one end of the food retailing continuum, that Wal-Mart will occupy the other end, and that the middle is going to get squeezed, eventually putting retailers such as Ralphs and Vons out of business.

    This strikes me as hyperbole. The middle may change, may evolve, but it isn’t going to go away, even if it squeezed a bit. Tesco’s Fresh & Easy stores, it seems to me, essentially are an effort to redefine the middle. And Kroger and Safeway, which own Ralphs and Vons, are themselves working to refine the middle. As much as Whole Food and Wal-Mart may be working to squeeze the middle from either end, they’ll be looking to work the edges and squeeze those retailers a bit.

    Maybe it’s old age – or, heaven help me, some level of maturity – but I find myself thinking, let’s not get hysterical about this format or that. The world changes in increments, and while a little revolution may be good for the soul, real revolution is exceedingly rare in the retailing business.

    Published on: December 3, 2007

    Safeway has reached a tentative contract agreement with 25,000 employees in Northern California represented by the United Food and commercial Workers (UFCW), averting a strike that had been authorized by the employees.

    Details of the agreement have not been made available, except that it is a four-year deal that the union said that it has protected wages, medical benefits and pensions. A ratification vote is scheduled for the coming few weeks.
    KC's View:

    Published on: December 3, 2007

    The Washington Post reported over the weekend that Ahold-owned Giant Food will open a store this week in one of Washington, DC’s poorest wards, a place where residents have not had a full-service supermarket since 1998, but where new developments have made the opening of a store more viable.

    “Although most neighborhoods still have far more shopping options, Ward 8's new Giant is the chain's largest in the city,” the Post reports. “Spanning the length of a football field, the Giant offers the usual supermarket fare and then some, including 200 types of cheese, more than two dozen brands of ice cream, 14 kinds of honey, fresh sushi, books, toys and DVDs.”

    KC's View:
    Giant has come in for a lot of criticism – here and elsewhere – for seeming to have lost touch with the DC community as its operations have been merged with those of sister company Stop & Shop. So it seemed only fair to note this particular store opening.

    However, it also seems fair to suggest that the success of this store to at least some extent will depend on exactly how n touch with local consumers the company is.

    Published on: December 3, 2007

    The Los Angeles Times reports that this week the California Supreme Court will be hearing arguments in a case brought by 11 consumers “who contend California markets have failed to clearly distinguish salmon caught in the wild from its farm-raised cousin, which contains red dye to appear more palatable.”

    According to the Times, “Although federal and state laws require suppliers to clearly label salmon containing dye, officials from the Food and Drug Administration and the California Department of Public Health acknowledge that because of limited resources, they don't actively enforce the rule.”

    The story continues, “Critics say salmon farming poses environmental and health concerns. The fish are raised in nets in bays and inlets; excess fish meal and waste from the fish cause pollution. The meal, which is used to fatten the salmon, contains small amounts of dioxin and PCBs, or polychlorinated biphenyls, according to a study cited by the plaintiffs. The fish waste harms the ocean's ecosystem, scientists say.

    “In a study last year, a consumer advocacy group tested salmon advertised as wild in markets in the Northeast and found that about half contained dye without labels disclosing the fact.”

    KC's View:
    If the Times story is accurate, it sounds like the argument isn’t just over whether the salmon are being inaccurately labeled, though that’s certainly one of the things that California’s biggest grocers are disputing. It also seems to be about whether consumers even have the right to sue to force governments to adhere to and enforce rules that are on the books.

    And I must confess that if I’m understanding this correctly, I’m confused. Because whether or not you agree with the consumers’ case, aren’t these kinds of rules and regulations theoretically put into place to protect consumers? So who better to hold the government’s feet to the fire?

    I read these things, and I sometimes think that many people have lost track of the fact that government works for us, not the other way around.

    Published on: December 3, 2007

    • The Seattle Post-Intelligencer reports that letters were being mailed to 75,000 current or former Wal-Mart employees, telling them that they are plaintiffs in a class action suit against the retailer. The suit, which charges that Wal-Mart didn’t pay employees for all of the hours that they worked and deprived them of meal and rest breaks, first was filed almost six years ago – and now is slated to come to trial in spring 2009.

    The paper reports that “similar class actions against Wal-Mart have been filed in more than 35 other states. Four have gone to trial and been resolved, all in favor of the plaintiffs.”

    KC's View:

    Published on: December 3, 2007

    • The Sacramento Bee reports that Tesco has announced plans to open one of its Fresh & Easy stores in Fairfield, California, about 50 miles northeast of San Francisco. And, Tesco is saying that it is looking at a number of locations in Sacramento, which is about 40 miles northeast of Fairfield.

    According to the Bee, “That signals Northern California's tumultuous grocery industry is in for more shake-ups with what will likely be dozens of nonunion Fresh & Easy stores reaching for shoppers who buy food at traditional supermarkets and big box stores.”

    Tesco is saying that it will open stores in underserved neighborhoods in Sacramento, just as it has pledged to do in Southern California. However, Tesco has come in for some criticism in Los Angeles as some community groups have questioned both its commitment to such neighborhoods and what is perceived as lack of speed in opening such units.

    Meanwhile, the Washington Post reports that Fresh & Easy CEO Tim Mason is saying that the company plans to open a warehouse facility near Stockton, which, like the company’s first distribution center in Los Angeles, will be able to serve 500 stores.

    And, Mason says, “We want the stores to be no more than two miles apart so no one has to travel more than a mile to get to a Fresh & Easy.”

    • The Times of London reports on how UK businesses are responding to a new Climate Change bill that has set some specific and ambitious goals – “to reduce CO2 emissions by at least 60% by 2050, and 26%-32% by 2020, compared with 1990 levels.”

    According to the piece, “Sir Terry Leahy, the Tesco chief executive, knows in which direction he has to take the supermarket chain.

    “’At Tesco, we know that going green is not just a desirable way forward. Increasingly, it’s becoming a business imperative as customers look to retailers to help them lead a greener lifestyle,’ he said.

    “Leahy has greeted the Climate Change Bill warmly, but calls for co-operation in helping achieve its objectives. ‘Government and business need to work together to cut carbon emissions, so I welcome anything that helps move us all in the right direction. It’s important that the government helps businesses to play their part by removing planning bottlenecks and other impediments to renewable technology and by providing incentives,’ he said.”

    And, the Times reports, in 2008 Tesco “will be two years early in meeting its target to halve the energy consumption per square foot of its UK stores compared with the year 2000. Tesco also has a target to halve carbon emissions per square foot across its entire global estate by 2020.”

    KC's View:

    Published on: December 3, 2007

    • The Wall Street Journal has an interesting story about Safeway’s Blackhawk gift card business, which will contribute $100 million to the company’s bottom line this year.

    According to the story, Safeway CEO Steve Burd “is bullish on Blackhawk, saying there are many opportunities for the business to grow. He says Safeway may eventually consider selling part of the unit if it determines Wall Street isn't assigning enough value to Blackhawk through Safeway's stock price. ‘As far as the eye can see, this business will grow faster than the supermarket business,’ he says.”

    • The Wall Street Journal reports that a Pennsylvania women named Mary Bach has won $100 plus court costs in a lawsuit she filed against Kmart, charging that the retailer illegally taxed a 12-pack of toilet paper she bought there. According to the story, Kmart offered to settle the lawsuit, but Bach refused – because he settlement would have required her to sign a confidentiality agreement. So the suit went forward, she won, and now is talking about it…which apparently is something that she’s been doing for 15 years as a “longtime consumer advocate” specializing in scanner errors.
    KC's View:

    Published on: December 3, 2007

    • Smithfield Foods reports second quarter net income of $17.4 million, down 61 percent compared to the $44.7 million in profits it had during the same period a year earlier. Revenue rose about 24 percent to $3.46 billion from $2.80 billion in the second quarter of 2007.

    • Longs Drug Stores reports that its November sales were up 1.8 percent to $362 million compared to last year, with same-store sales down 0.6 percent.

    KC's View:

    Published on: December 3, 2007

    MNB reported last Friday on a new study done by TNS Retail Forward suggesting that Tesco’s new Fresh & Easy Neighborhood Market format, which has recently begun rolling out in the US, “potentially represents a significant threat to the U.S. food retailing industry,” and that by 2011, Tesco could be generating $4 billion in sales in the US, and that by 2015 it could be doing $10 billion in sales and be among the nation’s top 10 retailers.

    According to the report, “Fresh & Easy’s format fulfills several different shopping modes and occasions including fill-in trips, immediate consumption, ‘grab-n-go’ and quick replenishment. TNS Retail Forward believes Fresh & Easy’s small-size advantage gives it the opportunity to almost double space productivity per square foot compared with supermarket industry averages.”

    I commented: It may be presumptuous for little old me to disagree with as august an organization as TNS Retail Forward, but may I suggest for a moment that they are getting a little ahead of themselves here?

    Not that I don't like the Tesco Fresh & Easy format. I do. But at this point there are too many unknowns to be able to judge whether Tesco is going to be able to make the kinds of leaps that Retail Forward is projecting. For example, they point to Fresh & Easy’s prepared foods selection as being a main driver of its success. There is no question that it is innovative by US standards, but I’ve heard enough mixed reviews of the quality to be unwilling to declare it a runaway success. Tesco itself released a statement yesterday saying that it is undercutting supermarket rivals by 10-25 percent on grocery prices. But again, I’ve gotten emails from folks suggesting that they’ve seen lower prices in other outlets. Regardless of whether Tesco is lower or not, it would be foolhardy to suggest that the competition will just lie down and allow themselves to be beaten. Not going to happen. I’m also not sure that low price will be the determining factor in whether the Fresh & Easy stores succeed or not.

    Furthermore, TNS Retail Forward suggests that it is the adaptability of the format – offering gourmet products to appeal to upscale shoppers, and low prices to appeal to value-driven shoppers in less affluent markets - that will distinguish Fresh & Easy. Again, I just don't think we know that yet. Certainly that’s the plan…but I’m not yet ready to bet the house.

    Let’s be clear here. I’m intrigued by what Tesco is trying to do in the US, and think that it is worth watching, in part because it will be interesting to see how what its competitors come up with in order to blunt Tesco’s impact. But it strikes me as way too early for TNS Retail Forward to be projecting victory for the Fresh & Easy format.


    One MNB user wrote:

    I live between two Fresh and Easy locations Upland and West Covina. I went into both locations during their grand openings to see what all the buzz was about and have gone back once a week to see how things were holding up. The openings as expected the stores were busy with traffic. I would say sixty percent looked and forty percent made a purchase. Going into the stores now I would say there isn't all that much going on the Upland store is pretty much customer free and West Covina store has some traffic but nothing compared to the Vons store up the street. As a consumer I will not be doing any shopping in these stores, they feel cold and unfriendly much like a 99 cent only store. The prices weren't all that great as compared to my local Stater Brothers Market and the self checkout thing to me is a total turnoff, if you want me to do a check out clerks job there had better be a pretty steep discount involved. I also understand why the Tesco people are saying that things are going great at the stores – let’s be honest, if they are investing two billion dollars into this project would you expect them to say anything different at this point? As for me, color me not impressed.

    MNB user Dan Graham wrote:

    I agree that the pricing does not appear to be lower than competition. When I visited the store in Anaheim, I received an unsolicited comment from a consumer that "it looks like we need to get used to paying 10 -15% more". I have also spoken to several industry professionals who feel the pricing on the lines they represent are generally high, with the curious exception of the limited HBC selection Tesco carries.

    MNB user Dave Wiles wrote:

    My wife and I drove to California (from Phoenix) and while we were there, we drove to a "Fresh & Easy" to see what all of the fuss way about. I was in the food business but my wife is a "shopper". We see things through different eyes. I also asked a person in the store what they thought about it. We all had about the same view (from different directions), that we wouldn't be shopping here.

    Pricing was too high. WAY too much Private Label. Selection was small. Almost all produce was multi-packs, (my wife hates that.) Few items that we would shop for. We didn't buy one thing.

    I know that Tesco will "adjust" as the shoppers will dictate. Adjusting distribution will be hard for them. They come from the UK and will soon find that they can not force private label down people throats. I been to the UK 15 times and seen the large Private Label sections. I worked for a Private Label manufacture for 14 years so I have some knowledge in this area. Safeway went very heavy Private Label in the 80's and sales dropped. They need to dial this back to no more then 40% P.L.

    "F&E" reminds me of Sol Price's Price Company in Southern California back in the 70's. People said that a warehouse style store wouldn't work. I believe that they were proven wrong. Price Company and then Costco adjusted and made it work. They used price as the draw. Tesco isn't doing so.

    So, bottom line, poor start, has promise, needs a lot of work, only question is... will they adjust or be bull-headed?


    And another MNB user wrote:

    Kevin, I have to tell you I was your biggest critic because you kept praising Tesco before they opened however now that they are open you are being very honest and cautious with your assessment and I compliment you for that. In fact, I'm proud of you. I haven't seen the stores yet but will when I go to NGA in February but it doesn't sound like they wowed you. Anyhow, I am quick to criticize … I feel I should also be quick when it is the other way as well. Thanks for the daily newsletter.

    My pleasure.




    MNB had a story last week about how Oregon has passed a law enabling cities to fine supermarkets for abandoned shopping carts, which has led to the creation of an infrastructure by the chains designed to find and round up such carts.

    One MNB user wrote:

    Wouldn't it be cheaper for the stores to install some anti-theft devices on the carts? Maybe not cheaper than a $50 per cart fine, but cheaper than having roving teams of trucks out looking for carts on walkabout. How much does it cost to install locks on a wheel that get activated once the cart reaches a certain distance from the store?

    And another MNB user wrote:

    A great case of punishing the innocent party (or treating the symptom, not the root cause). Retailers aren't the ones abandoning their carts, it's those who steal them.

    True enough.




    I joked last week about how maybe the Baseball Hall of Fame should have a day when it inducts all sorts of disreputable characters – Barry Bonds, Pete Rose, Mark McGwire, Jose Canseco. Rafael Palmeiro and Shoeless Joe Jackson. Now that would be an induction ceremony worth attending, I wrote.

    To which MNB user Archie E. Dishman responded:

    Very disappointed you lumped Shoeless Joe Jackson in the same crowd as Barry Bonds, most baseball people including Bob Costas, believe Jackson was not guilty of the charges and remains a scapegoat to this day, but undeservedly so.

    Fair point. I was wrong to lump him in with that group.




    Finally, MNB user Bob Savage had some thoughts about last week’s “OffBeat” column:

    Thanks for sharing your Thanksgiving experience. It was a very poignant reminder to me about priorities. While I bet most of us in the MNB community would say that we are pretty good at work/life balance, in reality I would wager that most of us may fall a bit short of expectations. We all may love the thrill of the “hunt” for career advancement, market share, earnings increases or even that special new product to launch, but nothing (to me) is more satisfying than building memories with family and friends! It is not even as much about the quantity of time spent together, as it is the quality. In reality, quality is not even defined by the price on the menu or the number of stars a resort has but by focus. Daring enough to shut off the BlackBerry, e-mail, phone and our watch to just focus 100% on and enjoy the people we are with.

    Personally, I am one of the worst at doing this! While reading about your experience, I was transported to walking right behind you and Mrs. Content Guy down Michigan Ave and feeling that cold wind blowing. I could hear your family laughing at you struggling to ride the Segway and I could see the smile on your face as you reflected on the satisfaction of seeing your kids growing into quality, accomplished adults.

    Thanks for the reminder….work things come and go, family memories last forever!


    My pleasure.

    I was touched by the enormous number of emails I received in response to the Thanksgiving piece, many of which shared personal stories and memories. It was a reminder that we all share something special here…and I thank you for that.

    KC's View:

    Published on: December 3, 2007

    In Week Thirteen of National Football League action…

    San Francisco 14
    Carolina 31

    San Diego 24
    Kansas City 10

    Detroit 10
    Minnesota 42

    Atlanta 16
    St. Louis 28

    Buffalo 17
    Washington 16

    Jacksonville 25
    Indianapolis 28

    NY Jets 40
    Miami 13

    Seattle 28
    Philadelphia 24

    Houston 20
    Tennessee 28

    Denver 20
    Oakland 34

    NY Giants 21
    Chicago 16

    Cleveland 21
    Arizona 27

    Tampa Bay 27
    New Orleans 23

    Cincinnati 10
    Pittsburgh 24
    KC's View:

    Published on: December 3, 2007

    A couple of stories report on some of the problems encountered by Tesco in its US efforts…

    The Financial Times reports that a California court has ruled that Tesco’s main warehouse in Los Angeles does not comply with environmental planning laws – a ruling that could have an impact on its ongoing operations and roll-out plans.

    According to the story, the suit filed against the retailer’s Fresh & Easy Neighborhood Market division argues “that the distribution centre should have been subject to a full environmental review, including a public consultation. Tesco says the distribution centre, on the site of a former military base, is covered by the environmental approvals secured for the base redevelopment.”

    FT writes: “Tesco executives acknowledged that the ruling could, in theory, lead to the closure of the depot, the logistical backbone of its US operation. But they said this was highly unlikely and that similar disputes had been settled without such radical measures.” Marketing Director Simon Uwins says that the company has contingency plans that will deal with any possible problems.

    At the same time, in the UK the Mail reports that Tesco suffered a computer glitch in the US that caused a number of out-of-stocks. The problem apparently was with the software; while the chain’s replenishment systems are designed to be highly automated, there wasn't any historical data, which cased product shortages that plague the company’s first six stores during their early days of operation.

    Tesco is responding to the story by saying that the problem was higher than expected demand, especially for private label products – which make up more than 50 percent of the stores’ SKUs.

    KC's View:
    As Longfellow once wrote, “Into each life some rain must fall, Some days must be dark and dreary…”

    Even in Southern California.