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    Published on: December 6, 2007

    Now available on iTunes…

    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.

    I’ve been working over the past few weeks on a video project for the CIES International Food Safety Conference, schedule to take place in mid-February in Amsterdam. The goal of the piece is to look at food safety issues from the perspectives of a number of senior executives, from global companies such as Wal-Mart, Carrefour, Tesco, Delhaize, Ahold, as well as retailers from companies such as Woolworths in Australia and Pick n’ Pay in South Africa.

    I can’t go into details about the video, because it is scheduled to be seen for the first time in Amsterdam, and neither CIES nor the sponsor, JohnsonDiversey, would appreciate it if I let the proverbial cat out of the bag. You want to see it, you have to come to Amsterdam for the conference, which I’d recommend anyway because 1) the CIES Food Safety Conference is always an outstanding event, and 2) because Amsterdam is a wonderful city.

    But I don't think they’d mind if I clued you on one of the themes that has emerged from all the interviews I did, sounded by outstanding people from diverse as Mike Duke of Wal-Mart, Pierre-Olivier Beckers of Delhaize, and Feargal Quinn of Superquinn.

    That’s the importance of communication and information, up and down the supply chain, and in fact reaching into every aspect of the business, not just food safety. Because transparency is a reality of doing business in 2007 and beyond, like it or not, and you'd better embrace it before someone else forces it on you. Transparency has to be a core value for the successful retailer in 2007…again, like it or not.

    Some retailers will struggle with this concept more than others, but I think Bill McEwan, the CEO of Sobey’s, put it best when he suggested that “the new competitive advantage” will be not just in the quality and freshness of food, but “in the quality and simplicity of information.”

    He was talking about food safety, but he could have been talking about virtually any aspect of the food business. It reinforces the point made often here on MorningNewsBeat – that it isn’t enough to be a source of product. You have to be a resource for information.

    As for the rest of the video and these executive insights…you’ll have to come to Amsterdam.

    For MorningNewsBeat Radio, I’m Kevin Coupe.

    KC's View:

    Published on: December 6, 2007

    The Buffalo News reports that under its new ownership, Tops Markets plans to open new stores, upgrade existing units and increase its payroll.

    CEO Frank Curci, who has returned to the company’s executive suite with the $310 million sale of the company by Ahold to Morgan Stanley Private Equity, tells the paper that a prime goal will be to restore a local focus to the company’s operations as it ramps up to better compete with the likes of Wegmans, Wal-Mart, Sav-A-Lot and Aldi.

    “The best way to compete with any of the chains, whether it be Wal-Mart or Wegmans, is to be different, to be something that resonates with customers that’s a little different,” Curci said.

    Tops “will hire about 100 people for corporate jobs in merchandising, marketing, finance and information technology,” according to Curci, who says that “those are the functions that will best enable us to serve our customers better. If we had one weakness in the past couple of years, it was in the centralized organization’s lack of focus on individual customers.”

    KC's View:
    Curci is making all the right noises, though it is a bit concerning when the News reports that he says “customers shouldn’t expect many immediate changes inside the stores, since the chain first needs to rebuild its local organization.”

    Knowing how tough the competition is, it seems to me that the first place changes ought to be seen is in-store. It is hard to imagine that the folks at Wegmans would ever suggest that they ought to rebuild the headquarters infrastructure before getting the stores in order.

    After all, the stores are where the customers are.

    But it probably makes sense to give the new ownership the benefit of the doubt for at least a little while.

    Published on: December 6, 2007

    The New York Times reports this morning that 15 years after an E. coli outbreak in Jack in the Box restaurants “made people aware that hamburgers could kill them, the American beef industry is still searching for a practical method to prevent the toxic E. coli strain from contaminating ground beef.”

    According to the story, the beef industry is spending more than $350 million a year on these efforts, “but even as expenditures keep rising, the industry appears to be losing ground,” reflected in the fact that there have been 20 beef recalls this year alone, only one less than the record number that took place in 2000.

    “It is difficult to say whether the amount of E. coli in ground beef has increased this year, since the number of recalls is an imperfect measure,” the Times writes. “Limited sampling by the Agriculture Department has found a slight increase in the level of E. coli 0157:H7 this year over recent years, though it remains lower than it was five or six years ago.

    “But some meat industry officials say they are sure that more E. coli is turning up in cattle this year.”

    And, the Times reports, “As part of its efforts to eradicate E. coli, the meat industry is experimenting with vaccines, antibiotics, and feed additives that may reduce the level of E. coli 0157:H7 in cattle intestines. But so far, those are not commercially available. To date, nearly all of the efforts to curb E. coli have focused on interventions at slaughterhouses and at grinding plants that produce ground beef.”

    Irradiation remains an option – though not a popular one. “The federal government says it believes that exposing meat to radiation is a safe and effective way to kill E. coli and other pathogens,” the Times writes. “But meat companies have been hesitant to use irradiation because of fears that it would make meat more expensive, change the taste and color, and provoke consumer opposition.”

    KC's View:
    And the food safety stories keep coming, as you’ll see below…

    Published on: December 6, 2007

    USA Today reports this morning that Sen. Bob Casey (D-Pennsylvania) and Sen. Chuck Grassley (R-Iowa) have introduced the Eat Safe Act of 2007, which mandates that test results of imported foods conducted by safety laboratories must be submitted to federal regulators, regardless of what the results say. And, according to the story, the bill “includes additional funding for food-safety agencies and requires tighter oversight of private labs that test some imported foods.”

    The paper had previously reported “that five private labs confirmed they don't submit failing test results to the FDA if the importers tell them not to,” and that in certain cases, importers were trying a second time to get products into the US by going to labs seen as less strict. The new bill would make such efforts impossible.

    And, according to USA Today, “The legislation also calls for $25 million a year in additional funding so federal food-safety agencies can hire 250 workers, many of whom would focus on imports. That includes $10 million for the Department of Agriculture and $15 million for the FDA.

    “The bill also proposes $6.5 million a year for food-safety and food-defense training for federal employees. The two agencies spend about $1.3 billion a year combined on food safety.

    “The bill is one of a dozen food-safety proposals introduced this year after scares involving pet food, seafood and toys. The bill is the only one in the Senate that has bipartisan authors.”

    KC's View:
    Not sure about you, but some of these numbers make my head hurt. And I’m not nearly smart enough to know if $6.5 million a year for food-safety and food-defense training for federal employees will mean anything when added to an annual federal food safety budget of $1.3 billion.

    Regardless of the numbers, it is extraordinary how many stories about food safety have been in the press lately. Which is why – to repeat an assertion made above in the MNB Radio commentary – retailer and manufacturer transparency is so critical.

    Published on: December 6, 2007

    The New York Times reports that in Florida, the Seminole County School Board has struck a deal with McDonald’s restaurants in the area that rewards students with good grades and attendance with free Happy Meals. The program reportedly replaces a similar deal that had existed for 10 years with local Pizza Hut restaurants.
    KC's View:
    This is just horrible, horrible public policy, and the Seminole School Board ought to be ashamed of itself. Presumably, the folks on that board have been living in a cave, and haven't been reading all the stories about the negative impact of fast food on the nation’s obesity epidemic.

    Maybe they could have made a deal with the local supermarket chain for free apples or other kinds of fruit. Or maybe could have gotten the kids free one-month memberships in a gym.

    Too much fast food creates slow minds.

    Published on: December 6, 2007

    • Published reports say that Jones Soda founder/chairman/CEO Peter van Stolk plans to leave the company, saying that it needs new leadership as it continues to grow.

    A search is underway for a permanent successor, and van Stolk reportedly plans to remain on the board of directors and provide strategic leadership on marketing initiatives.

    • In Canada, Alain Brisebois, senior vice president of Metro’s Ontario division, and Robert Sawyer, senior vice president of Metro’s Quebec division, are switching jobs, according to reports in the local media there.

    KC's View:

    Published on: December 6, 2007

    • Costco reports that its November sales were $5.72 billion, up 13 percent compared to the same period a year ago. Same-store sales were up nine percent.

    • New Jersey-based Village Super Markets reported that its fiscal first quarter revenue was up five percent to $263.6 million, with same-store sales up 3.6 percent. Q1 profit was up two percent to $4.3 million.

    KC's View:

    Published on: December 6, 2007

    MNB user Tom Murphy had some thoughts about the A&P acquisition of Pathmark:

    Having lived in NJ and shopped both A&P and Pathmark stores, this has been a very interesting acquisition to watch. Unquestionably, the new company will have some of the most intriguing locations in their markets, albeit many that are distressed to put it mildly. They both, at times, have had strong identities within those communities they serve. Both have fallen on hard times of late, as you have often pointed out in your columns. I suspect that between the two management teams, there is probably close to one good team that can lead A&P out of the doldrums. The questions are fairly simple:
    1. Can past management tone it down and let someone who knows what to do, do it?
    2. Can those who merchandise and market, figure out: a) the right target customers, b) the right path to serve them and most importantly, c) have the patience to stay the course during the conversion and while the early results and naysayers are negative?
    Tough questions for a tough market in a tough business!!

    MNB had a story the other day about how Tim Mason, CEO of Tesco’s US division, described the Fresh & Easy stores as being “as fresh as Whole Foods, with value like a Wal-Mart, the convenience of a Walgreens and product range of a Trader Joe’s. That leaves us with a specific edge in the market.”

    My comment: When he says that Fresh & Easy is designed to compete with four different retailers on four different fronts, and then says that this gives the retailer a “specific edge,” well, it just doesn’t sound very specific to me.

    One MNB user agreed:

    The CEO's perception of Fresh and Easy, "we are everything to everybody" does not jive with the perception that Fresh and Easy is "differentiated." If you try to be everything to everybody, you wind up being nothing to nobody.

    I try never to underestimate Tesco. But one of the real questions about its US operations is how it plans to out the same kinds of stores in communities as different as West Covina, Hemet and Compton – which supposedly is what the retail is doing. It is an interesting strategy that remains to be proven.

    But never, ever underestimate Tesco.

    Regarding Wal-Mart’s ownership of 95 percent of troubled Japanese retailer Seiyu, which is being run by Ed Kolodzieski, one MNB user wrote:

    What a huge blunder to have a guy named Ed running Seiyu. This is classic marketing 101 and culture is very important to everything from the design of the building to product selection, hours of operation, labor, management, customer service…well, everything. Without a deeply engrained understanding of the culture I predict failure and I would suggest the person heading up Seiyu ought to have English as a second or third language.

    Great leaders and great companies surround themselves with people who know more than they do. In this instance I don’t see that happening.

    Never, ever underestimate Wal-Mart. But the point you make is a legitimate one…that Wal-Mart’s problems in Japan may be related to a lack of connection to local shoppers. That’s what a lot of people there think, and it seems logical.

    MNB noted the other day about how AT&T is getting out of the pay phone business, just another reflection of how the world has changed. The piece also prompted a couple of emails with unique perspectives…

    MNB user Ed Martin wrote:

    About a year ago, I was in the Sacramento airport when I saw a young girl who was walking with what appeared to be her grandmother. When they passed a bank of four payphones, the child asked her grandmother what those were. Her grandmother explained how people could make phone calls by placing coins into the phone. At that point the little girl was very excited and said “Does this mean we won’t have to carry cell phones anymore?”

    Very funny. And telling that she had no idea what pay phones were.

    And another MNB user wrote:

    A bit of history. My father had a drugstore in a small Ohio town, opened in the early 30's, closed in the early 70's. The pay phone was 5 cents during all that time. He repeated many times stories about the two "houses of ill repute" tolerated in that small town, and how the "girls" would sneak down to his drug store to call their boy friends on this pay phone as the house "mom" didn't approve of giving away the merchandise. Changing attitudes caused the town to force these operations to close in the late 30's.

    Don't know about you, but I can't get past the idea that this “small Ohio town” had not one, but two brothels…and was able to support them during the Depression.

    KC's View:

    Published on: December 6, 2007

    MNB received dozens of emails yesterday about the story noting that Marv Imus, whose single-store independent supermarket has served the Paw Paw, Michigan, community for more than six decades, has decided to get out of the business, selling it to his wholesaler, Spartan Stores. It was a testament to Imus’s role in the industry that so many letters came in, and MNB got a number of requests for a column written about him and another independent, Al Lees, several years ago. (Lees has since passed away.)

    So, here it is:

    On The Road: Dining With Dinosaurs
    by Kevin Coupe

    It always has amazed me over the years how many supermarket retailers don't like food.

    It's not that they don't have good taste. It's just that they don't seem to tale pleasure in the act of eating, don't much care about the beer or wine chosen to go with a meal, and would just as soon go to a local Olive Garden as anyplace else. It just doesn't matter to them.

    (I knew one retailer whose idea of a good meal was to take me to Hooters. He said he loved the chicken wings, but there may have been something else going on there…)

    I've always felt that one of the great attractions of the food business - as opposed, say, to the tire business - is that I've always found that how and what we eat to be a matter of great romance. I'm just one of those people who finds himself thinking about what's for dinner before finishing breakfast.

    Two of my favorite retailers happen to be guys who love food. Maybe that's part of the reason they’re among my favorites. Whatever. But not only are Marv Imus, of Paw Paw Shopping Center in Michigan, and Al Lees, of Lees Market in Massachusetts, food retailers who love food, but they also share the dubious distinction of having stores built on the same competitive quicksand. They're single-store independents, and that's a tough place to be these days.

    During a recent trip to San Francisco, where we were all attending FMI's MarkeTechnics conference, I thought it would be fun for the three of us to combine our passion for the business with our passion for food. So we journeyed north to Napa Valley, and gathered for dinner at Greystone, the restaurant located at the Culinary Institute of America.

    The menu for the evening, as might be expected, was wonderful: Yukon Gold Potato Ravioli, Creamy Butternut Squash Soup, followed by amazing melt-in-your-mouth Slow-Cooked Ribs and Braised Lamb Shanks. (We shared portions…the food was too good, and we were too ravenous, not to.) And the wine was spectacular - a 2000 L.M. Martini "Continuum" from nearby Sonoma. (Actually, only Imus and I drank the wine; Lees preferred to sip at a favorite brand of vodka.) But what really set the evening apart was frank conversation about the future of the single store operator, and whether these two independents would be able to survive.

    A decade from now, I asked them, will the single-store supermarket retailer be a viable, functioning entity in the United States?

    The answer was sobering.

    Probably not, they both agreed. In some sense, they see themselves as dinosaurs facing extinction.

    "Some will be able to survive," Imus said, "but it is going to depend on location and the kind of store you operate. If you have an upscale store in the right location with the right customer base, you can survive. But at the low-end, you’re competing against Wal-Mart. And that means you have to reinvent yourself. The problem is that nobody knows exactly what that means."

    Imus noted, between bites of beef ribs that threatened to melt off the bone, that even if an independent such as himself wanted to change formats - become a Whole Foods-style retailer that specializes in natural and organic products - it would be enormously difficult for him to find cost-effective and efficient sources for those products. "And yet, I know that I cannot survive as a traditional grocer." The traditional independent grocer, he says, tends to be firmly planted in the middle, the mainstream - which, in the current environment, is the most dangerous place to be.

    But, Lees emphasizes, it isn’t about a certain enormous Arkansas retailer. "I still come back to the fact that Wal-Mart is not our competition," he says. "The single store independent operator's main competition is other supermarket operators." And, he agrees, that single store operator's often biggest challenge is himself.

    "How far should we stretch? How big a gamble should we take? And when do we take it?" Lees asks. "You can't take it after the fact. You have to take it before the fact, you have to anticipate. Warren Buffett once said that by the time you identify a trend, it is too late."

    Both men said they agreed with a metaphor that is quick becoming one of our favorites - that while the industry has traditionally acted as if retailing is a game of chess, with interconnected moves being planned out long in advance on a playing field with rules that never change, in fact retailing has to be approached as if it is poker - you have to bet quickly and move on, never dwell on failed wagers, and deal with the fact that there are constantly changing rules and wild cards. "The problem is that sometime you have to bet like it is poker, and you can only afford the nickel slots," Imus says.

    It was appropriate that over such a fabulous dinner, both men agreed that one of the opportunities for the independent - and one of the toughest challenges - was to become food oriented without being upscale, to create a retailing environment that is food-focused without being precious, and without giving up the image of being at least competitive on price.

    As we sipped excellent coffee and perused the dessert menu, the men did disagree on one thing - their individual chances for survival. Imus was brutally frank - he doesn't see how, ten years from now, his company will still be in existence as a single store operator. Doesn’t mean he's giving up, or that he's stopped looking for alternatives and solutions. But the situation seems grim.

    Lees, on the other hand, expressed cautious optimism. "I think we'll still be there," he said, "but we will not be the same company we are today. I don't know what we'll be selling, but it may not be soap and household products. I do think we're headed in the right direction, as an alternative to other chain stores in the area. We may no longer be a supermarket. We will be a food distribution business"…whatever that means.

    The dinner ended, and we parted company. Imus and Lees went off together as they often do at these conferences, trying to figure out where they will look for the next big idea, and hopefully a good meal in the bargain.

    Dinosaurs? Maybe. But my sense, at least for the moment, is that they won't go into extinction quietly.
    KC's View: