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    Published on: January 15, 2008

    Burd, Nooyi Urge Creation Of Coalition Focusing On Health Care, Obesity

    SCOTTSDALE, Arizona - In separate presentations today to the Food Marketing Institute (FMI) Midwinter Executive Conference here, the CEOs of Safeway and PepsiCo each threw down a challenge to the industry to create a coalition that can fight obesity in the US and develop a more holistic approach to the health care issue.

    The challenge from Safeway’s Steve Burd certainly had more meat on it, since it came a year after he’d rocked the same conference with a speech about corporate and national health care policy that stressed the importance of personal responsibility, and pledged to create a corporate approach at Safeway that would have enormous impact on both the health of its employees and the health of the company’s bottom line.

    This year, Burd’s update on last year’s speech came after a 12-month period in which his company had negotiated numerous union contracts, each of which had health care-related elements. And if there was one question that hung out there a year ago, it was whether Burd would be able to make his argument stick during negotiations, and convince union leaders that it simply made sense that people who demonstrate unhealthy behaviors should pay higher insurance premiums than people with more healthy lifestyles.

    Remarkably enough, he did. Burd said that in virtually every negotiation, union leaders were willing to adopt a personal responsibility-driven health care model because they understand that if health care costs continue to go up, there will be no money left for pay increases. (And the fact that Safeway is willing to write a rebate check at the end of the year to people who change their behavior and adopt a healthier lifestyle certainly means hat Burd is putting his money where his mouth is.)

    Burd reiterated some of the basic numbers he presented in January 2007 – that 70 percent of all healthcare costs and behavior-driven, that 74 percent of all health care costs are related to four chronic conditions, the vast majority of which can be reduced through a change in personal behavior and that the private sector – through smart and disciplined programs – can reduce costs without shifting costs or turning to the government for assistance. In the case of Safeway, Burd said, health care costs were taken down 13 percent in 2006, remained flat in 2007, and he was convinced that they would stay flat or fall further in 20098.

    Burd noted that the Safeway approach has been two-pronged – it both encourages greater amounts of exercise (through a corporate fitness center and subsidizing gym membership costs in other locations) and better eating (the company cafeterias subsidize healthy meals and charges full market value for less healthy options).

    But there were other, remarkable elements to the Safeway approach that Burd described, including a soon-to-launch concierge service that will assist employees and their family members diagnosed with either cancer or cardiovascular disease. It will, he said, give them some they can call and rely on for support after getting the diagnosis, helping them make the proper and most effective treatment decisions.

    And, he said, Safeway currently is forming a healthcare services company that will endeavor “to help other companies and governments replicate our experience.”

    Burd urged attendees – retailers and manufacturers alike – to join the Coalition to Advocate Healthcare Reform (CAHR), which currently consists of 53 members and is focused on influencing national public policy in the health care arena. The essential concept is to create a mechanism so strong that it will be able to influence, even dictate, national policy in this area because it has been so effective and efficient, creating a market-based healthcare system that focuses on universal coverage and individual responsibility, imbedding real change within both public institutions and private enterprise.

    In the morning’s opening presentation, PepsiCo CEO Indra Nooyi chose to address the obesity crisis in America, urging the food industry – and society at large – to “stop the blame game. You cannot blame one person, industry or government.”

    Nooyi suggested that the industry band together to create a national awareness program on the scale of the “Keep America Beautiful” and “Buckle Up” campaigns. Such a campaign, she said, would develop science-based programs that could be distributed to schools, helping students understand portion control, healthy eating and the importance of moderation; it could also lobby for states to mandate K-12 physical education programs.

    Virtually everyone in the industry can agree on both the goals and the process, Nooyi said. “The hardest part is the will,” he said. And she called for an obesity-focused industry conference that would take place within three months, aimed at pulling together a cohesive and coherent strategy.

    Burd agreed with the suggestion, but emphasized that any obesity strategy has to be a subset of the larger health care debate.

    Note: Michael Sansolo will offer additional analysis in his “Sansolo Speaks” column Tuesday morning.

    In other news...

    • Barry Scher, the longtime vice president of public affairs at Giant Food and Ahold USA, received the FMI 2008 Glen P. Woodard Jr. Public Affairs Award, in recognition of his leadership in helping the industry address governmental issues.

    • Liz Minyard, former co-chair and co-CEO of Minyard’s Food Stores, received the FMI 2008 Sidney R. Rabb Award for community service, especially “her efforts to feed the hungry and help the homeless, students and other people who suffer from chronic diseases.”

    • Tom Infusino, chairman emeritus of Wakefern Food Corp., received the FMI 2008 Herbert Hoover Award for “personal and professional excellence in serving the food retail and wholesale industry.”

    • A.G. Lafley, chairman/CEO of Procter & Gamble, received the FMI 2008 William H. Albers Industry Relations Award.

    KC's View:
    Over the last six years, it seems like the obesity issue has come up in some sort of MNB story at least once a week … and while I think there is a public policy role that government can play, the country – and individual consumers – will be far better off if the notion of individual responsibility is front-and-center.

    This is the central thesis advanced by Safeway’s Burd, and I find it no less compelling today than I did a year ago. In fact, it may be more compelling, because real, not just theoretical, dollars and cents are beginning to be show up in the ledger, even as care gets better and people become more responsible.

    Burd’s argument, at its most basic, is this. As a driver, you get better insurance rates if you have a good record than if you have a bad driving history. That same formula should be applied to health insurance.

    I have to say that it is impressive the extent to which Steve Burd has made this issue a kind of personal mission … and I am convinced that part of the reason he is so successful – and persuasive – is that this has become a personal passion, one that he lives and well as preaches. It isn’t just about money, but doing something that can have lasting impact on society as well as business.

    It’s strong medicine for business, but necessary.

    Published on: January 15, 2008

    by Michael Sansolo

    It’s hard to imagine a bigger moment of truth than the honesty Safeway’s Steve Burd displayed when talking about healthcare reform to the FMI Midwinter audience. Burd was explaining how he started to bring about many of the changes he’s championed on health and wellness inside his company.

    “They usually do what I want them to do,” he said, referring to his direct reports in his company. Then he quickly amended the statement, adding, “Well, they actually always do what I want.” Sometimes power matters.

    Then again, it should. While Burd’s talk was about healthcare reform, it was really about the challenges of leadership. It wasn’t enough that Burd has talked about reform, he has lived his words bringing about changes in Safeway policies, Safeway benefits and taking his case to the world of unions and politicians. “There’s no issue that’s more important than this,” he said and then he outlined the steps he’s taken demonstrating clearly that his words weren’t empty rhetoric. And the challenge he gave to the entire audience to join his coalition of change were aimed at drawing the same level of commitment.

    In many ways, Burd’s comments and actions followed perfectly on the speech from Dan Sanders of United Supermarkets, the chairman of the conference. Sanders opened the meeting talking about his leadership philosophy leadership in terms that every leader at every level—should consider.

    Sanders, who has authored a leadership book called Built to Serve, talked about the concept of servant leadership that is popular among many entrepreneurs in the industry. The message is fairly simple: the job of the leader is enabling the power of those reporting to them.

    Sanders said he tries to delegate authority not responsibility, giving his people the best possible chance of success. For him and his company to succeed, he said, his store managers must have the power to be merchants, not storekeepers.

    It was a powerful message in a day with many such themes. While some speakers outlined key new issues of industry interest from animal cloning to the state of the Middle East, the underlying theme was about how the words of leadership translate into action and change. And how the food industry is so well positioned inside the community to create exactly that level of change throughout society.

    The message of turning words into action came again and again. Beyond Burd there was PepsiCo’s Indra Nooyi urging a high industry profile on health and wellness. Where Burd sees business reshaping the debate on healthcare, Nooyi sees the same type of high profile on improving the overall state of America’s health. Former FMI chair Liz Minyard - the recipient of FMI’s Rabb Award for industry service - reminded the crowd that this is a good industry “that must care about customer, employees and issues.”

    As Sanders said, the burden on today’s leaders is to “create the future.” Lofty words all around and possibly easily dismissed by skeptics. Yet, as Burd’s comments made clear, the CEO’s words can and should become action and rhetoric can become a powerful force of change.

    When that happens, anything is possible.

    Michael Sansolo can be reached via email at msansolo@morningnewsbeat.com .

    KC's View:

    Published on: January 15, 2008

    A new study by The Nielsen Company finds that almost half (49 percent) of US consumers are reducing their spending to compensate for rising gas prices, up four points from June 2007. Consumers are also battling high gas prices by combining shopping trips and errands (70 percent), eating out less (41 percent) and staying home more often (39 percent).

    According to the survey, Nielsen found “that record-high gas prices likely contributed to 2007’s less-than-stellar holiday sales season. Sixty percent of consumers surveyed said they had less money to spend during the holidays due to increased gas prices, and 44 percent of consumers reported they planned on spending less money on holiday gifts in 2007 as compared to the year prior.”

    Nielsen says “that gas prices are impacting where consumers shop, with 27 percent of consumers reacting to gas prices by shopping more at supercenters, or megastores and big-box stores, where more items needed are in one store … Increased fuel prices are resulting in more coupon clipping, with 25 percent of consumers using coupons to save money, up from 20 percent in June 2007. Twenty-three percent of consumers indicate they will buy less expensive grocery brands to deal with higher gas prices, signaling a possible boost for private label or store-brand products and lower-priced branded products.”

    “2008 will likely be a challenging year for U.S. consumers and the economy as a whole as we grapple with growing inflation, credit card debt, declining house values - - as well as expectations for gasoline to hit $3.40 by spring,” said Todd Hale, senior vice president of consumer and shopper insights at Nielsen. “Manufacturers and retailers need to be alert to the fact that consumers are looking to save by altering where they shop, how they shop and what products and brands they buy. Value, convenience and competitive pricing will be more important than ever in the year ahead.”

    At the same time, the New York Times reports that there is growing evidence that consumer spending, “a bulwark against recession over the last year even as energy prices surged and the housing market sputtered, has begun to slow sharply at every level of the American economy, from the working class to the wealthy.”

    Personal consumption is 70 percent of the economy, and there are numerous reports that Americans are cutting back at retailers ranging from Nordstrom to JC Penney. The pullback seems to be related to high cost of gasoline and the collapse of the housing market, and the Times notes that such a reduction is rare.

    “Even in tough economic times Americans rarely reduce their consumption, preferring instead to slow the growth in their spending,” the Times writes. “Since 1980, they have cut spending in only five quarters — a total of 15 months — most of them in the depths of a recession. The 2001 recession passed without a cutback in consumer spending.”

    The Times points out that “there are plenty of recession naysayers. Average hourly wages and salaries have not fallen, and some economists argue that unless - or until - that happens, consumer spending will hold up despite widespread economic unease. According to these economists, what happened in December was a temporary blip.”

    Meanwhile, Bloomberg reports that the National Retail Federation (NRF) seems to be a little more sanguine about the state of the economy, predicting that “sales might increase 3.5 percent this year, slowing the first six months, and then accelerating later on as the economy improves,” though it conceded that the challenges will be “formidable.”

    KC's View:
    One would like to report that the glass is half full, but more and more it appears that it may, in fact, be half empty.

    Which means that Todd Hale’s observation is right – retailers need to begin developing marketing programs that take these economic trends into account, perhaps featuring affordable indulgences that will help people get through tougher fiscal times.

    Published on: January 15, 2008

    The Washington Post has obtained the 968-page “risk assessment” prepared by the US Food and Drug Administration (FDA) concluding that “foods from healthy cloned animals and their offspring are as safe as those from ordinary animals, effectively removing the last U.S. regulatory barrier to the marketing of meat and milk from cloned cattle, pigs and goats.”

    According to the Post the still-to-be released report “finds no evidence to support opponents' concerns that food from clones may harbor hidden risks,” recognizes “that a majority of consumers are wary of food from clones...and that cloning could undermine the wholesome image of American milk and meat,” and “acknowledges that human health concerns are not the only issues raised by the emergence of cloned farm animals.”

    The Post reports that FDA concedes that “moral, religious and ethical concerns . . . have been raised," but that its report is science-based and does not take any of those issues into consideration.

    And, the Post writes: “In practice, it will be years before foods from clones make their way to store shelves in appreciable quantities, in part because the clones themselves are too valuable to slaughter or milk. Instead, the pricey animals – replicas of some of the finest farm animals ever born -- will be used primarily as breeding stock to create what proponents say will be a new generation of superior farm animals.”

    KC's View:
    There was session about cloning at yesterday’s FMI Midwinter Executive Conference, and I came away with one central conclusion – that if the sale of the progeny of cloned animals is to find acceptance with the American public, the cloning industry is going to have to do a very good job of explaining the technology to shoppers. Too often, I find the explanations to be reminiscent of science classes that I had trouble passing; they make my teeth hurt.

    Of course, labeling would be a good start.

    Published on: January 15, 2008

    The Des Moines Register reports that “Hy-Vee Inc. plans to offer many generic drugs for $4 per month,” a program that “will cover 30-day supplies of 400 medications. Officials said the list will include antibiotics and drugs that treat ailments such as allergies, asthma, arthritis, diabetes, cholesterol and digestive issues. The program is similar to ones launched last year by Wal-Mart and Target.
    KC's View:

    Published on: January 15, 2008

    The Wall Street Journal this morning reports that Microsoft has spent four years working with MediaCart Holdings “on a grocery cart-mounted console that helps shoppers find products in the store, then scan and pay for their items without waiting in the checkout line. Microsoft's acquisition of online advertising company aQuantive last year for $6 billion shored up the company's capacity to serve video ads onto these grocery cart screens.

    “Starting in the second half of 2008, the companies plan to test MediaCart in Wakefern Food Corp.'s ShopRite supermarkets on the East Coast. Customers with a ShopRite loyalty card will be able to log into a Web site at home and type in their grocery lists; when they get to the store and swipe their card on the MediaCart console, the list will appear. As shoppers scan their items and place them in their cart, the console gives a running price tally and checks items off the shopping list.

    “The system also uses radio-frequency identification to sense where the shopper's cart is in the store. The RFID data can help ShopRite and food makers understand shopping patterns, and the technology can also be used to send certain advertisements to people at certain points,” as well as “help advertisers reach potential consumers based on past grocery purchases, which are logged when they swipe their loyalty cards.”

    KC's View:
    Not to be overly cynical about this stuff, but it seems like so-called “smart shopping carts” have been hyped for years, but they never seem to get the kind f traction necessary to really have an impact on the supermarket industry. Maybe this will be the one – it certainly seems to have good parentage – but I need to see real evidence.

    Published on: January 15, 2008

    This month’s edition of Facts, Figures & The Future features a piece by Phil Lempert in which he argues that “2008 may well be the year that the typical diet food falls to the side as we actually start thinking holistically about losing weight … It's going to be about the food, exercise, smaller portions and that kind of boring stuff, and perhaps for some, a pill.”

    Lempert writes that “the generation of boomers that has led the trends in fashion, music, media and food is now about to set the trends for dieting. No one wants to see 76 million fat 65 year olds jiggling around, least of all the vain boomers themselves! It's a huge opportunity that is about to set the stage for war between diet foods, programs and OTC products; and the OTC folks might just win.”

    But if the OTC folks do win, with “fat blocker” pills that promise significant results, it may be because of superior marketing that appeals to consumers’ time constraints and desire for instant results. Marketing aside, Lempert writes, one thing hasn’t changed: “The formula for all of us regardless of program is rather simple - burn more calories than you eat and you will lose weight.”

    In other F3 stories:

    • Anne-Marie Roerink, director of research at the Food Marketing Institute (FMI), offers an update on the industry’s battle against high credit card interchange fees.

    • There is a report on a Nielsen study saying that “six out of ten US consumers say that "good value for money" is the prime reason that they choose where to spend their food dollars. That is a big percentage, but it pales next to international attitudes toward value; 85 percent of global consumers say that good value is the reason they choose where to shop for food.”

    What is interesting is how US consumers determine "good value.” For example, 80 percent of US consumers said they use "frequent promotions and discounts" as a measure of "good value," while 72 percent depend on a store's reputation for delivering low prices. About seven out of 10 people pay attention to store circulars and flyers, while 63 percent depend on discounts delivered to loyalty or frequent shopper cardholders. Almost six out of 10 US consumers do price comparisons across retailers to determine value, while 53 percent depend on private label offerings, and 43 percent use friends' recommendations.

    F3 takes note of a report by the International Food Information Council (IFIC) saying that “language used to communicate information about dietary fats is unclear. Even with the abundance of nutritional information available online, consumers are struggling to decipher the messages they are receiving - especially when some of the messages may be confusing or likely, inaccurate.”

    And, there’s much more.

    To get your copy of F3, go to:

    http://www.factsfiguresfuture.com/

    F3 is a joint production of the Food Marketing Institute (FMI), ACNielsen, and Phil Lempert.

    (Full disclosure: MNB’s Kevin Coupe is a regular contributor to F3.)

    KC's View:

    Published on: January 15, 2008

    • The New York Times reports this morning that “fish is now the most traded animal commodity on the planet, with about 100 million tons of wild and farmed fish sold each year. Europe has suddenly become the world’s largest market for fish, worth more than 14 billion euros, or about $22 billion a year. Europe’s appetite has grown as its native fish stocks have shrunk so that Europe now needs to import 60 percent of fish sold in the region.”

    This means that “the imbalance between supply and demand has led to a thriving illegal trade. Some 50 percent of the fish sold in the European Union originates in developing nations, and much of it is laundered like contraband, caught and shipped illegally beyond the limits of government quotas or treaties. The smuggling operation is well financed and sophisticated, carried out by large-scale mechanized fishing fleets able to sweep up more fish than ever, chasing threatened stocks from ocean to ocean.”

    KC's View:

    Published on: January 15, 2008

    • Wal-Mart has appointed Vicente Trius to be Executive Vice President, President and CEO of Wal-Mart Asia, International. Trius has been serving as president/CEO of Wal-Mart Brazil.

    • Trius will be succeeded in Brazil by Hector Nunez, who previously was serving as executive vice president/COO.

    • Dollar General announced that Richard W. Dreiling has been appointed CEO o the company. Dreiling previously was chairman/president/CEO of Duane Reade, and also was a senior executive at Safeway and Longs Drug Stores.

    KC's View:

    Published on: January 15, 2008

    Yesterday, MNB commented on a New York Times piece about how the airlines have misinterpreted how customers feel about their frequent flier programs, believing that there is real loyalty there and not understanding that many fliers feel trapped and resentful about such programs.

    Our comment, in part:

    This just struck me as a relevant piece to bring to your attention, because it reflects a misnomer in the food retailing business – people keep talking about loyalty marketing programs, when the card programs they often are using are just glorified electronic discount programs. Which explains, of course, why so many customers have a multitude of cards in their wallets – they’ll use them wherever they can get the best price. And still they refer to them as loyalty card programs and think they have loyal shoppers…

    Of course, in most supermarkets, best shoppers – generally the ones making the largest purchases – usually get to wait on the longest lines. That’s one of the reasons I was so impressed with the new system being tested by Hannaford, in which customers with 25 items or more are able to use the “Go Cart Curb Service.” They simply leave the cart with store employees, who scan the groceries, bag them, and then carry them out to the customer’s car, which the shopper can drive up to a covered bay. The customer can use a wireless unit to pay for the groceries, and drive away.

    That’s a great start, and one that more retailers ought to emulate, finding ways to put their own spin on it. And while I know there is a lot of resistance to this, there ought to be a way to reward “gold card” customers who spend an average of $100 a week or more.

    But the overarching message is worth paying attention to: don't misinterpret frequency as loyalty. Because they’re not necessarily the same thing.


    Which prompted MNB user Rich George to write:

    I really enjoyed your piece today on customer loyalty and happy to learn about Hannaford's new program. For years I have implored supermarket operators to do something for the customers who spend a lot in their stores. I have suggested dedicated check-out times and/or lanes, double baggers, priority services, e.g., deli, to name a few.

    I would also ask the audience how many "loyalty" cards they had in their wallet and the answer was usually three or more. I then would tell them that if my wife found the picture of three other women in my wallet that were not our children I would be in trouble.

    Finally, I think we have this concept of loyalty backwards. Customers do not have to be loyal to their supermarket. One can be loyal to his family, country, church, or alma mater, but to be loyal to a supermarket makes no sense. I think supermarkets need to be loyal to their customers.

    How? Simply, deliver on their promises.


    Couldn’t have said it better myself.

    And MNB user Jackie Lembke wrote:

    Good points. To me, loyalty would be when a customer chooses to shop, fly, consume at your business instead of competitors no matter the price or incentive. There are the occasional stores I will shop first no matter what the competitor is offering because on at least one and probably most every time I have shopped at that store the experience has been a positive one.

    For me, it also goes the other way, I will give a business a second chance if the first experience was not positive, but more than likely they won't get a third, this goes across the board for any retailing experience including fast food or sit down restaurants. No loyalty program makes up for a lousy shopping experience, I may carry your card, but never use it.





    We wrote yesterday about a couple of unimpressive Fresh & Easy stores that we visited in Scottsdale, Arizona, and one MNB user commented:

    I found your comments about the lack of customers in Tesco's Fresh and Easy stores interesting. In November I went to Southern California and visited 4 F&E stores (one of which it was opening day.) The lack of customers really surprised me, and the customers who were leaving the store had only 1 bag.

    Personally, if I had a choice of going to F&E or Safeway, I'd choose Safeway because there's more of a choice and the time to run in and out would be about the same. I don't 'get' what all the hoopla's about...


    In the interest of fairness, I should report here that I spoke with someone yesterday who visited the same Fresh & Easy store that I did; he went Monday at noon, and I went last Saturday at about the same time. But he found the store to be crowded with customers, many of whom were pushing full shopping carts. Business was booming, and the shoppers seemed enthusiastic and happy.

    I was careful yesterday to note that my report focused on one moment in time….apparently, during other moments, Fresh & Easy is finding some success.

    KC's View: