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    Published on: January 18, 2008

    The New York Times this morning reports that McDonald’s will no longer advertise on kids’ report cards in Seminole County, Florida, and will no longer offer Happy Meals as rewards for students who get good grades.

    The decision, according to the Times, came “amid an outcry over childhood obesity and junk food diets because a fast-food chain was tying its products to academic performance. It also generated controversy because McDonald’s USA had agreed to curb its advertising to children in schools.”

    The Times reports that “the decision was made ‘because we believe the focus should be on the importance of a good education,’ William Whitman, senior director for communications and public affairs at McDonald’s USA in Oak Brook, Ill., said Thursday. ‘McDonald’s, not the school district, will cover the cost to reprint the report-card jackets,’ he added, and ‘remove our trademarks.’”

    While the ads will be removed from report cards immediately, the Happy meals-for-good-grades program will remain in place until the end of the current school year.

    KC's View:
    Sanity has return to Seminole County.

    When news of this rewards program broke, MNB was extremely critical of it. In a time when childhood obesity is a national issue, it simply doesn’t make sense to be rewarding kids for good behavior by sending them off to fast food joints.

    Now, let me make one point. I am not trying to demonize fast food here. If schools were doing a better job of teaching kids about nutrition and moderation, and making sure they took physical education classes on a regular basis, there would be less to be concerned about. But those aren’t the messages being sent to kids, so we have to be careful about the rewards messages we’re sending them.

    Fretting about obesity, and then sending kids to McDonald’s when they get decent grades, isn’t just hypocrisy. It’s absurd.

    Published on: January 18, 2008

    The New York Times reports that the Chinese government is saying that during 2007 it used more than 30,000 inspectors “to close shoddy seafood operations and enforce regulations against the use of banned antibiotics - like chloramphenicol and like malachite green, which has caused cancer in laboratory tests. And in an unusual public acknowledgment, officials from the ministry’s fisheries bureau said that pollution and water-quality problems had become the biggest challenges facing China’s fish farming, or aquaculture industry.”

    According to the story, the government blames “urbanization and industrialization for polluting waterways that are used by fish farms, a situation that experts say forces some farmers to turn to illegal drugs to protect their fish stocks from disease.

    The story comes about a month after the Times reported that that China was exporting tilapia and shrimp that were being raised in enormous ponds contaminated with sewage, industrial waste and pesticides. And then, according to the story, fish farmers “have coped with the toxic waters by mixing illegal veterinary drugs and pesticides into fish feed, which helps keep their stocks alive yet leaves poisonous and carcinogenic residues in seafood.”

    KC's View:
    Hate to seem overcautious here, but I think that I’ll still be avoiding Chinese seafood for the time being.

    Published on: January 18, 2008

    Consumers Union yesterday issued a statement calling for the tracking and labeling of all meat and milk from cloned animals or the progeny of cloned animals, despite the fact that the US Food and Drug Administration (FDA) has approved such products for human consumption.

    “The FDA’s own data show that a large proportion of cloned animals do not make it to their first birthday. Many fail to survive gestation, and others have birth defects such as squashed faces, deformed limbs, and immune deficiencies. Consumers have a right to choose whether they eat milk and meat from clones,” said Michael Hansen, PHD, Senior Scientist with Consumers Union, in a prepared statement. “It should be mandatory for clones and their offspring to be tracked and their products labeled in the supermarket.”

    Even as the FDA was approving cloned food for human consumption the US Department of Agriculture (USDA) called for a continued voluntary moratorium that would keep products from cloned animals off the market indefinitely, to give consumers time to understand and accept what the technological advance means, not to mention giving the government time to work with global trading partners to reassure them.

    As FDA and USDA were issuing their seemingly conflicting statements, the Washington Post added to the confusion by reporting that “even as the two agencies sought a unified message -- that food from clones is safe for people but perhaps dangerous to U.S. markets and trade relations -- evidence surfaced suggesting that Americans and others are probably already eating meat from the offspring of clones.

    “Executives from the nation's major cattle cloning companies conceded yesterday that they have not been able to keep track of how many offspring of clones have entered the food supply, despite a years-old request by the FDA to keep them off the market pending completion of the agency's safety report.”

    KC's View:
    As stated in this space earlier this week, while it is easy to imagine that the creation of clones and the harvesting of food from these clones will be part of 21st century reality, and in fact could have an enormous impact on global hunger, the events of this week do absolutely nothing to reassure consumers that anyone knows what they are doing, nor that anyone is being entirely truthful. And this is distressing.

    Published on: January 18, 2008

    The Associated Press reports that analyst Scott Mushkin of Banc of America Securities changed his rating of Supervalu’s stock from “sell” to “neutral,” and urged the company to respond to “contracting earnings, eroding margins and higher capital expenditures” by selling off its distribution business

    "Supervalu could divest non-core assets such as distribution (we believe worth about $10/share) and use the capital to accelerate remodel activity and subsidize lower prices," Mushkin wrote in a note. "While current market conditions may make this more difficult, such a move by management could yield significant upside."

    KC's View:
    I was talking to Michael Sansolo about this story yesterday, and he said the following:

    Messages like this strike at the hard balance of stakeholders, which brings culture and corporation into conflict. If Supervalu follows this advice and scales back on distribution to help retail, what happens to the Supervalu independent operator community. In today's market place, where do they go. Distribution is what powered Supervalu to its place in the world and now distribution is seen as a ‘non-core asset’? Says who?

    To which I would respond that stock analysts tend to have their eye on only one thing – a company’s short term share price. They can change their minds with a quick note to investors, but when companies the size of Supervalu change their minds, it affects thousands of people and potentially upends millions of dollars worth of infrastructure.

    That said, it wouldn’t be the first time that a company’s original business ended up being defined by the marketplace as non-core. But messages like Mushkin’s won’t help Supervalu’s relationship with its independent retail customers, at least some of whom have told MNB that they are concerned about competing with the company that supplies them.

    Published on: January 18, 2008

    The New York Times reports that the state of Pennsylvania has issued new guidelines, reversing a previous ruling that banned milk-container labels from saying that the milk comes from cows not treated with bovine growth hormone.

    The new rules say that “a label cannot read ‘No BST,’ which is short for bovine somatotropin, since the hormone occurs naturally in cows. A dairy can, however, label its milk as coming ‘from cows not treated with rBST’ - for recombinant bovine somatotropin, the synthetic version — as long as a disclaimer is included that says that ‘No significant difference has been shown between milk derived from rBST-treated and non-rBST-treated cows.’ (A dairy can preface the disclaimer with ‘The F.D.A. says.’)”

    Michael Hansen, Ph.D., a senior scientist with Consumers Union, released the following statement: “This is a victory for free speech, free markets, sustainable farming, and the consumer's right to know. Consumers increasingly want to know more about how their food is produced, and particularly whether it is produced in natural and sustainable manner. There is no justification for prohibiting information about rbGH use on a milk label. Pennsylvania deserves credit for realizing that its initial regulation prohibiting such labeling was flawed, and for reversing its position."

    KC's View:

    Published on: January 18, 2008

    Information Week reports that Wal-Mart has said that it will charge $2 per pallet for each pallet delivered to a Texas warehouse that does not carry a radio frequency identification (RFID) tag. The warehouse is one of 22 that Wal-Mart uses to supply its Sam’s Club stores; Wal-Mart also has informed manufacturers that all pallets coming in to all the warehouses will have to be tagged within three years.

    According to the Information Week story, “The charge going into affect this month is to cover Sam's Club's cost to affix tags on each pallet, said a Wal-Mart spokesman, since the retailer needs to have every pallet tagged to meet inventory efficiency goals … Wal-Mart seems focused on turning its 700-store Sam's Club division into an example of RFID supply-chain technology in action, down to the item level, by 2010. It makes sense: Sam's Club has far fewer suppliers than Wal-Mart stores, and customers buy products by the case, the pallet, or individual packages that are larger (like a 48-count box of granola bars) than what's typically sold in retail stores. That makes the cost of RFID tags, at about 20 cents a piece, more digestible for Sam's Club suppliers. The division contributed $41.5 billion to Wal-Mart's $344.9 billion in revenues for its 2007 fiscal year.”

    KC's View:

    Published on: January 18, 2008

    • The Dallas Morning News reports that “Kroger Co. plans to bring its larger Marketplace stores – which sell furniture, electronics, linens, dishes and other general merchandise in addition to groceries – to North Texas.” Kroger currently operates about 30 of the units, under several banners.

    • Local press reports say that Hannaford Bros. is acquiring Mister Market, a single store operator in Winthrop, Maine, that the company has been supplying. Terms of the deal were not disclosed. Hannaford is expected to raze the store – pending planning approvals – and build a new one to serve the community.

    •The Wall Street Journal reports this morning that “global food and consumer goods companies are backing a plan to certify palm oil -- the vegetable oil used in products ranging from margarine to cosmetics, and, increasingly, biodiesel -- to ensure that its soaring production doesn't spur greater destruction of tropical rainforests.”

    According to the story, “The companies have signed up with a consortium of 200 oil producers, commercial buyers and environmental groups to improve the industry's image and avert a consumer backlash. Almost 90% of all palm oil is produced in Indonesia and Malaysia, which have seen widespread deforestation in recent years, much of it from illegal land-clearing and logging. The development of oil-palm plantations is causing the loss of forests in Indonesia, putting the survival of animals like the orangutan at risk, the United Nations Environment Program said in a report last year.

    KC's View:

    Published on: January 18, 2008

    Regarding some of the volatility of the marketplace these days, and how senior executives deal with it, MNB user Michael F. Parker wrote:

    We are traveling in uncharted waters for most of the CEO’s of today’s companies in retail as they are too young to know the volatility of the 70’s. Those of us with experience and the ability to grow and survive during a recession are either dead, retired or not valued. We are not wanted or desired by the “young pups” that have only enjoyed success during a period when even an idiot could be successful. I have suffered through the success that any idiot could experience and await the opportunity to lead young people whom will soon be humbled. It may or may not happen, but for many of us who succeeded in downturns and upturns, we are enjoying the failure of the leaders who only succeeded in a market where only an idiot could fail!

    It should be noted here that Mike is the former COO/president of Trader Joe’s.

    Got the following email from MNB user Greg Seminara about Tesco’s Fresh & Easy stores in the US:

    Words not spoken in a long time “ The crowded parking lot at a Kmart”.

    However, the mini crowd at Kmart made the Tesco Chula Vista in the same parking lot appear like a “Ghost Town”. I popped by the Tesco Fresh and Easy in Chula Vista, a store 15 miles or so from the border with Mexico. I wanted to see how Tesco was tailoring their merchandising mix to the Hispanic neighborhood dynamics. The answer was evident in the solitary consumer checking out at 3 pm while the adjacent Kmart actually had evidence of shoppers. The Tesco Fresh and Easy’s effort to lure Hispanic shoppers included “stale” private label chips and a very mild private label salsa. I believe that Tesco is smart enough to figure it out eventually. Maybe Fresh and Easy is a “soft opening” until they get the logistics right ? All I know is that shoppers in Chula Vista do not appear impressed!

    If there is one thing that we learned in Arizona this week, it is that you can't draw opinions about Fresh & Easy based on one or two visits. A store that seems deserted right now might be crowded in a few hours, even if the timing seems counterintuitive. Products that you shake your heard at end up being popular when you start talking to customers.

    Fresh & Easy isn’t always easy to figure out, but I’m not sure that Tesco cares whether people like me are able to discern what it is up to. (Actually, I am pretty sure – that Tesco doesn’t really give a damn.)

    Got the following email from MNB user Terry Pyles about my piece yesterday regarding Starbucks selling Naked Juice:

    Any regular reader of MNB knows your position on grocery retailers stocking restaurant branded items, i.e., it’s a terrible idea based on share of stomach. Now we have Starbucks, a beverage provider, stocking selling products made by PepsiCo, a beverage manufacturer, and you seem to believe this is a good idea. Please tell me how it is different from the grocery/restaurant scenario from the same share of stomach perspective.

    You misunderstood…or, more likely, I was unclear.

    I didn’t say it was a good idea, though it could be argued that it is an excellent idea for Starbucks and Naked Juice.

    My larger point was that this deal illustrates how share of stomach is being sought by everybody all the time…and that to be complacent about it is to risk losing business.

    Regarding Starbucks’ recent travails, one MNB user wrote:

    At 8 am every Friday morning I attend a regular corporate meeting with people from all over our company.

    A pre-meeting running joke is pointing out the various coffee brand cups that attendees grab in the morning. Without fail I salute an acquaintance across the room as she hoists her Starbucks cup and I my Dunkin Doughnuts. ( I love DD coffee, always have, and wouldn’t drink SB if you gave it to me, status statement or no.)

    Two weeks ago I looked across the large table only to see her sheepishly hiding a generic cup of joe from the company cafeteria. She went on to explain that at the $5 per day times 5 days per week times 52 weeks SB is no longer an option. Not with gas at $3+ per gallon.

    I continue to enjoy my $ 1.45 cup of DD every Friday. Nuf said.

    Along that same line, another MNB user wrote:

    Seems like Starbucks may be on the wrong side of the economic trends for 2008. As we saw with the holiday sales results, Wal-Mart enjoyed a gain while Macy’s and Target slumped. Seems like the consumer sees economic uncertainty ahead and is hunkering down by purchasing value goods and leaving the fancy labels for others. In the coffee world, this would argue that McDonalds and Dunkin Brands are trending right. While Starbucks may bee seen as the indulgence that doesn’t make sense as home values drop and unemployment rates rise. May be difficult for Mr. Schultz to overcome this without a value play of his own.

    Responding to yesterday’s story about “better margins through chemistry,” which took note of a new study saying that brain function makes people feel better about spending more money on various products, one MNB user wrote:

    Many years ago, when I was a buyer for a NYC supermarket chain, I was presented with an extraordinarily delicious pate that was merchandised in a beautiful little crock. Government subsidized, the profits were obscene even at half the price of competitive products so, naturally, the pate was promoted at a very low price. It sat in the case untouched until the price was nearly doubled and then it began to fly out of the store, which only proves that in order to understand price/value, you must first understand price/perception.

    MNB user Al Kober observed:

    If you do not think your product is worth more, neither will the consumer. Just make sure it is.

    We also had a story yesterday about how people tend to form emotional connections to foods and retailers that they connect to memorable times of their lives. This story led some folks to share their own memories.

    One MNB user wrote:

    Back in the early 60"s .... growing up in Hawaii myself and several of my high school teammates would take off Saturday in an old broken down station wagon to our favorite body surfing area....... Sandy Beach. On the way home we usually would stop at an old cafe in Waimanalo and get the greatest plate lunch ever put together ......... sweet/sour spare ribs!!!!! To this day when several of us get together .... about once a year in Seattle......... we talk about sun, surf, camaraderie, 60's music and of course that incredible plate lunch!

    Another MNB user wrote:

    Townline Pizza -- Simsbury, CT; A Friday evening Family tradition growing up. Not sure why, but even to this day our entire family still remembers the amazing pizza.

    But one MNB user was unimpressed:

    This may be the most pretentious thing you've ever written!

    KC's View:

    Published on: January 18, 2008

    A couple of months ago I wrote enthusiastically about a Fast Company article by Alex Frankel, in which he wrote about his experiences working for a number of retailers, including The Apple Store, Gap and Starbucks. Now, I’ve had a chance to finish the book on which the article was based – “Punching In: The Unauthorized Adventures of a Front-Line Employee” (Collins, $24.95) – and it is a must-read if you are in the retail business.

    Frankel does a deft job of trying to understand and explain not just the employee point of view, but also how management and leadership try and often fail – to create cultures that nurture the best characteristics of their employees. It is a fascinating read, and I cannot imagine that anyone in the retail business won’t see parts of themselves and their companies in the events and people that Frankel describes. That’s not necessarily a good thing…and I suspect a lot of food retailers will be thanking the fates that Frankel didn’t choose to work in a supermarket. (He applied to Whole Foods, but couldn’t get hired.)

    This is no hatchet job, by the way. Frankel is extremely empathetic to the people who serve as his fellow employees, and perceptive about the cultural and economic issues that these businesses face. (He is very tough on Gap…but they deserve it.)

    It has been written here before that too many retailers treat their people like costs instead of investments, like liabilities instead of assets. That’s a shame, and with relatively few exceptions, it is one of the hardest things that food retailers need to come to drips with and change.

    When you’re done with MNB this morning, click over to and buy “Punching In.” And then think hard about the lessons it teaches.

    Here’s what I don't get. In Boston, the mayor is trying to prevent chains such as CVS from opening in-store medical clinics, on the grounds that such installations will prevent continuous and quality patient care. The mayor ignores the argument that such clinics actually make basic heath care available, accessible and affordable to people who might otherwise find themselves in emergency rooms or, worse, not getting treatment at all.

    Now, he’s entitled to his opinion.

    But what makes me curious is the fact that Boston is one of several cities where a local entrepreneur has opened skin care and laser treatments in local malls – in fact offering Botox and other similar, noninvasive treatments to people looking for a quick tune up.

    Which means, I suppose, that in Boston retail outlets cannot help you if you have pink eye. But if you have sagging eyes….or other drooping parts…there always will be a place at the mall.

    Go figure.

    There are times during speeches when we get into a discussion about how young people, the customers of tomorrow, have vastly different ways of getting information and buying products than their elders, and how important it is for retailers to begin planning for the day when these shoppers are the center of the food marketing bull’s-eye.

    Then again, maybe these young people aren’t so different at all.

    The Pew Internet & American Life Project now says that 48 percent of American adults who go online are visiting video websites such as YouTube – as opposed to 33 percent who said the same thing a year ago.

    Which means, I think, that to a great extent aging baby boomers are adopting the patterns of their children faster than some might have expected. Which makes sense, since we aging baby boomers often seem to be perennially in search of the fountain of youth.

    On the Internet, at least intellectually, some of us may have found it.

    And here’s some more evidence of how the Internet is changing our lives and the way commerce is transacted – 2007 was the first year on which more travel was purchased online than offline. The travel industry prognosticators are saying that this trend will continue.

    Sure am glad to see that Oprah is starting her own cable network. Because it seems like lately she’s pretty much fallen off the radar, and this sounds like a desperate attempt to get some attention, to rejuvenate a career that is nothing if not foundering.

    I’m a little embarrassed to admit that before this week, I’d never been to an In ‘n Out Burger, but was goaded into correcting that situation by Michael Sansolo, who insisted that it serves one of the world’s great hamburgers.

    And so we went. And ordered Double-Doubles served “animal-style” which has something to do with the sautéed onions. I must admit, it is a very, very good burger…on a par with the great Original Tommy’s on the corner of Rampart & Beverly in Los Angeles. (Though I have to admit that while I used to go to Tommy’s all the time when I was in college, I haven’t been back in years and so can’t vouch for the current quality. But the romantic memories of 2 a.m. double chili cheeseburgers persist.)

    That said, I must say that I had a better burger this week, at a place in Phoenix called Delux which has been open for about three years and has become renowned for its Delux Burger, which is made from all-natural Harris Ranch ground beef…topped with maytag and gruyere cheese, organic arugula and a caramelized onion and applewood bacon mixture and served on a toasted demi-baguette. (I even nibbled on a few sweet potato fries, served with aioli, which I’m not supposed to eat, but what the hell…)

    At nine bucks, the Delux Burger also was about three times as expensive as the Double-Double…and some will accuse me of being an aging Yuppie…but in my humble opinion the Delux Burger was nothing short of magnificent.

    I also happened to like the fact that I could wash the Delux Burger down with a glass of wine. (In ‘n Out doesn’t have much of a wine list.) In this case, it was a 2004 Merlot from the 14 Hands vineyards of Washington State – which was delicious and certainly robust enough to stand up to the burger. Yummmm…

    Maybe I am an aging Yuppie.

    In addition to having a restaurant, the owners of Delux also have a small take-out store next door that does a very nice lunch and dinner business. People call from their cars, drive up to the curb, and the folks inside carry out the food, take cash or credit cards, and quickly send people on their way. It’s very smart, it extends the brand, and I wonder if we’ll see more of that as the economy continues to struggle and people are looking for affordable indulgences.

    By the way, I checked, and you can pick up the 14 Hands Merlot for about 12 bucks a bottle…which strikes me as a very good deal.

    And I have another wine to recommend this week: the 2005 Domaine de Monpertuis Vin de Pays du Gard Vignoble de la Ramiere Counoise, which is a really long name for a wine that only goes for about $15 a bottle…but maybe that’s appropriate, because it tastes a lot more expensive. It is extremely soft on the palate and just yummy.

    That’s it for this week.

    Have a great weekend.


    KC's View:

    Published on: January 18, 2008

    Monday is Martin Luther King Jr. Day – a national holiday, a school holiday, and therefore a day on which Mrs. Content Guy and the sole remaining living-at-home Content Kid will be at home. I have pledged to spend the day with them…and will see you Tuesday morning.
    KC's View: