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    Published on: January 24, 2008

    Wal-Mart CEO Lee Scott, in what the New York Times called “a lofty address that at times resembled a campaign speech” to more than 7,000 store managers yesterday in Kansas City, Missouri, laid out an aggressive and ambitious agenda for the retailer’s future that included a number of initiatives linked to its environmental and sustainability goals.

    According to the Times, “Scott committed Wal-Mart to creating a more socially and environmentally conscious network of suppliers around the world. He called on other major retailers to join a global network of retailers and consumer goods companies” that is being led by CIES to develop “socially conscious manufacturing standards.”

    "Our customers want products that make them feel good about their purchases," he said. "They want to walk into our stores and be confident that the products on our shelves are safe and durable. They also want products that are made in a way that is consistent with their own personal values."

    Scott suggested that Wal-Mart could one day find itself in the business of selling hybrid and electric cars, and could even have wind turbines and solar panels that would allow customers to recharge their vehicles in the retailer’s parking lots. Scott said that he has held talks with major automakers about moving into auto retail. “Maybe there isn't room for Wal-Mart in this right now,” Scott said in the text of the speech, according to a Bloomberg report. “But something tells me that there may be some role for us in the future.”

    Also in the speech, Scott said that the company is requiring that its suppliers – especially in foreign countries – meet basic standards. “We will favor, and in some cases even pay more, for suppliers that meet our standards and share our commitment to quality and sustainability,” Scott said.

    And, Scott said that Wal-Mart would not depend on industry-wide efforts to focus on sustainability. “Wal-Mart will in fact lead; we will move forward by ourselves,” he said.

    The Times notes that some of Wal-Mart’s previous environmental efforts seem to bearing fruit, and that “Scott said Wednesday that Wal-Mart had sold 145 million compact fluorescent light bulbs, which he said had saved enough electricity to forestall the need for three coal-fired power plants in the United States.”

    The Wall Street Journal this morning reports on Scott’s declaration that Wal-Mart plans to step “into the lucrative pharmacy-benefits arena, in a move likely to shake up a field that has been dominated by just a handful of players,” and how the company has begun a pilot program to help other employers “manage how they process and pay prescription claims.”

    The Journal writes: “Pharmacy-benefit managers, or PBMs, are the companies behind the cards that insured patients present at drugstores in order to fill their prescriptions. Most U.S. employers contract with PBMs to provide prescription-drug coverage to their workers, and in exchange, the PBMs promise to negotiate lower prices from retail pharmacies and obtain rebates from drug manufacturers. PBMs also may own their own mail-order pharmacies, and increasingly make much of their profits from big markups on generic drugs.”

    Such a move by Wal-Mart would bring it into direct competition with CVS Caremark, Medco and Express Scripts, which between them generated close to $140 billion in sales last year, and processed or filled 387 million prescriptions just during the third quarter of 2007.

    According to Bloomberg, Wal-Mart “will contract with a group of other employers to manage payment and processing of their prescription drug programs, a move Scott estimated would save the companies $100 million this year.

    “It's also working with doctors to boost by fivefold the number of prescriptions its pharmacies fill electronically this year, to 8 million. That move will save money and cut medical errors, Scott said. Wal-Mart will also try to convert its workers' health records to electronic form by 2010, Scott told managers.”

    The Times concludes that “with the new commitments, Wal-Mart is trying to cement its reputation as a leader in areas where it was once known as a laggard. The initiatives are the most visible sign to date that Wal-Mart, which spent much of the past decade defending itself against criticism of its business practices, has gone on the offensive.”

    And in his speech, Scott aid: "It is important for all of us to understand that there are a number of issues facing the world that will profoundly affect our lives and our company. I am talking to you about issues like international trade, climate change, water shortages, social and economic inequities, infrastructure and foreign oil. Wal-Mart can take a leadership role, get out in front of the future, and make a difference that is good for our business and the world."

    KC's View:
    One of MNB’s enduring beliefs is that retailers need to get ahead of the issues in a more aggressive way, rather than whining about too much government intervention.

    It strikes me that this is exactly what Wal-Mart is trying to do, in some very specific areas. There were some analysts who suggested yesterday that the idea of Wal-Mart selling electric cars and then selling the electricity with which to power them was somehow silly or absurd. But I don't think so. I think that this is a real vision of how the future could change certain basic assumptions about both retailing and energy, and shows a real commitment to the sustainability issues upon which Lee Scott is hanging his legacy.

    Some companies talk about “outside the box” thinking, but Scott actually is doing it. (Besides, if the government won’t let Wal-Mart get into businesses like banking, Scott has to find other ways to broaden the company’s portfolio. This seems like a natural, unless the nation’s automobile dealers hire a lobbyist able to convince Congress that Wal-Mart getting into the car sales business somehow will bring about Armageddon.)

    There are also those who say that Wal-Mart’s efforts in the health care and prescription drug arena are a convenient feint designed to take people’s attention away from “questionable business practices.” But that demonstrates a level of cynicism to which I am not willing to descend. I have to believe – or maybe I just want to believe – that Wal-Mart is simply trying to find another, better way to approach these issues. Some would prefer that the company simply raise its pay scales and benefits offerings, and that might, in fact, be the easier approach. But Scott seems to prefer the harder road – he wants to change the world.

    I use that phrase advisedly. I recently had a conversation with another retailer on a different issue, and he said to me, “I’m not just doing this for my company. I want to change the world.” I find that to be both a compelling phrase and a magical notion.

    Published on: January 24, 2008

    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:

    Hi, I’m Kevin Coupe, and this is MorningNewsBeat Radio, available on iTunes and sponsored by Webstop, your first stop for retail website design services.

    It is with great pleasure that I can tell you that Tony Kornheiser is back.

    Not that he ever really went away; he’s been doing color commentary on ESPN’s “Monday Night Football” broadcast, a role in which some people like him and others detest him. But if there is one thing that Kornheiser does extremely well – other than write columns for the Washington Post, which he hardly ever does anymore – it is hosting a radio show. And this week, now that football season is all but over, he came back to local radio in Washington, DC, with a program that also is heard on XM Satellite Radio as well as being podcast on iTunes, which is how I listen to it each day.

    And thank goodness. With a terrific mix of acerbity and humor, Kornheiser is equally expert at analyzing the sports stories, political events and cultural goings on of the day, and putting them all in context.

    I mention all this because Kornheiser – or “Mr. Tony,” as he often is referred to – said something interesting this week that is worth considering from a business perspective. He was talking about the fact that he was given an iPod, had lost his iPod, doesn’t really miss it, and doesn’t even understand how to use an iPod and Apple’s iTunes service. And he said something very interesting, noting that the iPod gives him too many choices. “Guys my age don't need that many choices,” he said.

    Now, Mr. Tony isn’t that much older than I am – six years, to be precise, which puts him younger than 60. He’s part of my generation, not my father’s…and I would have expected that he’d be more conversant with technology, and would understand that, in fact, the iPod allows people to actually edit their choices so that they have easy access to the stuff they really like. Kornheiser has very specific musical tastes – he has a feature on his show called “Old Guy Radio,” in which he plays music from his past and waxes rhapsodic about the artists who created it. I would have expected that he would understand that an iPod allows you to essentially program your own radio station.

    But my expectations really aren’t the point, and Kornheiser’s statement actually sends a really important message. “Too much choice” can translate into “too much wasted time,” and I suppose at some level, that’s what all of us aging baby boomers are concerned about, as we realize that, as a Jean-Luc Picard once said, “there are fewer days ahead than there are behind...”

    I’ve been thinking about choice this week because of the news that Wal-Mart essentially decided to cut the list of magazines that it is able to sell virtually in half, saying that its accredited list now will be made up of titles that its customers actually want and that it actually believes it can sell.

    To me, it isn’t a matter of too much choice or too little choice. It is really about having the right choices…and I suppose that Mr. Tony makes an excellent point – that as we get older, having the right choices available with the least amount of wasted time simply makes sense.

    However, there is something else to consider. Properly presented, a plethora of choices can allow many of us to become educated and interested in new products, whether it is music, movies, books or groceries. I think that this is something we cannot forget – that choice also can mean opportunity. It is why my larder always has a few foods in it that I’ve never bought before, just as my iPod always has music being added to it…a song here, a movie there, as I try to expand my options and alternatives.

    It is up to retailers to strike the right balance, by being both relevant and challenging to consumers.

    For MorningNewsBeat Radio, I’m Kevin Coupe.

    KC's View:

    Published on: January 24, 2008

    In the UK, The Guardian reports that the government is working to create “a single, simple food labeling scheme” that would end the current “contradictory and confusing systems” and serve as a centerpiece for the government’s anti-obesity campaign.

    “The anti-obesity strategy will also introduce planning guidance advising councils not to allow fast food outlets to be opened close to schools or parks,” the Guardian writes, and also will accelerate consideration of a “proposed ban on pre-watershed junk food advertising.” The government also plans to make cooking classes mandatory in the schools.

    The Guardian writes: “Previous attempts to introduce a single labeling system have been thwarted by different supermarkets backing different schemes. Tesco has refused to back a traffic-light system, fearing consumers will shun food with red labels for salt, sugar or fat. It uses monochrome signposts based on guideline daily amounts (GDA) and claims this system is more informative.

    “Sainsbury's uses a traffic-light system, favoured by the FSA, while Asda and Waitrose back a hybrid system.

    “Tesco chairman, David Reid, has agreed to sit on the Nutrition Strategy Steering Group, overseeing the £500,000 labeling research, and ministers believe his involvement ensures that Tesco will feel obliged to abide by its findings.”

    KC's View:
    Betcha they won’t be allowing fast food companies to be advertising on report cards, nor will they be using Happy Meals as rewards for good grades.

    Published on: January 24, 2008

    The Wall Street Journal reports this morning that Carrefour, the world’s second largest retailer, has decided to delay its plans to spin off a public real estate company.

    According to the story, “Carrefour's change of heart indicates that retailers' interest in capitalizing on the value of their real estate -- a popular idea in the first half of last year -- may be waning because of economic and credit-market woes. Carrefour in August announced plans to create a pan-European real-estate company, Carrefour Property, that would own 60% of its real-estate holdings and be valued at between €20 billion and €24 billion ($29 billion to $35 billion). The plan, which Carrefour devised under pressure from investors, was to raise cash by selling part of Carrefour Property.”

    KC's View:
    The encroaching recession claims another victim. C’est la vie…

    Published on: January 24, 2008

    It was reported earlier this week that Wal-Mart has decided to eliminate about 1,000 magazines from its list of eligible titles that can be sold in its stores, which virtually cuts the number of approved magazines in half.

    The company described it as a decision made to “fine tune” its selection so that it was more in line with its customers’ interests and needs. The eliminated titles reportedly were either slow-movers or magazines that did almost no business in Wal-Mart stores, such as The New Yorker and SI Kids.

    However, contrary to some reports (though not one in MNB), Better Homes and Gardens is not one of the titles being de-listed.

    In a memo to Meredith Publishing employees, Jack Griffin, president of the publishing group, said that “Wal-Mart stores and Meredith Corporation have enjoyed a fruitful partnership for many years. That partnership is strengthening and continues today.

    “In October, Wal-Mart and Meredith jointly announced a multi-year licensing agreement for the design, marketing and retailing of a wide range of home products based on the Better Homes and Gardens brand.

    “Certain recent press reports have suggested that a number of Meredith magazines will no longer be sold at Wal-Mart. These reports are incorrect. Better Homes and Gardens, Ladies’ Home Journal, Fitness and Family Circle will all continue to be sold at Wal-Mart.”
    KC's View:

    Published on: January 24, 2008

    The Seattle Times this morning reports that Starbucks chairman/CEO Howard Schultz, the company’s president of international operations Jim Alling, and now-departed president/CEO Jim Donald, have not received bonuses for 2007 because the company did not meet profit targets.

    Starbucks’ stock price has dropped 48 percent in the last six months, and traffic at its US stores declined one percent last summer, which led to Donald’s departure.

    The Times writes: “Schultz, who remains chairman, maintained his 2006 salary of $1.19 million and got $8.58 million in option awards plus $861,398 in other compensation.

    “Except for the options, Schultz's compensation was down 57 percent from 2006, when he received a $2.38 million bonus. His options for 2006 were worth between $18.49 million and $46.86 million, depending on appreciation, according to Starbucks calculations.

    “Donald, who stepped down as CEO, received a salary of $1 million for 2007, up from $978,846 for 2006, plus option awards worth $6.49 million and $36,920 in other compensation. The company has not yet disclosed if it paid Donald any severance.”

    And, the Times reports, “Alling was president of Starbucks' U.S. operations until September, when he became president of international operations. He did not receive a bonus because he did not meet goals set by the company, largely because of problems with U.S. operations. Two executives who received scaled-back bonuses were Martin Coles, who became chief operating officer in September after being president of international operations, and Michael Casey, chief financial officer who has since retired.”

    KC's View:

    Published on: January 24, 2008

    Reuters reports that a new study funded by the National Heart, Lung, and Blood Institute says that “people who eat two or more servings of red meat a day are much more likely to develop conditions leading to heart disease and diabetes” and that “eating two or more servings of meat a day increases the risk of suffering from a cluster of risk factors known as metabolic syndrome by 25 percent compared to those who had only two servings of meat a week.”

    Business Week< reports that convicted former Wal-Mart vice chairman Tom Coughlin is resisting demands that he undergo a physical before he is resentenced on fraud charges.

    Coughlin pleaded guilty to the charges, but only got 27 months of house arrest because he claimed to have severe health problems; prosecutors appealed on the grounds that the sentence was too lenient, a judge agreed, and prosecutors now want Coughlin to be examined by a doctor before the resentencing.

    KC's View:

    Published on: January 24, 2008

    • Convenience store chain Casey's General Stores announced yesterday that its senior vice president John G. Harmon, who has been with the company since 1976, has resigned from the company, taking early retirement.
    KC's View:

    Published on: January 24, 2008

    …will return.
    KC's View: