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    Published on: January 28, 2008

    The Sunday Telegraph reports that Tesco has decided not to release sales figures for its US-based Fresh & Easy Neighborhood Markets until 2009 at the earliest. The decision is said to be a hedge against skepticism in some quarters that the stores are being successful.

    According to the story, it is believed that Tesco may not be living up to original sales projections at Fresh & Easy despite its public statements that sales are “encouraging”; the retailer also has said that the first 18 months worth of sales cannot be fairly evaluated because the company is working to establish brand equity.

    KC's View:
    The best I can tell - based on personal observations, discussions with people “in the know,” and all the email MNB has received from people who have shopped Fresh & Easy in various locales – it is way too early to be drawing any conclusions about Tesco’s US operations.

    First of all, the stores don’t have to generate a lot of sales to move into profit – between $175,000 and $200,000 a week, according to one source, and there are a number of locations that reportedly are doing just fine. Other locations, not so much…but Tesco is starting from scratch here, which creates certain challenges but also allows them to start with a blank slate, which gives them all sorts of opportunities in terms of brand creation.

    There is a certain logic, by the way, to the notion that brand creation takes time. Fresh & Easy is doing exactly that…which is why it has more than a dozen locations chosen in Northern California, and probably a bunch more that the company isn’t talking about. The more locations there are, the easier it is to start making an impact.

    This isn’t going to be a short-term battle. Wal-Mart already has committed to a new small-store format that it will test head-to-head with Fresh & Easy in Arizona. There will be plenty of other small store formats created, I’d expect, to do battle with both Wal-Mart and Tesco. Which will drive both innovation and competition…which ultimately should be good for both the industry and consumers.

    Published on: January 28, 2008

    The annual National Shopping Behavior Study is out from The Gordman Group, and the big “news” is that selection seems to be more important to most consumers than price. According to the study, when consumers reported spending more in a specific store,
    selection was the reason 45 percent of the time and price was the reason 19 percent of the time; at the same time, when consumers reported spending less in a specific store, selection was the reason 40 percent of the time and price was the reason 13 percent of the time.

    Among the other revelations of the study:

    • Eight-eight percent of consumers are very concerned about the environment and are willing to pay for environmentally friendly products;

    • Fifty-two percent of consumers checked the country of origin before making a purchase and 31 percent of those did not buy;

    • Retailers' advertising seemed to have little influence on shopping behavior or timing of purchase;

    • And while many consumers reported spending less during 2007, 50 percent of 18 to 24 year olds spent more, 43 percent of Hispanic consumers spent more and 39 percent of African Americans spent more. It may be an age thing, though, since only 20 percent of those 65+ spent more.

    KC's View:
    Keeping in mind that some people say one thing and do another, this remains an interesting study. After all, even if people don’t always live up to their own expectations or views of themselves, these kinds of responses tell you where their hearts and heads are…

    I’m particularly fascinated that so many people are actually checking country-of-origin…it reinforces the belief here that no matter what the government and industry want, this is something that shoppers increasingly are going to demand.

    Published on: January 28, 2008

    Following on the decision announced a few weeks ago by Wegmans, California’s Andronico’s Markets announced last week that it will stop selling tobacco products by the beginning of February.
    KC's View:
    It was fascinating to see the range of responses MNB got when the Wegmans story broke, and I suspect that this will continue with the Andronico’s announcement.

    It is perfectly understandable when people say that 1) tobacco is legal, and 2) stores should sell what people want to buy. Some will say that supermarkets sell plenty of products that can hurt you, and why should tobacco be singled out?

    That said, I wholeheartedly agree with both Wegmans’ and Andronico’s decision. (To be sure, I have a bias – my mother, a two-pack-a-day smoker for 40 years, died of lung cancer. So I have no love for the tobacco companies.) But I also think that as stores try to make the connection to health and wellness in a more overt way, it becomes harder and harder top justify selling products that are designed to addict you and, ultimately, kill you.

    And that’s the real difference between tobacco and, say, trans fats. The latter may not be good for you if you consume too many of them, but they aren’t essentially addictive and lethal.

    I think that as time goes on, we’re going to see more stores lining up behind Wegmans and Andronico’s, companies that one day will be celebrated for taking this step.

    Published on: January 28, 2008

    Interesting piece in USA Today about how “large cities such as Philadelphia, New Orleans and Chicago, as well as smaller ones such as Louisville and Troy, N.Y., are studying and trying to address the issue of grocery gaps - the lack of full-service supermarkets in lower-income neighborhoods. Such a lack, experts say, usually means that residents (who may not have cars) often don't have fresh fruits and vegetables available to them, do have ready access to fast food and convenience stores, and therefore tend to have poor eating habits. These poor eating habits can then translate into lifelong health and wellness issues that affect them as well as their employers and the health care system in general.

    Among the approaches being taken, according to the paper:

    • “Louisville established a food-security task force of members of the Louisville Metro Health Department, food-justice advocacy groups and the city's development staff. Its mission is to look for ways to close the gap with strategies including farmers markets, incentives for small stores to carry fresh produce and increased education about nutrition.”

    • In Philadelphia, the “statewide Fresh Food Financing Initiative has pumped nearly $22 million in grants and loans into 27 projects over the past four years, including new supermarkets in poor urban areas and refrigerators for corner stores to carry more fresh fruits and vegetables…”

    • In New Orleans, “a coalition is working to expand markets in poor areas such as the Lower 9th Ward after Hurricane Katrina reduced markets citywide from 36 to 15, said Dee Bowling at the Prevention Research Center at Tulane University.

    • And, in Troy, “a mobile market funded by a $500,000 state health department grant began last April. It delivers food ranging from herbs to fruits and vegetables to residents who lack nearby supermarkets, according to the Capital District Gardens, which runs the program.”

    KC's View:

    Published on: January 28, 2008

    Nine years ago, according to a story in the UK’s Sunday Telegraph, the then-CEO of Wal-Mart International went to 10 Downing Street in London to complain to then Prime Minister Tony Blair about the restrictive planning rules that he felt were slowing down Asda’s expansion strategy.

    The February 26, 1999, meeting is of interest for a number of reasons.

    1. The minutes of the meeting between Bob Martin and Blair were only made public the prime minister’s office was order to do so by the government’s freedom of information authorities.
    2. The meeting actually took place months before Wal-Mart acquired Asda … but the Wal-Mart executive left no doubt that the purchase would take place.
    3. According to the story, “Martin's focus on planning is controversial because his comments appear to be at odds with the Government's official account. Commenting on the meeting in July 1999, the prime minister's spokesman said: ‘There were no concrete discussions about planning or business or anything else’.”
    4. Martin told Blair that "the main obstacle to entering the UK market was zoning and planning controls.”
    5. While Blair appears to be extremely impressed with Wal-Mart and was supportive of the acquisition when it happens, it remains instructive that Asda has not been able to topple Tesco from its dominant market share position in the UK, and has continued to look for government intervention to show Tesco down.

    KC's View:
    Gosh. A top government official. Secret meetings. Details denied or obfuscated. I’m shocked. That sort of thing would never, ever happen here in the USA.

    This meeting provides a subtext to Wal-Mart’s decision to confront Tesco’s Fresh & Easy stores in Phoenix with a new, small-store format. Unable to dent Tesco’s growth in the UK for all sorts of reasons, Wal-Mart wants to make sure that it doesn’t allow Tesco to get a foothold here.

    Published on: January 28, 2008

    Forbes reports this morning that McDonald’s is one of three companies in the UK - the others being a train company and an airline – that “have been given the power to award the equivalent of advanced high-school qualifications as part of a plan to improve young people's skills.” The companies have “been granted approval to develop courses and set exams up to the standard of A-levels - the final exams taken by high school students that determine college and university admission.”
    KC's View:
    Love this idea. Love it. It strikes me as a really smart way not just to demonstrate to employees that the company wants to invest in their future, but to even create the kind of employee base that may be able to help a company grow.

    When I say “grow,” by the way, I’m not just talking about the number of units. I’m really talking about growth in the sense of taking root within a community, and becoming meaningful in a transcendent sort of way. Good for McDonald’s as it engages in this important step.

    Published on: January 28, 2008

    • US District Judge Robert Dawson has ruled that convicted former Wal-Mart vice chairman Tom Coughlin will not have to undergo a physical before he is resentenced on fraud charges later this week..

    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, but prosecutors wanted Coughlin to be examined by a doctor before the resentencing.

    Dawson said that a physical would cause an unreasonable delay of his February 1 resentencing.

    • The Wall Street Journal reports that Wal-Mart will pay John Menzer, who will retire March 1 from his role as vice chairman and chief administrative officer, $6.71 million in “transition payments” over a two-year period, assuming he lives up to his obligations under a separation agreement.

    • The Financial Times reports that Wal-Mart-owned Asda Group in the UK will “explore selling electricity to its customers through its power services company, Power4All, in a move that reflects its US parent's growing interest in energy.”

    According to the story, Asda CEO Andy Bond would like to extend to the retailer’s customers a program set up last year to provide its stores with low cost and sustainable energy. "I'm very confident that in the future we'll be able to do it for our customers as well," he said.
    KC's View:

    Published on: January 28, 2008

    Sears Holdings Corp. announced this morning that its president/CEO, Aylwin B. Lewis, will step down at the end of the week. He will be succeeded on an interim basis by W. Bruce Johnson, the company’s executive vice president of supply chain and operations, while the board conducts a search for a new and permanent CEO.

    The move comes a week after Sears said that it would change its organizational structure as a way of improving performance. "We are entering a new phase in Sears' evolution as a multi-channel retailer, as reflected by the new operational structure we recently announced, and the board has determined that now is the right time to put in place new leadership to take the company forward," said Chairman Edward S. Lampert, in a statement.

    Lewis, who previously was president and chief multi-branding and operating officer for restaurant company Yum Brands, joined Sears in October 2004.
    KC's View:
    When Lewis moved over to Sears, he told the New York Times, , "I would not have left the situation I was in at Yum Brands to come to a company that was not interested in being a growth company, in winning in the marketplace, and operating great stores to serve unmet consumer needs. I'm here to make the Kmart brand a super retailing brand in the United States."

    Ah, well. Sometimes things don't work out…

    When Lewis joined Sears back in 2004, I wrote that I was reminded of an old joke…and it came to mind once again with this morning’s announcement…

    When Bill Gates died, he went up to Heaven, where Saint Peter showed him to his home - a beautiful 20-room house, with grounds and a tennis court that thrilled the deceased founder of Microsoft.

    But one day, when Gates was enjoying one of Heaven's many fine parks, he ran into a man dressed in a fine tailored suit. "That is a nice suit, my friend," said Gates. "Where did you get it?"

    "Actually," the man replied, "I was given a hundred of these when I got here. I've been treated really well. I got a mansion on a hill overlooking a beautiful hill, with a huge five-hundred-acre estate, a golf course, and three Rolls Royces."

    "Were you a Pope, or a doctor healing the sick?" asked Gates. "No," said his new friend, "Actually, I was the captain of the Titanic."

    Hearing this made Gates so angry that he immediately stalked off to find St. Peter. Cornering Peter, he told him about the man he had just met, saying, "How could you give me a paltry new house, while you're showering new cars, a mansion, and fine suits on the Captain of the Titanic? I invented the Windows operating system! Why does he deserve better?"

    St. Peter replied, "Ah, but the Titanic only crashed once."

    Which makes me want to suggest a new Sears marketing slogan:

    “Just one more crash.”

    Published on: January 28, 2008

    • The Financial Times reports that Tesco, which already operates more than 50 hypermarkets in China through a joint venture with a local operator, plans to open its first Tesco Express store there next month with a unit in Shanghai.

    FT writes, “Tesco, lagging behind international rivals Wal-Mart and Carrefour in the race to roll out hypermarkets across China, has adopted a multi-format approach in some of its other markets such as Thailand, Hungary and South Korea. The retailer, which came to China nearly a decade after Carrefour, has earmarked the country as one of the markets, alongside Turkey and the US, that will be crucial to its long-term success.” And now, China appears to be the next place where Tesco will adopt the multi-format strategy.

    KC's View:

    Published on: January 28, 2008

    • The Business Courier of Cincinnati reports that Kroger has come to a tentative three-year agreement on a new contract covering stores in Central Michigan with the United Food and Commercial Workers (UFCW) union – nine months before the contract was due to expire.

    While specifics of the new contract were not disclosed, the UFCW said that the new deal includes wage and benefits increases.

    • CVS announced that starting in May, it will sponsor a monthly magazine entitled Great Health that will be delivered to half a million customers, mostly women, and that will contain links to an email newsletter as well as featuring health-related editorial content and advertising/promotions.

    • Published reports say that Marsh Supermarkets is participating in something called the “Prenatal Select Program,” which provides expectant mothers with a doctor’s prescription up to twelve months of vitamins free of charge.

    • In Wisconsin, the Janesville Gazette reports that about 1,000 employees at Woodman’s Food Market are finding out whether their union, the United Food and Commercial Workers (UFCW), is going to be decertified before their contract runs out in about six weeks.

    The National Labor Relations Board (NLRB) is making the determination based on a petition, signed by 30 percent of the employees, asking for the UFCW to be decertified. A decision is expected to be made in a couple of weeks.

    • The United Food and Commercial Workers (UFCW) is accusing Arizona’s Bashas’ of retaliating against about 30 employees who participated in pro-union activities by eliminating their positions. Bashas’ has denied the charge, saying that while specific jobs were outsourced the affected employees were offered other jobs within the company.

    KC's View:

    Published on: January 28, 2008


    Last week, MNB reported that Fortune had published its annual list of “100 Best Companies To Work For,” and that eight of recognized companies were retailers. The retailers that made the list were Wegmans (#3), Starbucks (#7), Nugget Markets (#12), Whole Foods (#16), The Container Store (#20), Stew Leonard’s (#26), Nordstrom (#36), and Publix (#91).

    However, I missed one….as Hal Adams, vice president of merchandising for Valero Retail Holdings, pointed out:

    “Maybe you didn't know-but Valero Energy Corporation (#67 on the list) has been on the list for 8 years! In addition to being a world-class refiner/marketer, Valero is the owner/operator of more than 900 convenience stores (Valero CornerStores) in the Southwest U.S. While only a small portion of Valero's mammoth corporate earnings, a significant portion of the employee interviews used to qualify the company come from retail employees!

    “I count Valero as a retail company and can vouch that it IS a great place to work!”

    Point taken. And I apologize for the oversight.

    KC's View:

    Published on: January 28, 2008

    In the UK, the Daily Record reports that Scottish officials are pushing the United States to once again allow haggis to be imported into the country.

    Haggis, which is made from sheep lungs, was banned by the US in 1989 because of concerns about mad cow disease.

    The paper suggests that the Bush administration may not look kindly on the request, since President Bush refused to eat haggis when it was served to him at the 2005 G8 summit at Gleneagles, Scotland.

    KC's View:
    Never been to Scotland, so I’ve never had haggis there. But I did have for the first time when I went to a wonderful restaurant/wine bar in Paris called Juveniles, and thought it was extraordinary. (I did have to put up with a lot of abuse from people who wondered about the character of someone who would go to Paris and order haggis. But that’s another story…)

    It is amusing that the US seems to have no idea what’s going on with its own cows, but it worried about haggis.

    Published on: January 28, 2008

    Contributing to the continuing discussion about the role of choice that took place here last week, MNB user Steven Ritchey wrote:

    Some time ago I was shopping with my girlfriend for her a new washing machine. She passed over the newer, more expensive models that had all manner of features on them, instead choosing a quality machine that did not have all the bells and whistles on it. Her reasoning was that the other models were too complex, she wanted to wash clothes with it and that was about it. She is a Registered Nurse of 30 years experience, she handles the complexities of patient care with confidence, and skill, her knowledge of the human body is encyclopedic, but in appliances or electronics, she wants something that suits her needs, and not a lot of extra features. However, don’t ever think of her as simple-minded, she is far from it. There are a lot of us out there, the point I’m making is not all of us want an endless variety of choices, we want the features we need and not a whole lot else. You, on the other hand, are someone who wants the complexity, wants a lot of features, you like learning how to use them. Not all of us are like that, that is part of makes this world, and the CPG industry so interesting.

    I agree with you completely, but with one caveat.

    The phrases I always try to use are “appropriate choice” or “relevant choice.” In my case, there are areas in which I embrace lots of choice…but there are others in which I prefer simplicity and minimal decision-making. The trick for retailers and manufacturers is to understand the target consumer so well that they can match need states with categories…providing lots of choice where it matters and minimal choices where it does not.

    Another MNB user wrote:

    I suppose the difference between too much choice and not enough depends on the persons tastes and day-to-day needs. I am around your age (51) and no longer need a choice of deodorants, shampoos, toothpaste, and soaps. I haven't changed in years.

    However I appreciate choices when it comes to meat, ice cream, frozen pizza, and beer. Even within families, too much vs. not enough just depends. For instance, we are looking for a couch ( I use the word "we" in only the loosest sense ). We have looked at just about every couch in a 50-mile radius. For one of us that is way too much, for the other not nearly enough. I'll let you guess which is which.


    The role of the schools in terms of nutrition education continues to be a big subject here on MNB, as Bob McMath wrote:

    I will never forget my Father's remarks at a PTA meeting in the grammar school I attended in New Rochelle, NY. It was a long, long time ago!

    "I don't care if my two sons become the best two cookie bakers in the world! I want my kids to learn reading, writing and arithmetic!"

    Unfortunately to get the education we needed to go on to college, we had to go away to private boarding schools elsewhere in the US. The only kitchen experience we had then was one day a week to help out in the kitchen at meal times when the kitchen help had a day off.

    My father had a similar conversation with one of the nuns at Sts. John & Paul School in Larchmont, NY, right next door to New Rochelle. She was saying that I seemed to be a nice kid (not something that all the nuns would have said about me, by the way), and my father said, “I know he’s a nice kid. What I want to know is why his math and science grades are so awful.”

    Your point is certainly legitimate, but I would disagree. I don't think there is anything wrong with schools teaching nutrition and helping to prepare kids for life after school. This should support, not replace, what parents do at home…but it seems entirely appropriate to me.

    Besides, isn’t nutrition, at some level, biology and chemistry?

    On the related issue of general health-and-wellness marketing MNB user David Brewster wrote:

    One of my well-loved sons-in-law graduated from a service academy, and was one of several young men there who came down with juvenile onset diabetes in the same 12 month period - statistically suspicious, and raising troubling speculation about the possible causes among a group of supposedly fit individuals. That's a tidbit of background for linking, in my mind, two of your Friday MNB stories ...

    There are a number of other afflictions that are also plaguing our population that have food-related concerns and that are the focus of much attention. If one were to add obesity, cancer, heart disease, rotting teeth, etc., plus the actual annual cost and misery, then the Supervalu "Fresh and Healthy" program, a marketing position of considerable merit, should be a precursor of a whole new (wholistic ??) and worthwhile category for the grocery and foodservice business. This could and should be taken very seriously with appropriately science and art applied to its development.

    Makes sense to me.

    Simply from a public policy perspective, it would seem to make a lot of sense to take such an approach.

    MNB user Brian Polk had an interesting point:

    Retail point of sale material can do so much more than say "...come over here, buy me." Some years ago, while in a Publix store, I noticed a shelf card that had Publix' logo in one corner and the Mayo Clinic's logo in another. The information on the card was directed at people with incontinence and/or those who were caregivers. The information was brief, providing tips on how people can help themselves and others with incontinence.

    There is a similar opportunity with diabetes. Information on recognizing, controlling and even reversing (type II) diabetes could easily be put at shelf in appropriate places. Having a consistent method of informing the public, like using POS for more than advertising is sensible, responsible and good for business.

    Another MNB user chimed in:

    On the diabetes would be more aptly named, the obesity epidemic. This is not a stealthy, sinister, unpredictable disease, such as cancer, but rather is a disease (Type 2, which is 90% of all new cases) that can be predicted and in most cases, prevented.

    Unfortunately, most of America continues down the destructive path of obesity, and expects the medical community to fix them. I truly believe that if our insurance premiums in a group insurance setting (like most corporate settings) were tied directly to your fitness, (i.e., reduced for fit people, higher for obese people), then there would be more people that worked to keep the weight off. Company fitness programs, exercise regiments, sponsored gym memberships, etc, would only help the bottom line in the long run, yet nobody seems to see it.

    A Dunkin’ Donuts executive noted last week that one of the company’s central challenges was establishing the primacy of coffee – not doughnuts – when it comes to the chain’s brand equity. Which led one MNB user to observe:

    Gee . . . do you think maybe the problem might be that the name of his company is Dunkin' DONUTS?????

    Could be.

    Another MNB user wrote:

    Who is he kidding, "We really are the leading beverage authority". Before Starbucks and others raised the awareness the impression of coffee at Dunkin' was at best dark hot water to wash down a pretty good donut. Let's be honest, Dunkin' was created to make and sell donuts and there is nothing wrong with adaptation to meet customer demand, just be realistic about what it is you are the authority on.

    On a different subject, one MNB user wrote:

    Kevin, I agree completely with your insights and the clone decision follows a pattern set by the FDA, USDA, etc. creating a widening schism in their decisions which appears that they are more concerned about the health and well being of big business rather than the health and well being of U.S. citizens. It depends on whose "science" the FDA and USDA believes. Just like the drug industry, whose "science" provided evidence for the FDA to make drug-decisions, only to have the "scientifically-approved" products kill and and destroy the lives of many U.S. citizens...only to later find the "science" that they did not disclose did not support approval. These "later" disclosures are very disturbing and have repeated themselves way to often.

    Regarding the suit filed against Dannon by a consumer who claims that the company’s
    advertising of its Activia, Activia Light and DanActive products is misleading and false, one MNB user wrote:

    Sued by a consumer? This is yet another lawyer promoted class action suit motivated entirely by the almost certain award of multi-million dollar legal fees. My prediction - Dannon will eventually "settle" to avoid the ongoing costs of litigation. That settlement will include a minor rewording of the Dannon claims, a token payment to consumers or perhaps to a food bank, and $25 million in legal fees to plaintiff's counsel. These costs will eventually be passed on to consumers in higher prices. The nitwits in Congress ought to pass legislation curbing these litigation abuses.

    KC's View: