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    Published on: March 5, 2008

    The Financial Times reports that Amazon.com plans to get into the wine business, probably by the end of the year.

    According to FT, the company is looking to recruit a senior level wine buyer who will be responsible for “the acquisition of a massive new product selection for its site.”

    The new category would augment Amazon’s growing, two-year-old dry grocery business, which is focused both on gourmet products and non-perishables; Amazon also is testing the fresh food business, but only with a limited pilot program in its home Seattle market at the current time.

    KC's View:
    This makes an awful lot of sense for Amazon. Now that more states than ever are allowing the shipment of wine across borders, Amazon can use these liberalized laws to have a real impact on the business.

    The folks at Amazon know who has bought a wine book from its site, as well as various sorts of wine paraphernalia…and that will create a tremendous foundation on which it can build this business.

    This is a smart decision, and I would expect Amazon to implement it with its customary panache.

    Published on: March 5, 2008

    Business Week reports that even as the US Food and Drug Administration (FDA) has decided to allow food and milk from cloned cows and their progeny into the food supply and not to require that these products be labeled, states are taking matters into their own hands.

    According to the story, “At least 13 bills have been introduced in state legislatures across the country—including California, Tennessee, New Jersey, and Kentucky—that call for words or symbols alerting shoppers to the presence of cloned foods.

    “The language in all the bills is similar—and strong. For instance, the Kentucky House bill introduced on Jan. 28, by Representative Jim Glenn (D) says: ‘No person shall sell, offer or expose for sale, have in his possession for sale, or give away, for human consumption, any fresh or frozen meat, meat preparation, meat by-product, dairy food or dairy food product, or poultry or poultry product derived from a cloned animal or its offspring unless the product is clearly and conspicuously labeled as such.’ In an interview, Glenn says: ‘Just like we know whether salmon is farm-raised or from the ocean, a consumer should know whether the meat is from a clone or not.’

    “These bills are strongly opposed by the biotech and livestock industry, which are pinning their hopes on the cloning technology to replicate the highest quality meat and milk in the industry for mass consumption.”

    KC's View:
    Business Week notes that just because these labeling bills have been introduced, it doesn’t mean that they will become law. After all, while such a bill was passed in California last year, it was vetoed by the Governator, who said that tracking would be costly and unnecessary.

    But I think the biotech industry is wrong on this one. I think that they ought to accept that such products ought to be labeled, and then embrace the responsibility of educating the public about why such products are completely safe. The farm-raised salmon metaphor, I think, is a good one.

    But if they aren’t willing to educate the public, then they shouldn’t get to sell the products. And the FDA has abrogated its responsibilities by not representing consumer interests in this matter.

    Published on: March 5, 2008

    Interesting column in Advertising Age taking the position that “innovation is not a strategy, and companies that depend on a constant flow of new, innovative products will someday find themselves in deep trouble.”

    The notion is that “every successful company needs a branding strategy, which may or may not include innovation,” and the columnist, Al Ries, suggests that “a business enterprise has only one basic function: build a brand that can dominate a category.”

    And yet, Ries writes, “many marketing gurus have elevated ‘innovation’ to a point where it is widely perceived as the single-most-important function of a corporation.” But, he says, “Most brands don't need innovations; they need focus. They need to figure out what they stand for (or what they could stand for) and then what they need to sacrifice to get there.

    “It's sacrifice -- not innovation -- that builds brands.”

    KC's View:
    Fascinating. I have to admit that I am one of those who probably would say that innovation – especially in a recessionary period – is incredibly important for businesses to succeed.

    But the point made by Ries is a good one – that innovation for innovation’s sake can be a distraction, and that companies need to focus on their core competencies if they are to be successful.

    I guess my contribution to this discussion would be that the most important strategy for any company is “relevance.” If you focus on that, then innovation … the right kind of innovation … should follow.

    Published on: March 5, 2008

    The Los Angeles Times reports that Safeway CEO Steve Burd is now saying that he might spin off the Blackhawk Network gift-card business – which sells gift cards for chains such as Nordstrom and Starbucks at more than 63,000 outlets, including its own supermarkets and those of its competitors.

    According to the story, Burd discussed the possibility at a Bear Stearns investor conference, though he refused to offer a timetable for such a move.

    “We are determined to get the market to appreciate the underlying value of Blackhawk,” Burd said. “If at some point we feel frustrated in that the market's not valuing that, then there would be an effort to monetize a piece of that so that we could get that appreciation.”

    KC's View:
    For a long time, I have been critical of the Blackhawk concept. Not so much of Safeway, which I think has done an excellent job of developing of the business, but rather of Safeway’s competitors. While I understand that the gift card profit goes right to the bottom line, I’ve wondered why they would be so anxious to feather Safeway’s nest.

    I’ve also questioned why any supermarket would want to sell gift cards that would send people into other places that sell food, whether they be Dunkin’ Donuts or The Olive Garden. My feeling has been that supermarkets ought to be aggressively competing for share of stomach, and that everybody who sells food – everybody – ought to be treated as the competition.

    I’ve had a chance to think about this latter position, and I want to back off a little bit. A friend of mine told me recently that he thought I was wrong, and these gift cards are only for people and eating occasions that have little or nothing to do with the supermarket. “Nobody wants a trout for their birthday,” he said, and suggested that when someone buys a gift card to, say, Red Lobster, that’s pretty much what is being bought.

    It’s a good point.

    I think my broader position remains correct – that supermarkets ought to be more aggressive is pursuing share of stomach. But maybe I’ve been too dogmatic (who, me?) in my criticism of the gift card business.

    Maybe.

    Published on: March 5, 2008

    CNN reports on a new survey by AlixPartners saying that “economic uncertainty is forcing U.S. shoppers to consider low prices and bargains above all else for the first time in a decade,” and that indications are that “retailers with the lowest prices will perform relatively better than more upscale rivals over the next few quarters.”

    Frederick Crawford, a managing director with AlixPartners, tells CNN that he’s never seen price and value registering so high as a consumer concern. "We know that people are going to be focused on absolute price and value. We anticipate that means people will be trading down to those formats that are positioned well in that regard," he said.

    And, Crawford said that he expected all retailers to be hurt this year as “US consumers rein in discretionary spending due to higher costs for food and fuel, declining home values, job uncertainty and the credit crunch.”

    KC's View:
    To paraphrase Bette Davis’s Margot Channing in “All About Eve,” it is time to fasten your seatbelts, it's going to be a bumpy couple of quarters.

    Published on: March 5, 2008

    The Boston Globe reports on a new Nielsen survey showing that “about 23 percent of US mobile phone users have seen advertising on their cell phones in the last 30 days and about half of them responded to the ads.”

    In addition, “The number of phone users who recalled seeing mobile ads rose by 38 percent to 58 million in the fourth quarter compared with 42 million in the second quarter,” and that the survey indicates that “almost a third of people who use data services such as text messaging or Web surfing are open to advertising if it lowers the overall bill.”
    KC's View:
    If your company doesn’t have someone at least considering what the possibilities are for relevant and compelling advertising using this venue, then you may miss an opportunity.

    And last I checked, nobody can afford to miss this sort of opportunity.

    Published on: March 5, 2008

    The Los Angeles County Superior Court has issued a ruling that finds the City of Los Angeles’ Grocery Worker Retention Ordinance to be unconstitutional, a decision that was immediately applauded by the California Grocers Association.

    The ordinance, which was passed in December 2005, required supermarkets to retain workers for a period of time when a store changes ownership. But the judge in the case found that the law conflicted with existing statutes as well as discriminated against supermarkets based on size and whether they have collective bargaining agreements.

    “We are satisfied with Judge Dau’s final ruling,” said Jill Rulon, Acting President, California Grocers Association. “Since the Grocery Worker Retention Ordinance has been in effect, sales of grocery stores from one operator to another in the City of Los Angeles have ceased. Stopping the growth of new retail in the city was just one of the many harmful impacts this law had on city residents.”

    “We strongly believed that the ordinance is unlawful and unenforceable because it is preempted by federal labor relations laws, violates the equal protection rights of employers, conflicts with state food-related health and safety laws, and improperly dictates rules of employment.”

    KC's View:

    Published on: March 5, 2008

    Dow Jones reports that in the quarter ending February 24, Tesco’s market share in the UK declined from 31.3 percent during the same period a year ago to 30.9 percent. Wal-Mart’s Asda Group saw no change, and had a steady market share of 16.9 percent. J. Sainsbury’s market share dropped to 16.4 percent from 16.5 percent, and William Morrison Supermarket saw its share rise from 11.1 percent to 11.6 percent.

    KC's View:

    Published on: March 5, 2008

    The Washington Post had a story the other day about a Safeway employee who got fired…but as in all things, the story was more complicated than just that.

    The Post wrote: “Michael Holland was working the deli counter at a Safeway in Damascus in January when a manager told him to take a short break. On his way, he picked up a glazed doughnut from the bakery department and a small carton of milk from the dairy case.

    “Holland, who struggles with physical disabilities and some slowness in cognitive processing, returned to the deli without paying. He says he did not realize his mistake until a manager asked for a receipt. Holland apologized, he said, and explained he had been preoccupied and rushed … His failure to pay for his $1.78 snack brought Holland's nearly 18-year career at Safeway to a sudden halt. In the eight weeks that followed, Holland, the primary breadwinner for his wife and four children, was suspended, ordered to pay for the food, fined $50 and fired.

    “Yesterday, after a meeting with Local 27 of the United Food and Commercial Workers and inquiries by the Washington Post, Safeway offered to reinstate the 37-year old worker. Safeway officials said they will make an exception to their ‘zero tolerance’ policy against employee theft because of Holland's disabilities and his long-standing service with the company.

    “Safeway officials said that the store, like many other groceries, operates with a narrow profit margin -- 1 to 2 percent -- and takes a hard line on theft, no matter how small. That position, worker advocates say, can mean a big price for a small mistake and makes it hard to separate an honest lapse from criminal behavior.”

    KC's View:
    Two rules of thumb that this matter illustrates.

    One is that common sense always has to reign. If the guy has disabilities and 18 years of service, management maybe ought to show a little sensitivity.

    Two, you have to avoid stories like this one getting into the Washington Post. To do so, refer back to rule number one.

    Published on: March 5, 2008

    • Food Lion announced yesterday that the US Environmental Protection Agency (EPA) has recognized the retailer with a seventh ENERGY STAR award, the most ENERGY STAR awards ever received by a grocer.

    These ENERGY STAR awards recognize ongoing leadership in areas that include energy-efficient products, services, new homes and buildings in the commercial, industrial and public sectors.

    • The Indianapolis Star reports that Indianapolis-based Village Pantry “has acquired nine Columbus, Ohio-area convenience stores in central Ohio from Petro Acquisitions. The stores, formerly part of the AmeriStop Market brand, will be re-branded under the Village Pantry banner.” Terms of the acquisition were not disclosed.

    • In Virginia, the Daily Press reports that Harris Teeter is rolling out a new health and weight loss program called “Your Wellness For Life,” which “provides brochures, guidebooks and meal-planners that take customers through a 15-week program. As participants follow the plan, they can also refer to special in-store food labels … to help them make healthy meal choices. ”

    Crain’s Chicago Business reports that Kraft Foods is increasing its coffee prices for the second time in less than a month – ground or roast coffee will go up 20 cents a pound and instant coffee will go up three cents an ounce – as the cost of buying beans continues to rise.

    KC's View:

    Published on: March 5, 2008

    • Costco Wholesale Corp. reported that its net sales for the second quarter of fiscal 2008 increased 12 percent to $16.62 billion, from $14.80 billion during the second quarter of fiscal 2007, with same-store sales up seven percent. Net income for the second quarter of fiscal 2008 was $327.9 million, compared to $249.5 million during the second quarter of fiscal 2007.

    Net sales for the first half of fiscal 2008 increased 12 percent to $32.09 billion, from $28.66 billion during the first half of fiscal 2007, with same-store sales up seven percent. Net income for the first half of fiscal 2008 was $589.8 million, compared to net income for the first half of fiscal 2007 of $486.4 million.

    • Walgreen Co. said that its February sales rose almost 15 percent to $4.93 billion, on same-store sales that were up 8.3 percent.

    KC's View:

    Published on: March 5, 2008

    Responding to Michael Sansolo’s column yesterday about the audacity of the credit card companies in pushing their products that ultimately cost consumers a great deal more money, MNB user Christine A. Myres wrote:

    Is it possible that some of those cards are debit, not credit, cards? I’m not sure you can tell by the face of it whether it is or not … I haven’t paid very close attention to the ad because it irritates me, but to be fair, all of those dancing idiots might be using their debit cards. It is currently the only card I carry (despite being issued by Visa, which was all my bank offered me), and is very convenient because a) it is just like cash & debits my account almost instantaneously and b) I don’t have to remember to go to the Magic Wall and get $$$$, since it accepted virtually anywhere. If they actually identify the card as credit, that’s another story.

    She’s right. Some of the ads cited by Michael are for the debit cards, but that doesn't make things any better. The fees and the misspending go on there, too…and have long been criticized here on MNB.

    MNB user Brad Thorsby wrote:

    Your article on Visa is right on target. We have 2 medium sized supermarkets and last year we paid $150k in fees. There is a bill be introduced (not numbered yet), in the House “fairness in interchange fees” or something similar. Retailers should be knocking down their representatives doors on this bill.

    Another MNB user wrote:

    Where are the examples of large retailers offering consumers an incentive to use cash? Haven't seen it personally from a chain, but mom and pop stores are often willing to discount a purchase to avoid the credit card fees.

    I think the dirty secret is that retailers would rather pay the fees than encourage consumers to stare at the stack of $20.00 bills that they are about to surrender at the cash register. In this case, one audacity begets another. I will not be holding my breath waiting for any retail executives to encourage consumers to budget and spend wisely. Maybe when sustainability loses its luster, consumer fiscal responsibility will be the buzz.

    NOT.


    We don't care what people use. It is up to them to decide how fiscally responsible they want to be, and even how to define fiscal responsibility.

    What we are arguing for is complete transparency and fairness. And that’s the one thing the credit card companies have no intention of providing.

    MNB user David Livingston wrote:

    For those you play by the rules such as paying off your credit card balance every month, using some credit cards can be quite lucrative. Discover has been paying 5% back on certain purchases while American Express has been rebating 5% of different purchases. Combining the two cards with the right combination gets me $75-$100 back each month on my travel expenses. I realize that I am paying for those rebates with higher prices. But did you ever go to the Holiday Inn and ask for a cash discount? They look at you like you're nuts. I have had the audacity to ask independent business owners for a cash discount and more often than not they will give me one rather than take a credit card. Still for the most part, with the rebate credit cards, it’s less expensive to use plastic than credit.




    Responding to our story the other day about Stop & Shop reducing prices on condiments, part of a broader price reduction strategy, one MNB user suggested that “Stop & Shop equals smoke and mirrors,” and wrote:

    Don't let the story about Stop & Shop pricing slip under the radar … who feels that Stop & Shop is truly committed to low prices?

    Here are some questions to consider:

    When a retailer makes a press release about lowering prices, what is the goal?

    What does lowering prices at Stop and Shop even mean … Does it mean going from being the highest priced retailer by 25% to being the highest priced retailer by 20%?

    Is price being used as an unquantifiable marketing weapon, (as in) “we are the lowest price on a Tuesday at 4 o'clock so we can proclaim price leadership?”





    I wrote the other day about the nutritional importance of not eating doughnuts, and one MNB user responded that such things as french fries and potato chips actually are worse.

    Which led another MNB user to chime in:

    Next time you get a chance, please read the ingredient list on a Lay's potato chip package and then count the number of ingredients. You will not use all of your fingers on one hand. Nor will you find any ingredients that you cannot pronounce. If you look at one of the seasoned packages, there are still three primary ingredients. The seasoning has a number of ingredients but there are still basically three primary ones. And there is but one gram of saturated fat in a serving and due to the sunflower oil, there are good fats in there. Moreover, there is less sodium than a serving of Cheerios, yet health conscience parents view chips as bad for their kids and Cheerios as good. Look at the package of Tostitos and Fritos - again three ingredients. Now, compare those ingredients and that nutritional label against donuts and French fries. Or even compare against some of the so-called fruit snacks (which can be loaded with sugar).

    I know that you read packages, so I suspect you will do this exercise, if you haven't already.


    I will. But I’m already getting excited.




    MNB had a story yesterday about how “a group of religious investors is calling for more than 60 leading food, beverage, restaurant and other companies ‘to protect their brand, reputation and consumer confidence by opposing the spring 2008 planting of genetically modified sugarbeets. The genetically modified sugarbeet crop would be used to make the sugar consumed in thousands of the most widely consumed food products in the US,” according to the statement released by the group’.”

    My comment: On first reading, this story might just sound like it is about a small segment of the lunatic fringe, but I’m not sure that this would be accurate. These kinds of groups, and these kinds of opinions, seem to be getting some traction…and the food industry had better figure out how to deal with them.

    MNB user Bill Bodine wrote:

    I noticed the segment today on the campaign against GMO sugar beets. I don’t know much about sugar beets, but I do have experience with other biotechnology crops. Biotechnology crops have been extensively reviewed and tested for their safety. These crops have been grown for over a decade and yet there has never been proof that foods created from these crops are any less safe to eat than foods created from non-biotech crops.

    What biotechnology crops have done is allowed farmers to increase yields to meet the worldwide demand for food, allowed farmers to practice reduced tillage and no-tillage farming systems that reduce soil erosion and improve water quality, and have allowed farmers to significantly reduce pesticide applications. There are also biotechnology crops on the horizon that will provide more efficient water use and tolerance to drought, more efficient use of nutrients and fertilizers, and allow for continued improvement in crop yields. Biotechnology is an important key to feeding the world both now and in the future.

    I agree with your comment about dealing with these issues. Hopefully providing accurate information to consumers about the safety and benefits of these products can help.


    MNB user Jeff Totten wrote:

    You are right to be cautious in describing this group as perhaps being part of the "lunatic fringe." I am not familiar with ICCR and, while I tend to disagree with fellow Christians who do seem to come from the "right-wing fringe," marketers need to be more responsive to consumers and activist groups who are seeking to practice their religious faith by living more responsibly (e.g., being more ethical, being more earth user-friendly). For example, I am a United Methodist and the general conference of my congregation is meeting this week, I think, in Fort Worth, TX, and the congregation as a whole will be considering whether to pull some investments from companies that do not walk an ethical or socially responsible line.

    MNB user Jerry Sheldon, however, thought I went too far:

    Just because it is a faith based group why do you refer to them as “lunatic fringe” and “these kinds of groups.” I have no idea what their belief system is or anything more beyond what is in your article, but since I espouse to a faith based belief system I guess that would make me religious and part of this “lunatic fringe” too? You reflect this group in a negative light based upon their belief that they do not want genetically modified food, whose full impact on our bodies is not understood, yet I seem to recall you voicing similar concerns in the past. Bad choice of words.

    Hey, I think Wal-Mart is running some sensitivity training classes for cashiers who insult Muslims. You might want to participate.


    I didn’t exactly call them part of the lunatic fringe…I just said that was my first reaction.

    As for sensitivity training…I’m a pundit. Which means that I am an equal opportunity offender.




    In the ongoing discussion about corporate naming of baseball stadiums, one MNB user criticized me for not realizing that two historic ballparks – Wrigley Field and Busch Stadium – actually were named after companies. But two MNB users leapt to my defense.

    One wrote:

    Wrigley Field and Busch Stadium were named after the families that owned them. Those families also happened to own companies, which they also gave the family name (no denying that it may have been an advertising ploy as well). They did not sell the naming rights to the highest bidder - no matter how stupid it would sound.

    Apparently, there are some limits though. A Scottsdale restaurant, Pink Taco, wanted to buy naming rights to the new stadium in the Phoenix area, but were denied…


    And another wrote:

    I have to take exception w/one your reader’s comments that Wrigley Field and Busch Stadium were named for products. That is not true. Each was named for its owner, William Wrigley Jr and Gussie Busch.

    I feel exonerated. Thanks.

    KC's View:

    Published on: March 5, 2008

    It was announced yesterday that Brett Favre, 38, the longtime quarterback for the Green Bay Packers, has decided to retire after 17 years in the National Football League. He made the decision after a season in which he led the Packers – a young team that few expected to go very far – to the playoffs, only to be upset by the eventual champion New York Giants.

    Most remarkably, Favre started 275 consecutive games, including playoffs, the most ever by a quarterback.

    KC's View:
    Not sure how many times the names “Brett Favre” and “Woody Allen” have been used in the same sentence, but here goes…

    Brett Favre proves out what Woody Allen once said, that “eighty percent of success is showing up.” Favre always showed up, always played, always showed guts and talent and leadership.

    Can't ask much more than that of anyone.