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    Published on: March 7, 2008

    The US House of Representatives will take under consideration the Credit Card Fair Fee Act of 2008, which has been introduced on a bipartisan basis by House Judiciary Committee Chairman John Conyers (D-Michigan) and Rep. Chris Cannon (R-Utah), and co-sponsored by eight GOP and four Democratic congressmen.

    According to an analysis by the Food Marketing Institute (FMI) – which endorsed the legislation – the bill, if passed into law, “would require a committee of merchants and representatives of card companies and banks to negotiate uniform fees for debit and credit card transactions. The negotiators would decide which costs the fees should cover, such as computer processing, communications and system maintenance, and provide financial institutions a reasonable rate of return. If the negotiators cannot reach an agreement, the decision moves to binding arbitration by a panel of experts.

    “The fees would remain in effect for three-year periods. They could be renegotiated at the end of each period if costs and market conditions change … The legislation applies to electronic payment systems that account for at least 20 percent of the annual credit and debit card dollar volume. Only the Visa and MasterCard systems currently hold this market share.”

    Tim Hammonds, president/CEO of FMI, released a statement: “This law would restore fairness and reason to an anti-competitive, anti-consumer and broken electronic payments system. For far too long, the card companies and banks have set these fees in secret with impunity — particularly interchange fees, which make up about 80 percent of the cost.

    “Americans pay among the highest fees in the developed world, while competition, economies of scale and plummeting computer and communications costs should make our fees the lowest.”

    In its analysis, FMI noted that “in the U.S., total interchange costs alone increased from $16.6 billion in 2001 to $36.3 billion in 2006 … at the current rate of increase, these fees will cost more than $40 billion in 2007 and near the $50 billion mark this year. Card companies and banks charge myriad other fees on each transaction, including dues and assessments, base rate settlement fees, surcharges, access fees, risk fees and PIN debit switch and transaction charges — all of which have been increasing as well with no clear justification.”

    KC's View:
    When the US Congress holds these guys’ feet to the fire, I hope that they build an actual bonfire to do so…because that’s what all these banks deserve. Sure, there’s no denying that consumers who have abused their credit cards have a ton of responsibility…but beyond the fact that the card companies have created a system with rising costs and virtually no transparency, they also bear some culpability for having seduced the public with their offers of cards, cards and more cards.

    Published on: March 7, 2008

    Florida Today reports that 7-Eleven is going the private label route, rolling out a line of snack products under the label “7-Eleven Select.”

    This is in addition to other new products - new types of iced coffees, guava-based pastries, snacks and a variety of additional Slurpee flavors – that were introduced in Florida this week at an annual showcase for employees and suppliers called “University of 7-Eleven.” Similar events are planned for around the country.

    According to the story, “The event showcased products and store configurations the convenience store giant plans to push in the upcoming year. With its private label brands and daily-made sandwich menus and fresh coffee -- a pot is never supposed to sit longer than 20 minutes at a 7-Eleven store before another is made -- the company is taking aim at a number of competitors.

    “Think traditional grocery stores, fast-food stalwarts such as Subway and Quiznos, and specialty retailers like Starbucks.”

    And, the paper writes, “On Wednesday, University of 7-Eleven attendees were able to sample new foods such as guava and cheese pastry, curry chicken Asian roll and several new flavors of Slurpees, including Twizzler, Bubble Yum and a purple-colored fruit concoction called Baja Yaha … Many new products are aimed at the company's key demographic of 18- to 34-year-olds, but 7-Eleven also is targeting younger consumers with the fruitier drinks and varying colors of some of the Slurpees flavors. That effort also includes partnering with video games and movies … “

    KC's View:
    Yet more evidence that tradition format borders are coming down.

    7-Eleven is smart to move into proprietary product lines that nobody else can duplicate. That’s how you create a differential advantage. And the move into better and more varied foodservice offerings also reflects much of the conversation that I heard this week at the IRI Convenience Retailing Forum.

    And, by the way, own-label is something that 7-Eleven has some experience with. After all, isn’t “Slurpee” a private label product?

    Published on: March 7, 2008

    The Baltimore Sun reports that the city is expected to approve a ban on trans fats in all restaurant food, and notes that the legislation has moved through the process with surprising speed, faster even than a smoking-in-restaurants ban that took more than a year to enact.

    "This is a movement," the ban's chief sponsor, City Councilwoman Agnes Welch, tells the paper. "This is a call to action to save our children." Welch has described the bill as one way of addressing the childhood obesity issue.”

    And, the paper notes, “The bill follows trans fat bans enacted in Philadelphia, New York City and Montgomery County. Any prepared food product containing partially hydrogenated vegetable oil - such as shortening or margarine - would be prohibited by the legislation … The ban would apply to any establishment where food is prepared for sale, including restaurants, deli counters and fast-food chains.

    “The legislation has a number of kinks, though. For instance, it currently calls for no penalty for violators. Council members said they would work to include one before the bill comes up for a final vote. The legislation was amended yesterday so that it would take effect 18 months after it is enacted.”

    KC's View:
    It’s been a big week for food-oriented legislation in the state of Maryland. Earlier this week, it became apparent that state legislation that would have banned the sale of foie gras will not succeed…annoying animal activists but pleasing gourmets.

    Foie gras has become controversial because activists charge that it is made by inhumanely force feeding ducks and geese.

    But I have a serious question about the trans fat ban: How exactly is this going to affect the food booths at Camden Yards? (Should there be a baseball stadium exemption? Perhaps…especially because lately, the food at Camden Yards has been better than the baseball.)

    Published on: March 7, 2008

    The Washington Post reports this morning that in the wake of product recalls that affected millions of toys last year, the US Senate has “approved the most far-reaching changes to the nation's product safety system in a generation,” which would almost double the budget of the Consumer Product Safety Commission and give it more enforcement power.

    The Senate version of the bill still needs to be reconciled with a House of Representatives version, which is said to be less stringent. The Post notes that “both contain provisions that would require retailers and manufacturers to be more vigilant about product safety.

    President Bush has not threatened a veto, according to the story.

    KC's View:
    It is worth noting, by the way, that the New York Times reports this morning that “criminal charges were filed on Thursday against four executives at two American companies who imported toothpaste from China that contained a poison used in some antifreeze … The chemical, diethylene glycol, which is banned from certain ingestible items in the United States, was discovered in almost a million tubes of toothpaste last May and led to recalls in 34 countries. The chemical, commonly used in antifreeze and as a solvent, can lead to kidney damage or liver disease.”

    If these executives are found guilty, I have just the sentence, by the way. Give them tubes of the contaminated toothpaste and make them use if for a year or two.

    Published on: March 7, 2008

    CIES has released its annual “Top Of Mind” survey, indicating that the events of the past year have had a dramatic impact on the issues and priorities on which senior executives are focusing. And for the most part, retailers and manufacturers seemed petty much in synch, not showing the disparity of opinion that sometimes has been seen in past years.

    In the overall rankings – combining the opinions of both retailers and manufacturers – corporate responsibility (which includes both sustainability and social standards) got the top spot, up from number five in last year’s list. Food safety, which was number eight last year, moved up to number two, while consumer health a nutrition – top of the list a year ago – moved down to number three. The economy and consumer demands, which includes energy costs and consumer trends, moved to number four from number 11 last year, and retailer-supplier relationships moved down to number five from last year’s number two position.

    When retailer opinions were considered on their own, the top five positions were taken by corporate responsibility (#3 a year ago), food safety (#6 a year ago), consumer health and nutrition (#6 last year), and the economy and consumer demand (#10 last year), which tied for fourth place with technology and supply chain issues (#5 last year).

    On the manufacturer side, corporate responsibility was at the top of the list (#8 a year ago), consumer health and nutrition was second (the same as last year), retailer-supplier relations was third (top of the list in 2007), the economy and consumer demand was fourth (#11 last year), and food safety was fifth (ninth last year).

    KC's View:
    In a lot of ways, corporate responsibility and food safety are in the same general ballpark … and it is noteworthy that they are now top of mind of most senior executives.

    Good thing, too. Because these are issues that directly impact the relationship that the food industry has with the consumers.

    Published on: March 7, 2008

    Dow Jones reports that Wal-Mart plans to open 81 new stores in 30 states this month, and will open a total of 170 supercenters in the current fiscal year.

    According to the story, “The company also said the stores include two additional new high-efficiency (HE-2) prototypes designed to reduce greenhouse gas emissions and use 25% less energy than a standard Wal-Mart Supercenter.”

    KC's View:

    Published on: March 7, 2008

    The Wall Street Journal reports this morning on stories suggesting that Amazon.com is about to get into the wine business, noting that “the Seattle company posted a job advertisement for a senior wine buyer to build relationships with wine vendors and add product selection to its shopping site.”

    According to the story, “Amazon doesn't sell wine on its site now, but it's not for lack of trying. It invested $30 million in 1999 for a 45% stake in start-up Wineshopper.com, which later failed. Wine.com sells gift baskets of food on Amazon's site but not wine. Amazon would have to deal with a complex set of rules for shipping wine in certain states.”
    KC's View:
    Interestingly, there is a possibly conflicting story about Amazon’s plans on Decanter.com, which reports that Amazon plans to work with Wine.com – which shipped wine to more than 100,000 customers in 2007 – in developing its wine business. If true, that might mean that Amazon wouldn’t need a wine buyer of the sort speculated about by the Journal.

    Then again, it might not. Stay tuned.

    Published on: March 7, 2008

    The Wall Street Journal reports this morning that “with prices continuing to march higher for commodities ranging from corn to wheat, food companies are cutting costs, raising prices and otherwise adjusting to tighter margins for the long haul … For many companies, belt-tightening won't be enough to completely offset surging prices. Prices for corn, soybeans, wheat and other grains are expected to keep rising this year as demand for grain-based ethanol climbs and middle-class consumers in places like China and India push up demand for meat, milk and eggs. Poor weather and tight supplies of other commodities, such as coffee, have also caused costs to rise.”

    According to the story, Sara Lee “is reformulating some of its regional bread brands with cheaper, lower-protein wheat,” while General Mills has reduced the number of Hamburger Helper varieties from 75 to 40, and Campbell Soup is “paring the number of ingredients in its soups by an undisclosed amount, ranging from meats and vegetables to flavors and spices.”

    KC's View:
    I write more about this in “OffBeat,” below, but my sense of this is that these are not temporary changes. The world is changing, boys and girls, and we’d better get used to it.

    Published on: March 7, 2008

    • Christian Haub, chairman of the Great Atlantic & Pacific Tea Co. (A&P), told a Bear Stearns retail conference this week that the integration of Pathmark Stores into the company’s infrastructure “is right on track,” and that the company has not “experienced anything unexpected on the positive or the negative side.”

    According to an Associated Press story, Haub “said A&P likely won't need to replace equipment or fully renovate the stores, but that it will put a renewed focus on value through in-store displays. Haub also said the company would introduce freshly cut vegetables and fruit to Pathmark's produce department.”

    • The Austin Post-Bulletin reports that Hy-Vee is partnering once again with Hormel Foods, which will be a key sponsor of the 2008 Hy-Vee Triathlon, described in the paper as “an Olympic team selection event for United States athletes who are competing for the chance to race at this year's global event which will be held during summer in Beijing, China.”

    The Triathlon, in addition to being part of the Olympics selection process, is also seen as a way of educating consumers about the importance of an active lifestyle when combined with a healthy diet.

    • The Associated Press reports that a commercial refrigeration company, Alliance Mechanical, and the company’s president and co-owner, Kendall Pope, have pleaded guilty to a bid rigging scheme that targeted Safeway Inc.

    KC's View:

    Published on: March 7, 2008

    • Wal-Mart Stores said this morning that its February sales were $29.18 billion, up 8.9 percent over the same month a year ago. Same-store sales were up 2.6 percent.

    • Delhaize Group said yesterday that its fourth quarter net income was the equivalent of $175.2 million (US), down 0.5 percent, and fourth quarter sales of $7.2 billion (US), which were down 3.4 percent from the same period a year earlier.

    Delhaize said that its annual net income was up 16.5 percent to $630 million (US), and annual sales were down 1.4 percent to $29.1 billion.

    The company said that a weak dollar was partially responsible for some of the n umbers, and that it will an impairment charge of $18.6 million for 25 Sweetbay Supermarket stores in Florida, saying that the units were not meeting expectations even as the company was optimistic about the division for the long term.

    • Carrefour, the world’s second largest retailer, announced that its 2007 net profit rose 0.7 percent to the equivalent of $2.87 billion (US), from $2.86 billion (US) during the previous fiscal year.

    • BJ’s Wholesale Club announced that its February sales increased by nine percent to $655.7 million from $601.8 million during the same month a year ago, with same-store sales that were up 5.9 percent.

    • Family Dollar said that its February sales increased 4.4 percent to $533.7 million compared with $511.4 million for the comparable four-week period a year ago; same-store sales were up 1.3 percent.

    • Rite Aid Corp. said that its February sales increased 50.8 percent to $2.613 billion as compared to $1.733 billion for the same period last year, a leap that is attributed to the company’s acquisition of Brooks Eckerd stores last June. Same-store sales were up 2.2 percent.

    Rite Aid also said that its fourth quarter sales increased 50 percent to $6.8 billion, from $4.5 billion during the same period a year ago, on same-store sales that were up 1.3 percent.

    And, for the just-completed fiscal year, Rite Aid said that its total sales were up 39.6 percent to $24.3 billion, on same-store sales that were up 1.3 percent.

    • Target Corp. said that its February sales increased 5.9 percent to $4.37 billion, from $4.12 billion during the same period a year ago. Same-store sales for the month were up 0.5 percent.

    • Royal Ahold said that its fourth quarter earnings were the equivalent of $398 million, up 9.2 percent over the same month a year earlier. As previously announced, the company’s total quarterly sales were up 0.2 percent to the equivalent of $10 billion (US).
    KC's View:

    Published on: March 7, 2008

    …will return.
    KC's View:

    Published on: March 7, 2008

    The timing was particularly good for the IRI Summit this week, since two of the scheduled speakers on Wednesday were political analysts and sometime advisors James Carville and Mary Matalin, who have somehow managed to stay happily married despite their divergent political opinions. The night before, Sen. John McCain (R-Arizona) won enough delegates to make him the GOP candidate for the presidency this year, and Sen. Hillary Clinton (D-New York) upset Sen. Barack Obama (D-Illinois) in three out of four primaries. While Clinton was unable to make much of a dent in Obama’s delegate count lead, but her showing certainly stopped most of the calls for her to get out of the race.

    The interesting thing about Carville’s presentation wasn't the fact that he’d only gotten an hour or two of sleep and clearly was relieved that the candidate he was backing had lived to fight another day; on “Meet the Press” last Sunday, he didn’t seem very confident. Rather, it was his concession that at age 63, after decades of political consulting, he now was convinced that virtually all his preconceptions about voters were incorrect, and that all bets are off – orthodox politics simply aren’t appropriate for understanding presidential politics in 2008, he said, and it is almost impossible to know where things will end up.

    It sort of reminded me of something that screenwriter William Goldman (“Butch Cassidy & The Sundance Kid,” “Marathon Man”) once said about Hollywood:

    “Nobody knows anything.”

    In a special series of sessions later in the afternoon focusing on the subjects of convenience stores and convenient shopping – which are not necessarily the same thing – IRI’s Thom Blishock followed the same theme. In a panel discussion talking about the economy, exploring how the recession might affect how people define convenience and rank it in terms of their shopping priorities, Blishock said that if we talk about the nation going to recession, we are making a mistake…because the nation, in fact, is entering a kind of economic transition from which it will not recover. Gas will never go down to under three bucks a gallon, he suggested. Heating oil and electricity and virtually every kind of energy will continue to increase in price, just as food prices may never again be the kinds of bargains that US consumers were used to. Blishock even predicted that getting a Thanksgiving turkey next November may be both difficult and expensive, since many of them are raised on corn, which is in short supply these days because of ethanol. (Though in my family, not having to eat turkey on Thanksgiving will be seen as a blessing.)

    I think Thom Blishock and James Carville are right. I think that we’re entering a world in which all conventional wisdom is going to seem either obsolete or misguided, and that we’re all going to have to figure things out on the fly. From a business perspective, I think the next few months and years will be fraught with peril…and that there will be both unexpected victories and defeats … not to mention a lot of head-shaking and hair pulling when perfectly well conceived plans don't work out, and when accidents and gamble suddenly blossom into real opportunities.

    Speaking personally, I suspect that a lot of consumers…especially aging baby boomers…may begin to think differently about how and where they are going to spend their sixties, seventies and eighties. Because many of the assumptions – political, economic, cultural, social, environmental, maybe even spiritual - that a lot of us have been working under probably are going to vanish, or at least be revised.

    I’m not sure that this is entirely a bad thing. If we actually deal with the many issues that confront us – seeking long-term solutions rather than short-term fixes – then maybe we can survive the transformation Blishock talks about.

    But if we don’t … if we seek gratification rather than solutions … then I’m not so sure.




    Have you read about the two idiots who were taunting the rhinos at the San Francisco Zoo the other day?

    Apparently, these guys are too stupid to have read about the guys who were mauled two months earlier by a tiger that they allegedly taunted.

    Well, it looks like at least one of the guys is going to be fined, but this strikes me as a case in which the punishment does not suit the crime.

    What they really ought to do is take these clowns and explain to them that they are going to each get to spend 10 minutes in the rhino cage. Just them and the rhinos.

    Because it seems to me that it might be entertaining – and appropriate – to let the rhinos taunt them.




    As a Mets fan, I have to admit that I am waiting for the inevitable announcement that Johan Santana has rotator cuff problems and is out for the year.




    There’s a terrific USA Network television series that was on last summer, but that I’m only now catching up with. It’s called “Burn Notice,” and it is about a spy who has been unfairly disavowed by the CIA and finds himself living in Miami trying to reconstruct his life and figure out who “burned” him – and why. The series is cleverly written, looks great (it’s shot entirely on location), and has a trio of highly charismatic stars – Jeffrey Donovan as the outcast spy, Michael Westen, the gorgeous Gabrielle Anwar as his pistol toting former girlfriend, and the great Bruce Campbell as an overaged, overweight former spy now making a living as an over-sexed Lothario. “Burn Notice” is very smart about its genre…and even transcends it from time to time. You can catch up with the first season on iTunes; the second season is scheduled for USA this summer.




    Two wines this week I’d like to recommend:

    • the 2005 Banfi Chianti Classico, which is fabulous with Italian food.
    • the 2006 Cloudline Pinot Noir, which is just great for sipping.




    That’s it for this week. Have a good weekend, and I’ll see you Monday.

    Sláinte!!

    KC's View: