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    Published on: April 4, 2008

    Published reports say that Wal-Mart has slipped into second place in the race to see what company sells the most music in the US.

    The new title holder? Apple’s iTunes Store, marking the first time a digital download seller has beaten a brick-and-mortar store.

    According to the Los Angeles Times, “Apple sold more albums in January and February than any other U.S. retailer, market research firm NPD Group said Thursday, underscoring how the music industry is on the front edge of a digital media shift that is upending businesses as diverse as bookstores and video game makers.

    “U.S. consumers still buy more CDs than digital downloads, but the gulf is narrowing rapidly. Only five years after launching its iTunes digital store, Apple has dominated the fast-growing download market so completely that it jumped ahead of individual CD sellers such as Wal-Mart, Best Buy and Target.”

    And, the Times notes, this shift reflects a bigger trend. “Many industries are feeling the pain. Bookstores are shutting down, unable to compete with online sales and huge retail chains. Newspapers are laying off thousands of employees as advertisers and readers move to the Web.

    “Television networks are making more of their shows available online to reach people at their computers and prevent advertisers from abandoning them for other forms of online entertainment. Video game companies and other software makers are selling more of their products as downloads rather than CDs.”

    KC's View:
    The good news for people in the food business is that shoppers cannot download food via their computers. At least, not yet. (Don't forget, however, that “Star Trek” envisioned a gadget called a “replicator” that could almost do precisely that….)

    However, customers can use their computers to order food, to find out greater amounts of information about how to shop for, cook, and enjoy food. And this shift will only pick up momentum in the food business as younger customers become mainstream, target shoppers.

    If you don't have a strategy in place – or at least in the works – for how to deal with this shift, you are risking creeping irrelevance.

    Published on: April 4, 2008

    The Chinese government reportedly has drafted the proposal that would require customers to pay for disposable plastic bags obtained at retail venues and mandating certain standards for plastic bags.

    China Retail Now reports that stores violating the rule – which could go into effect as soon as June 2008 – could be fined thousands of dollars.

    KC's View:
    Forget fines. They ought to make executives of the companies that violate the rule go jogging near some of the Olympic venues ... an experience that some say will be truly life-threatening.

    Ironic, isn’t it, that a country with such a lousy human rights record would be ahead of the game on this particular issue.

    Published on: April 4, 2008

    Excellent interview in the Financial Times with Wal-Mart CEO Lee Scott, in which he said that business ought to take a more active role in the debate over health care policy.

    “I think business has been absent in this debate on healthcare. I’m not sure why,” he said. “I think government is going to be engaged after this election regardless of who wins, and I think business should be more involved in the discussion. I think it has long-term ramifications for our global competitiveness.”

    FT writes, “Some US corporate leaders say they have kept a low profile on healthcare for fear of being dragged into a political debate that could end up harming their companies’ image and finances. One chief executive of a large US company said recently: ‘Healthcare is a minefield of problems. We don’t know yet how the debate will shape up and until then we don’t want to make our positions known’.”

    But Scott said that he does not feel this way, in part because Wal-Mart already is embroiled in the debate.

    KC's View:
    It seems to me that no matter who wins the election in the fall, that person needs to get ideas from all parties for how best to create a system that provides insurance for everyone without over-burdening any one segment, and for creating a system that focuses on and promotes personal responsibility. That means you have to talk to the unions, but it also means that folks like Scott and Safeway CEO Steve Burd need to be at the table.

    And it means that they all have to be pro-active, not reactive, in getting involved with the debate.

    Published on: April 4, 2008

    The New York Times reports this morning that Starbucks is being sued by yet another former barista who is charging that he – and thousands of other baristas – were cheated when the company allowed shift supervisors to share in tip money.

    As the Times notes, “The lawsuit was inspired by a ruling last month in which a state judge in San Diego awarded $105 million to baristas throughout California, after finding that Starbucks had improperly allowed shift supervisors to share tips.” Starbucks is challenging the ruling.

    Meanwhile, a Massachusetts barista also is suing the company on similar grounds.

    The Times reports: “At Starbucks’ more than 7,000 shops nationwide, the baristas leave a tip jar near the checkout counter. The workers pool the tips each week, and typically shift supervisors and baristas divvy up that money based on the hours each employee has worked. Other types of supervisory employees, like shop managers and assistant managers, do not share in the tips … In a statement, Starbucks said it was unfortunate that copycat lawsuits had been filed in the weeks after the California ruling and that it intended to appeal. ‘Our tip policy allows hourly partners (baristas and shift supervisors) to receive their fair share of customer tips,’ the company said. ‘Shift supervisors are not managers and have no managerial authority.’ The company said that shift supervisors often do the same work as baristas.”

    KC's View:
    I actually think that Starbucks probably is right on this one, but that doesn’t mean that it is going to be able to spin the news in its own favor. At this point, this story has taken on a life of its own…and Starbucks has to resolve it. Quickly.

    Maybe the solution is to give everybody a raise and get rid of the tip jar. I’m not offended by it, but plenty of people seem to be…and at this point, it is just exacerbating the company’s image problems.

    Published on: April 4, 2008

    The Business Courier of Cincinnati reports that Kroger and the United Food and Commercial Workers (UFCW) have come to an agreement on a new contract covering more than 11,000 employees in 87 of the company’s Kentucky and southern Indiana stores. Terms of the deal were not disclosed, and the new contract still needs to be ratified by the rank-and-file.
    KC's View:

    Published on: April 4, 2008

    Advertising Age reports that McDonald’s plans to embark on a year-long “food credibility” campaign, aimed at dispelling certain myths about its foods, such as “that its hamburgers and chicken nuggets are made of ‘leftover parts’; that its milk shakes and ice cream contain lard; that its sausage patties contain additives that make people want to eat more; and that its cheese contains meat product.”

    "We've been hearing over the years that consumers have some misperceptions about the quality of our food at McDonald's," Molly Starmann, director-U.S. marketing, tells Ad Age. "In 2008 we're engaging in a conversation with our guests because we feel it's important for them to know the truth about our food."

    KC's View:
    I’d never heard the one about McDonald’s hamburgers and nuggets being made up of “leftover parts.” I thought they just tasted that way.

    Published on: April 4, 2008

    • The Minneapolis / St. Paul Business Journal reports that Wal-Mart is looking for “local vendors of environmentally friendly products and services to partner with its stores in Minnesota and Wisconsin … Vendors could include farmers who sell organic foods, landscapers that use innovative techniques to conserve water, or recycling companies.”
    KC's View:

    Published on: April 4, 2008

    The Boston Globe reports that the nation’s largest craft brewery – Boston Beer Co, makers of Sam Adams – has decided to share 20,000 pounds of its hops to smaller craft brewers around the country that were having difficulty obtaining the all-important ingredient in the making of beer.

    According to the story, there is a hops shortage, and “about six weeks ago Boston Beer sent out notifications to small brewers that it wanted to help them by making available some of its hops at cost. The company said it received 352 requests totaling about 100,000 pounds, much more than it could give away.” Company founder Jim Koch said that he was simply living up to long-held tradition: "We view each other as colleagues not as competitors," he said.

    KC's View:
    We should all raise a glass to that kind of generosity.

    Published on: April 4, 2008

    The Los Angeles Times has a nice piece about the E.& J. Gallo Winery, which is celebrating 75 years in business this year. “With annual sales of $3.5 billion -- about 70 million cases of wine -- Gallo is the nation's largest winemaker. One out of every five glasses of wine drunk in America is a Gallo wine,” the Times writes.

    But the story actually focuses on the shift that is taking place within the private family-owned business. “Gallo grew up on selling cheap, often sweet wines such as Hearty Burgundy, Bartles & Jaymes, Ripple and Thunderbird,” the Times writes, but these days is much more focused on premium wines under a wide variety of labels such as Red Bicyclette, MacMurray Ranch, Napa Valley Vineyards and Rancho Zabaco.

    The company also reportedly has moved beyond the union and personal strife that afflicted it for many years, which has allowed it to be far more focused on growing the business in a positive way.

    KC's View:

    Published on: April 4, 2008

    • Spartan Stores reportedly will sell 12 of its Pharm units in the Toledo, Ohio, area to Rite Aid, leaving it with two more Pharm units, the future of which are under discussion. The move was made to allow Spartan to focus more on its core businesses.

    • Kroger-owned Ralphs announce yesterday that it “will begin offering pharmacy customers generic drugs for $4 per prescription at its stores in Southern California. The $4 price will apply to hundreds of generic drugs prescribed for 30-day supplies and will be available at 90 pharmacies in Ralphs stores throughout Southern California … Ralphs' program includes generic alternatives for some of the most commonly prescribed drugs used to treat conditions such as diabetes, asthma, depression, heart disease, thyroid and other health problems.”

    • Published reports say that the Japanese government has commissioned a study into the safety of consuming cloned animals, following the issuance of a report there saying that there is no biological difference between the milk and meat of cloned and non-cloned cattle.

    There is no timetable on the study, but Reuters notes that “many Japanese consumers, notoriously sensitive to food safety, are likely to oppose moves to introduce meat or milk from cloned animals into the human food supply.”

    KC's View:

    Published on: April 4, 2008

    • Walgreen announce that its March 2008 sales were $5.1 billion, up 10,6 percent over the same month a year ago, with same-store sales up 4.4 percent.

    • Drug chain Rite Aid said that its total March sales increased 50.7 percent to $2.044 billion as compared to $1.356 billion for the same period last year, reflecting the acquisition of Brooks Eckerd in the intervening time. Same-store sales were up 2.6 percent.

    • Dollar General Corporation announced that net sales in fiscal 2007 increased $325.4 million, or 3.5 percent, to $9.50 billion compared to $9.17 billion in 2006. Same-store sales were up 2.1 percent.

    For the year, Dollar General’s net loss was $12.8 million compared to net income of $137.9 million a year ago.

    Sales in the fourth quarter of fiscal 2007 were $2.56 billion compared to $2.55 billion in the fourth quarter of fiscal 2006, with same store sales increasing 0.4 percent. Net income in the fourth quarter was $55.4 million compared to $50.1 million in the fourth quarter of fiscal 2006.

    KC's View:

    Published on: April 4, 2008

    • The San Francisco Business Times reports that Des Hague is leaving his job as president of perishables at Safeway, and will be succeeded by Kelly Griffith, who has been president of the company’s Portland, Oregon, division.

    Steve Frisby, president of Safeway's Texas division will replace Griffith in Portland, and Tom Schwilke, group vice president of produce and floral, will replace Frisby as president of the Texas division.

    KC's View:

    Published on: April 4, 2008

    A number of MNB users wrote in about the case of Debbie Shank, a former Wal-Mart employee who was permanently brain damaged in a car accident eight years ago. Her medical expenses were covered by Wal-Mart, but when she sued the person who caused the accident and won, Wal-Mart sued to get back more than $400,000 in medical expenses – something it was allowed to do under the terms of the company health plan. Earlier this week, awash in criticism that it was leaving the family almost destitute, Wal-Mart changed its mind.

    One MNB user wrote:

    Kevin, this is a very interesting story I have seen reports on over the last several days. It seems to me there are several losers and only one winner here. The pain and suffering experienced by the family and the woman are obvious and heartbreaking. Wal-Mart loses from a PR standpoint. As an example, only trailing the Gates Foundation, I think Wal-Mart is the largest charity contributor so the $400,000 is inconsequential. Wal-Mart employees lose as premiums will go up if subrogation is taken out of their policies as the insurance company will increase costs to Wal-Mart. This could affect many other company premiums as well. Bad news all around except for the law firm that collected the $200,00-$250,000 and resulting profits.

    MNB user Linda Wish had a different take:

    Amen! A little sanity in an insane world. Regardless of whether Wal-Mart had the law on it's side (and it seems they did), their decision to reverse themselves should give us all pause the next time they come up in conversation. Here and now, they are extending and we should all say amen.

    Another MNB user wrote:

    Let me start by saying that I agree with Wal-Mart's decision not to try and recoup the money from Debbie Shank. Sometimes having the legal right doesn't make it morally right. It's unfortunate that it took someone at Wal-Mart so long to realize that. I'm sure the additional stress and legal bills for the Shank's could have been avoided.

    And MNB user David Livingston wrote:

    Wal-Mart realizes the downside to being self insured. If they had used an outside company like Blue Cross, this would have not been news. Winning a lawsuit is not about "financial status" or hitting the lottery. It’s to payback for damages. Wal-Mart was damaged and they didn't get paid back. I feel bad for the family and it’s a very sad situation. I have a feeling Ms Shank will never see a nickel of that money and that her husband will live it up royally once all the television cameras are gone.

    I don't even know how to respond to this last sentence, which seems completely at odds to my impression of the situation. It must be hard, living day to day with such a low opinion of the human race.

    Also got a lot of email about the Seattle proposal to impose a 20-cent tax on every plastic or paper disposable bag handed out by retailers.

    One MNB user wrote:

    It’s my impression that all the talk/action is about the handled, plastic bags used at the front end to load the final grocery tally. What about all the bags that are used throughout the store when buying loose items? By the time I get to check-out, I may easily have 10+ bags in my cart from, say, 6 oranges, the leaf lettuce, the green onions, the garlic cloves, the 4 tomatoes, the hand-picked sweet potatoes, 3 onions, yadayada. I don’t see any discussion on these and am wondering if the bans or the surcharges count these bags. If so, what is the alternative? Will we place all these loose items in our cart and then re-assemble them at check-out and then pack them loosely in the re-usable bags? Or will we still use these plastic bags when picking our loose items? It’s easy to have more of these bags than the actual packing bags. So, 2 questions: What are you doing in produce when selecting/carting your loose produce? What is your sense (or knowledge) as to what the new regulations re plastic bags are doing w/these? I just don’t hear anything about them.

    I don't believe that any of these new regulations include these bags…and you’re right, this is a great opportunity for someone to come up with an innovative and environmental solution.

    Another MNB user wrote:

    Our company has been promoting reusable bags for nearly 20 years. Naturally, we’re seeing a huge surge in the purchase of reusable bags by retailers and customers … One of the challenges, however, is that many of the bags that are being sold in mass quantities are not any better for the environment than paper or plastic.

    Millions of bags being sold today are made from non-woven polypropylene, which is plastic. These bags are not currently recyclable in the USA; they’re permanent trash. So in seeking solutions both retailers and consumers have to look for smart solutions, not just quick ones.

    Agreed. I prefer the cotton canvas bags…and since they are practically indestructible, I don't have to worry about recycling them,

    Another MNB user wrote:

    Regarding the ongoing topic of plastic bags, I like the idea of charging a fee for them and having the proceeds go towards recycling and environmental programs.

    Unfortunately, you can hit a lot of people over the head and they just don’t listen, but hit them in the wallet and you get their attention.

    But the point I’d like to raise is that along with the challenge of getting consumers to change their ways, I think the stores (not just grocery stores, but ALL stores from Home Depot to the local Kwik-E-Mart) need to change their register habits as well. I really believe that having cashiers ask the simple question “Do you need a bag?” would raise the level of consciousness and consumers would realize that no, they really don’t need to put their box of screws or bag of chips and jar of salsa into a plastic bag.

    “Would you like fries with that?” has become standard. We just need to change the question.

    If we all try, behaviors can be changed. It just takes effort.

    Finally, responding to a story yesterday about a demographic study of coupon usage, one MNB user wrote in with a complaint about how the study was worded:

    "Broken down by age" seems like a rather harsh way to put it. I know I'm offended; how about you?

    I never worry about phrases like that used by research companies.

    I just try to make sure that my body is never broken down by age.

    KC's View:

    Published on: April 4, 2008

    Call me crazy, but I think American civilization went off the deep end this week.

    The news that as many as nine third graders at a Georgia school conspired to murder their teacher - bringing to school a knife, duct tape, handcuffs and a crystal paperweight with which to knock her out – brought more than a few of us up short this week.

    Now, I’m speaking here both as a citizen and as the husband of a third grade teacher. But this is nuts.

    The only reason anyone found out about the plot before they actually tried to off the teacher is because an uninvolved pupil warned the administration. And yet, in the circles of authority, people already are making excuses for these kids.

    "We did not hear anybody say they intended to kill her,” said the police chief.

    “From what I understand, they were considered pretty good kids," said a spokesman for the school district.

    "This is an isolated incident, an aberration … we have good kids," said the principal.

    No, I don't think so.

    I understand that these kids had some learning disabilities, but that’s no excuse for this sort of premeditated behavior. I understand that the educational philosophy of the moment is to “mainstream” every kid, no matter what the disability happens to be, but there’s no way that these kids ought to be allowed back into this school.

    I’m not suggesting that they be charged with a crime, but I am suggesting that a simple suspension isn’t nearly enough.

    It is time to find them another place to go to school. Preferably a place where there are metal detectors and regular strip searches.

    And, by the way, maybe someone ought to question the parents of these little prospective felons. Because it seems pretty obvious to me that these kids are watching too much television and playing too many videogames, and that the adults aren’t paying nearly enough attention.

    Maybe I’m just getting old, but when I was that age, the only physical violence being committed in the classroom was by the nuns…

    By the way, I can't wait to see what they do with this case on “Law & Order.”

    You need to go out right now and pick up a copy of the April 7 edition of “The New Yorker,” because there are three pieces you should read.

    There is an opening essay by the incomparable Roger Angell about baseball, in which he ponders the state of the national pastime and wonders, among other things, if money has hurt the game more than steroids.

    And, there is a brief profile of John Catsimatidis, the CEO of Gristedes, who is running to succeed Michael Bloomberg as mayor of New York.

    And finally, best of all, there is a Reflections piece entitled “Mine Is Longer Than Yours” by Michael Kinsey, in which he considers baby boomers’ desire and pursuit of longevity, and puts it in perspective. While this is a highly personal piece – Kinsley was diagnosed as having Parkinson’s disease 15 years ago – I also found that it made me think about how businesses (especially businesses specializing in health and wellness-related products and services) will cater to this demographic group. This is a terrific bit of personal journalism, and I recommend it highly.

    If you want to get ahead of the game, reserve your copy now of Thomas L. Friedman’s new book, a follow-up to his highly successful “The World Is Flat.” It is due out in August, and I guarantee you that it will be defining the debate come fall…which could be very interesting in view of the fact that we’ll be electing a president then.

    The title of Friedman’s new book: “Hot, Flat & Crowded.”

    I can't wait.

    I use this bully pulpit a lot to argue that the diversification of the planet means that retailers have to make sure that their employees are increasingly sensitive to people of different faiths.

    Well, here’s yet another indicator. The Vatican announced this week that Islam has overtaken Roman Catholicism as the single biggest religious denomination in the world – there are an estimated 1.3 billion Muslims on the planet, compared to 1.13 billion Catholics.

    I wrote the other week that the seemingly endless stream of research reports about how various foods affect the body always seem to leave me feeling, “uh-oh.”

    But finally, there’s a good one.

    Researchers at the University of North Dakota School of Medicine and Health Sciences say that the caffeine equivalent of just one cup of coffee a day could help prevent Alzheimer’s.

    No word, however, on whether six cups a day will make it six-times as unlikely to get it.

    I’m in South Beach in Miami on business, and last night I had something for dinner that I couldn’t even have imagined: lobster served with banana.

    Y’know what? It was really, really good.

    Go figure. Sometimes it’s worth taking a shot.

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


    KC's View: