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    Published on: April 11, 2008

    USA Today reports that the hot buzzword in marketing these days is “neighborhood,” which has become a term of art because it gives people a sense of place and community.

    Examples:

    • Starbucks stores brag about "the neighborhood's best espresso."

    • Applebee’s says in its commercials, "You're not just our customers, you're our neighbors."

    • Both Wal-Mart and Tesco have “Neighborhood Markets.”

    • And the Lowe’s home improvement chain advertises, “At heart, we're still a neighborhood store."

    KC's View:
    It seems to me that saying you are a neighborhood store is one thing, but actually behaving that way is something entirely different…and delivering on the pledge is a lot tougher in a world where efficiency – especially if you are a chain store company, which all of these are – is prized almost beyond all else.

    Published on: April 11, 2008

    The Associated Press reports that Hannaford Bros. has decided to pull all its advertising from WGME-TV in Maine over what the chain saw as coverage of its recent credit/debit card security breach that “lacked balance and fairness.”

    WGME-TV said that it was told by the chain that it was “too aggressive.”

    According to the story, “News 13 General Manager Terry Cole says all of the station's news decisions are made independently of its sales efforts.” And Hannaford released a statement saying that it understood the need for news decisions to be made independently, but thought that the decisions were unfair and that it needed to make a statement.

    KC's View:
    Which is all how it should be. News organizations aren’t supposed to care about the commercials (though they often do), and companies shouldn't support via advertising venues that they feel are unfair or inaccurate.

    Published on: April 11, 2008

    The latest annual report issued by the National Association of Convenience Stores (NACS) offers the following information:

    • “Convenience store industry sales reached a new high of $577.4 billion in 2007, but profits dropped by $1.4 billion, largely because of higher credit card fees … which surged $1.0 billion, or 15.2 percent, to reach $7.6 billion.”

    • Industry pretax profits dropped by roughly the same amount, $1.4 billion, falling to $3.4 billion. The net effect is that the industry’s credit card fees are now more than double the industry’s pretax profits, an extraordinary development considering that credit card fees surpassed industry profits for the first time ever last year.”

    • “Overall, industry revenues climbed only 1.4 percent, leveling off an extraordinary decade of growth that saw industry revenue grow more than three-fold from $174.2 billion in 1997.”

    • “By nearly all performance measures, the gap is continuing to widen between the industry’s top performers and the bottom performers as the number of new one-store operators continues to grow. Since 2000, the number of one-store operators has grown 51 percent, from 59,876 stores to 90,683 stores, as major oil companies continue to divest their retail assets and operators sell off underperforming stores, frequently to new entrants who often initially lack experience and resources. Today, major oil companies own and operate less than three percent of convenience stores selling motor fuels.”

    KC's View:

    Published on: April 11, 2008

    The Los Angeles Daily News reports that “California would have the nation's toughest plastic-bag law - requiring all large grocery stores and pharmacies to charge customers 25 cents per bag - under a bill sponsored and endorsed Thursday by Los Angeles County government.

    The bill would amend an existing law that forbids local municipalities from imposing fees for disposable plastic bags. According to the story, “In January, the Board of Supervisors voted to require large grocery stores and retail stores in unincorporated areas to significantly reduce the use of plastic bags or face a ban in 2013.”

    However, the American Chemistry Council tells the Daily News that “state lawmakers should wait to see how the current state law - which calls for plastic-bag recycling - works out before passing another bill.”

    KC's View:

    Published on: April 11, 2008

    The city of Stamford, Connecticut – which has about 125,000 residents, and is less than an hour from midtown Manhattan, not to mention about five minutes from MNB World Headquarters – decided this week to ban trans fats.

    The Stamford Advocate reports that the ban takes effect on July 1, but will only impact restaurant foods, and not consumer packaged goods.

    KC's View:
    Can’t help but think that things are getting a little nuts. Next thing you know, my little town, which has fewer than 20,000 residents, will ban trans fats. And then Scotland, Connecticut, which has roughly 1,500 citizens (and no restaurants that I am aware of), will do the same.

    It all becomes a game of politicians gone wild. And I’m not sure what these various bans mean for actual consumers.

    Published on: April 11, 2008

    • The Chicago Tribune reports that the Federal Communications Commission (FCC) has fined Wal-Mart, Sears, Best Buy, Circuit City, Target and a number of other retailers a total of $3.9 million combined for “failing to properly label that analog-only televisions will need to be retrofitted after the switch to digital TV next year.”

    According to the story, “ An FCC rule, adopted last May, requires retailers to display or affix ‘consumer alert’ labels to analog-only TV equipment that says it will not receive signals after the nationwide digital transition -- without a special converter box. The rule is to keep consumers from buying TV equipment that will not work after the digital switch by Feb. 17, 2009. After that, if the TV doesn't get cable or satellite service or isn't hooked up to the converter box that translates over-the-air digital broadcasts, it won't work.”

    KC's View:

    Published on: April 11, 2008

    Reuters reports that one house of the French Parliament has passed a new law that would regulate – but not ban – genetically modified crops, while simultaneously toughening the penalties for people or groups that intentionally damage such crops. The law now goes to the French Senate for further consideration.

    According to the story, the law itself is quite controversial, with organizations such as Greenpeace denouncing it as favoring industrialists and global chemical companies. However, the bill is designed to bring France into line with European Union policies – something that all EU member states were supposed to do starting in 2001. France, Reuters says, “has dragged its feet over an issue that is fiercely disputed by supporters including the main farmers union and environmentalist opponents.”

    • 7-Eleven will host its third Innovation event at its Dallas headquarters, inviting suppliers, vendors and manufacturers to apply to participate as the retailer looks for “the next Slurpee beverage, portable grill product, eco-friendly packaging, kid-appealing toy or whiz-bang prepaid service.”

    The event is slated to take place on June 10-11, 2008.

    “We designated Innovation Day to provide local and national vendors, whether they’ve worked with us in the past, currently or never before, the opportunity to present their new, innovative ideas to our merchandising executives,” says Kevin Elliott, 7-Eleven’s senior vice president of merchandising and logistics. “We want to keep our product pipeline full so we’re looking for companies that will come with great, new ideas, unique concepts, manufacturing capabilities and resources to meet the demand of our more than six-million customers a day.”

    KC's View:

    Published on: April 11, 2008

    • Family Dollar Stores reported that its March net sales decreased 1.6% to $641.2 million compared with $651.4 million during the same period a year ago. Same-store sales were down 4.4 percent.

    • Longs Drug Stores reported that its March sales rose 4.7 percent to $474 million, with same-store sales that were up 2.8 percent.

    • Target Corp. said that its March sales were up 1.5 percent to $5.59 billion, with same-store sales down 4.4 percent.

    KC's View:

    Published on: April 11, 2008

    MNB reported yesterday that Starbucks has decided to end a licensing deal with Save Mart and Lucky Supermarkets that will result in the closure of 45 in-store cafés in Northern California and Nevada.

    Commenting on this, I wrote, in part: “It won’t surprise MNB readers to find out that I’m not sure this is a bad thing for the supermarkets affected. They have three choices here. One is to find another national brand coffee company to take the space. The second is to find a local coffee purveyor to take over the operation. And the third is to develop a terrific in-house operation that will clearly offer a point of difference from everyone else, and then nurture it into a clear differential advantage. I like the last option best, and the second option second best.”

    MNB user David Carlson responded:

    There are considerably more than three choices for what to do with the space from the closed Starbucks locations. Turning it into a sampling station comes to mind...

    Excellent point. I was being myopic and only think of coffee.

    Glad someone called me on this.

    Another MNB user wrote:

    Interesting comments about Starbucks pulling out of some supermarkets. Here in UT, Albertson's recently remodeled a store and within it is a Starbucks. Only months after the store had its grand opening, Starbucks opened a free-standing across the street with a drive thru and sitting area both inside and out. Wonder what the strategy will be next? Albertson may go to another vendor or maybe use the space for another service. Strange bed-fellows....

    MNB user Brian Anttonen wrote:

    Good commentary on Starbucks, however, I really think this a differentiation play by Howard Schultz. What made Starbucks great initially? Was the coffee that much better? Sure they brought lattes and mochas to the forefront of the American coffee drinking public, which was a great innovative new product, but it was a product with low barriers to entry. So how were they successful for so long? I think their true competitive advantage was quality. Not so much an astoundingly superior coffee, but more so the quality of the experience and the high end image.

    I know I used to go to Starbucks in college a lot to just sit, study and enjoy the atmosphere. It was almost an escape or a retreat. The Company has lost that differentiation by putting a Starbucks in every conceivable location and in turn losing some of that luster. By changing the focus back to a more destination experience, I think they can restore what they once had. You didn’t just go buy a Starbucks coffee…you went to Starbucks to get a great cup of joe, or something to eat, and to be there. I think Starbucks is going to go back to limiting availability via only having Starbucks stores as a way to restore that lost experience (you paid $4 for coffee because it wasn’t everywhere). It is almost like differentiation in the grocery business. You can’t be all things to all customers, you have to pick your strategy that is going to give you a competitive advantage and stick with it. If you are in the mushy middle you die.

    Oh, and you are right on with the options for the supermarkets impacted. I think you’ll see the high end markets keep coffee shops in the stores, while those that compete on price pull them out because it doesn’t match the perception they need to create, hence they shouldn’t have had a Starbucks in them in the first place.





    On the subject of groceries that may cost more in low income areas that are even more impacted by the current economic hard times, MNB user David Livingston wrote:

    Any time the government is involved, prices go up. Low income residents basically get their food for free with WIC, Food Stamps, etc. It’s only natural that stores would charge higher prices. Lack of competition is also a factor. If you want to get more competitors into the low income areas (code for scary neighborhoods), one of the first things the government could do is eliminate the free breakfast and lunch programs for low income children. While it is a well meaning program, this does nothing to benefit supermarkets. Supermarket companies need to grease the palms of lobbyists and politicians to get the government out of the job of feeding people and get the supermarkets back in. Some of my successful clients operate inner city stores. They have found that they do better by not even accepting WIC or Food Stamps. First it keeps undesirable customers out of the store making the shopping experience nicer for others. It also reduces theft and security expense. These stores are often located in "old money" neighborhoods bordered by low income areas in the larger metro areas. Aldi used to be the savior of low income shoppers however they seem to be wanting to move to more affluent areas. Save-A-Lot has tried too with mixed success. Chain stores rarely bother, and if they do, close up soon after.

    I’m just guessing here, but I suspect that there might be a lot of poor people out there who would be surprised to find out that they’ve been getting their groceries for free.

    I commented yesterday that if indeed there are such poor neighborhoods where customers are being over-charged, there must be a retailer out there that could build a business catering to these folks.

    One MNB user wrote:

    Great response. We live in a country based upon free enterprise. Businesses are built when they serve an unmet need.

    But not everyone agreed.

    One MNB user wrote:

    I always enjoy your views & perspective, although I do not always agree. I think you will find that in all large metropolitan areas, there are higher prices in less affluent neighborhoods. Some of this can be attributed to increased shrink & security expenses.

    MNB user Richard Layman wrote:

    Your comment about supermarkets having an opportunity here is laughable. Since when do typical retail chains of any sort care about either serving urban areas or serving poor people? And some of the increased costs can be due to shrinkage, personnel, higher store costs, etc. (And some of the location decisions have to do with ROI, cost of capital, etc. The fact is that they can make more money, at least they think so, or are more comfortable, in suburbs.) If we look to chains to serve inner cities, people will starve. What cities need to do is figure out how to support independents, and improve grocery sales options in that manner. I wish the Nat. League of Cities and the equivalent would go to NGA and IGA meetings... and I wish the stores that big chains built in cities weren't so damn suburban.




    MNB user Frederic Arnal sent the following email:

    Regarding a comment from one of your readers taking issue with your positive view of Supervalu launching a private label organic line:

    Private label organics will be produced as non-organic private label is produced - i.e. same manufacturer different labels. The only "differentiating" will be in the attractiveness of the label...

    This can be but is not necessarily true. Private Label is often a national brand knock-off that offers a value alternative to the customer. This type is usually made by the same large private label (and occasionally national brand) manufacturers.

    But, it increasingly is a highly differentiated product made by selected manufacturers to demanding specifications. Especially by enlightened retailers who are striving to set them selves apart from their competitors. Retailers such as Trader Joe's, Wegman's, Safeway, Loblaw's, Whole Food's, etc.

    This is not new. When I developed the Full Circle natural/organic brand for Topco Associates in the mid 90's, many of the products launched did not have a national brand counterpart let alone a private label base. We had to source vendors with the capability to develop products that met our unique specifications.





    Responding to yesterday’s MNB Radio piece about trying to achieve more civil discourse here on the site – driven by encounters I’ve had with extremely nice A&P execs who didn’t seem to resent my past criticisms of their company – one MNB user wrote:

    Geesh! First Don Imus and now Kevin Coupe. What is this world coming to?

    I hope your newsletter doesn’t become too bland. Remember, most of us can, and do, get retail related news from a variety of different sources. It is your comments and remarks that many of us look forward to. Although you may sometimes rake a company, or a person, over the coals – they usually deserve it. In the case of A&P, the poor performing company deserves to be criticized. However, I don’t remember you personally criticizing Christian Haub or Eric Claus. Even if you have, as chief executive officers of a poor performing public company they have to expect to receive their share of criticism.

    In regards to Larry Johnston – well…. I think you’ve been too kind. He deserves all the criticism you can generate.


    Don't worry. Bland ain’t on the radar.

    MNB user Kevin J. Walker wrote:

    For what it is worth, I have always held your opinion in high regard even though I don’t always agree. That’s one of the many benefits of being an American.

    Your view in this article was touching and I’m sure greatly appreciated by many. Way to go!


    MNB user Philip Herr wrote:

    I read your radio message with a strong sense of agreement. Blogging has given rise to "flaming" which has exacerbated the general level of discourse today. Rather than focusing on issues and debating them, there is a tendency to denigrate the other's point of view and all too frequently, the person. It is a frightening prospect that we are unable to express an opinion without someone taking offense and lashing out at the messenger.

    MNB user Philip Bradley wrote:

    I applaud what you said today about A&P--how kind they (CEO, president) were to you when you had raked them over the coals.

    I really am pleased to hear you say that you want to turn down the volume a bit. Yes, it's perfectly okay to criticize without getting personal or being a smart-ass.

    We need a bit of restraint in our society today--there is simply too much rudeness, shouting and screaming everywhere.


    Thanks…though I can't guarantee that the whole ‘smart-ass” thing is going to go away. It is sort of in my DNA…just ask Mrs. Content Guy!

    Another MNB user wrote:

    Thanks for the reminder to be gracious - kind of a rare quality these days. And thanks for owning up to what you felt wasn't the best behavior on your part - unfortunately, also rather rare! For the past year I've really enjoyed reading your comments not just on the food industry, but on life...family...baseball...current events...wine with real corks. I really appreciate that you're constantly willing to learn, admit mistakes and that you're so open about it. I think that's probably why so many people enjoy your updates. Thanks for writing such a relevant, interesting, and human column - it's worth every penny. 🙂

    Thanks.

    And MNB user Karl Heink wrote:

    Nice start on your MNB this morning. Someone (or something) must have stirred your soul. I guess this is what I genuinely enjoy about your blog. Your blog shows your human side as well as your business side and hopefully you know where to separate that. I would have to agree with what you said and it is refreshing when someone is willing to show this side of their character.

    KC's View:

    Published on: April 11, 2008

    I have written before in this space about how, with a fair amount of frequency, a study will cross my desk warning of a variety of health problems associated with this food or that behavior.

    To which my response often is: “Uh-oh.”

    Well, I got a big “uh-oh” last weekend when the New York Times reported in a front-page story:

    “A growing work force of home-office laborers and entrepreneurs, armed with computers and smartphones and wired to the hilt, are toiling under great physical and emotional stress created by the around-the-clock Internet economy that demands a constant stream of news and comment.

    “Of course, the bloggers can work elsewhere, and they profess a love of the nonstop action and perhaps the chance to create a global media outlet without a major up-front investment. At the same time, some are starting to wonder if something has gone very wrong. In the last few months, two among their ranks have died suddenly.”

    In addition to the two guys who died, “Other bloggers complain of weight loss or gain, sleep disorders, exhaustion and other maladies born of the nonstop strain of producing for a news and information cycle that is as always-on as the Internet.

    “To be sure, there is no official diagnosis of death by blogging, and the premature demise of two people obviously does not qualify as an epidemic. There is also no certainty that the stress of the work contributed to their deaths. But friends and family of the deceased, and fellow information workers, say those deaths have them thinking about the dangers of their work style.”

    Uh-oh.

    Makes me sort of glad I passed on that suggestion that I do an afternoon edition.




    I try to resist cynicism, but I succumbed to it yesterday when I got a press release from a research company saying the following:

    “As consumers prepare to celebrate the Jewish festival of Passover, high retail sales are expected for matzo, kosher wine and other items traditional to holiday celebrations and the Passover Seder, the ritual dinners held on the first two nights of Passover.”

    Yikes.

    Now, that is the kind of news that is sending bloggers to an early grave as they struggle to keep up with it.

    Seriously, wouldn’t the real news be if sales of matzo and kosher wine were declining for Passover? Or of sales of kosher foods were going up for St. Patrick’s Day?

    The problem with some research organizations, it seems to me, is that in their enthusiasm for studies and reports, they spend too much time researching and reporting what seems to be obvious. Which leads to clutter, and could even obscure stuff that is more important.

    Of course, I could extend the criticism to journalists, who will sometimes pick up on these press releases and report them as if they actually are news.




    In this space on March 2, 2007, I wrote the following:

    “The next time the Pulitzer Prizes are announced, I think it is pretty much a lock that the Washington Post will get one for the extraordinary reporting it has been doing about the conditions at Walter Reed Army Medical Center. It is the kind of journalism that I think is going to make a real difference in terms of medical care for wounded veterans, and I suspect that it also could have long-term implications for the government bureaucracies that either ignored or were ignorant of a deplorable situation.

    This week, that prediction proved to be correct.

    Of course, it could be argued that this was an easy call. But so few of my predictions come true that it is worth pointing out when I get one right.

    Congrats to the Post.




    I have to admit that I’ve grown weary of Imus in the Morning, and simply don't find the show to be that interesting anymore. I’m not sure that it has anything to do with the fact that the show is more politically correct; I suspect it has more to do with the fact that I can listen to Tony Kornheiser’s daily radio program via iTunes each morning, and Kornheiser is infinitely more interesting and does a much better interview.

    If you get a chance, listen. He’s great on sports, as one would expect, but also has a terrific group of collaborators and wonderful takes on social and cultural issues.

    Plus, he’s got “Old Guy Radio,” perfect for someone of my advanced years.




    Playing on my iPod these days: UB40, including its covers on sings that include “Red, Red Wine,” “Light My Fire,” and a great version of “I Got You, Babe.”




    There was a note a couple of weeks ago about how a wine sold exclusively at Tesco’s Fresh & Easy stores in the US has been rated with 90 points by The Wine Advocate, considered a coup for the retailer and a real find for oenophiles.

    The wine, Bodegas Palacio's Reflexion Rioja Reserva 2003, sells at $9.99 and is one of more than 60 wines in the private label range sold at Fresh & Easy – and I said that such an offering could be a differential advantage for the retailer.

    However, when pressed, I conceded that I had not tasted the wine…because I do not live anywhere near a Fresh & Easy.

    Well, thanks to MNB user (and now, MNB-fave) Joe Grecula, who bought and sent me a bottle.

    It is, for the record, very, very good. What makes it a 90-point wine as opposed to an 85-point or 99-point wine is something that is beyond my meager talent for wine appreciation. But it is quite good.

    Thanks, Joe.




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

    Sláinte!!

    KC's View: