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    Published on: April 14, 2008

    Plenty of coverage of Tesco in various publications over the weekend, no doubt prompted by the release of financial data by the company scheduled for midweek.

    • The Sunday Times reports that Tesco is expected to rebut claims that its Fresh & Easy chain of stores in the US is substantially below its sales targets, and “quell fears” that the investment community has about the company’s short term prospects.

    • The Sunday Telegraph reports that Tesco has written to the UK Competition Commission, which has proposed that greater oversight must be given to retailers’ relationships with suppliers, saying that such a move is unnecessary and will have “serious ramifications for consumers and the UK economy.” In the letter, Tesco wrote that the Competition Commission “risks freezing investment, limiting expansion and having a detrimental effect, not just on the grocery sector as a whole, but in the wider economy beyond its remit.”

    • The San Diego Business Journal reports that there continues to be much debate among so-called “experts” about Fresh & Easy’s performance, with some people maintaining that its stores are way below projections, and others saying that it is too early to know how the chain will perform…especially because it is likely to make adjustments as openings continue.

    • The Sunday Herald reports that there is speculation that Tesco will launch a number of price cuts in its home UK market, in essence escalating price wars in the face of a declining market share. The “need for action will be underlined on Tuesday when chief executive Sir Terry Leahy is due to confirm that total underlying sales growth dwindled to just 3% over the peak winter months,” the Herald writes.

    “Sales of non-food items - about 25% of the total - are expected to have fared still worse. That compares with a 4.1% like-for-like increase achieved by Sainsbury's and a whopping 9% sales surge reported by a resurgent Morrisons over a similar period.

    The Herald also notes, by the way, that Tesco CEO Sir Terry Leahy has plenty of financial motivation to make sure that Fresh & Easy meets certain predetermined sales and profitability goals – a reported bonus, in the form of stock in the company, worth close to the equivalent of $20 million (US).

    • Meanwhile, the Times of London has a story that focuses not on Fresh & Easy or the company’s overall sales performance, but rather on the expansion of its sophisticated and highly effective customer tracking system:

    “Tesco is to monitor and record the shopping habits of more than 60 million customers around the world in an unprecedented deal with the “Big Brother” company behind its Clubcard loyalty card scheme,” the Times writes. “The supermarket chain’s partnership with Dunnhumby, the market research specialist, is being rolled out to nine countries where Tesco operates, including Thailand, South Korea and China but not, as yet, the United States.”

    The Times continues, “The new agreement is almost certain to spark yet more controversy over Tesco’s power … Dunnhumby, which is majority owned by Tesco, generates most of its revenue by selling on the data in an anonymous form to some of the world’s biggest companies, such as Coca-Cola and Unilever, to help them to devise marketing campaigns.”

    • And, because sales and profits aren’t the only thing Tesco apparently is trying to push up, Tesco has been criticized in the UK for selling what is described as a “salacious…padded plunge bra” being marketed to seven-year-old girls. While critics say that the bra is inappropriate for girls of that age, Tesco has defended the product, saying that “it is a product designed for girls at that self-conscious age when they are just developing. It is designed to cover up, not flatter, and was developed after speaking to parents.”

    One of the papers in the UK notes that it was just a couple of years ago that Tesco was forced to remove a pole dancing kit from its toy section – another event that caused it some public relations nightmare.

    KC's View:
    It is the Dunnhumby item that I find the most interesting, because it raises a question that I keep hearing during discussions of Tesco’s Fresh & Easy operation in the US.

    Since one of Tesco’s greatest advantages has been its database marketing operation, people ask why the company has not attempted to use it in the US.

    It is a very good question. And I have yet to hear a very good answer.

    Published on: April 14, 2008

    The Boston Globe reports that the Jenny Craig diet empire is launching a new series of commercials featuring Queen Latifah, described by the Globe as “the heavy-set starlet,” taking a new approach to weight loss.

    According to the story, “the Queen Latifah campaign aims for a different, potentially bigger, consumer base. The new ads suggest consumers can get healthier by losing 5 percent to 10 percent of their body weight.”

    The Globe notes that Jenny Craig hardly is alone in the new strategy: “After years of showing celebrities and heavy women shedding their excess weight over the course of several weeks, marketers of dieting aids and programs have finally begun to wrap their heads around a simple truth: Their version of skinny has become impossible for some. There's good reason for the maneuver. The weight-loss market has become fiercely competitive, and companies see a chance to expand their share of the overall business by focusing on getting healthy, not slimming down quickly, to attract larger numbers of potential customers.” Unilever’s Dove campaigns – which focus on “real beauty” rather than the supermodel version of what “beauty” means – is cited as a perfect example of a highly successful strategic positioning.

    KC's View:
    Getting healthy always should be more important than getting skinny. After all, the simplistic emphasis on “getting skinny” leads a lot of teenaged girls to problems with anorexia and bulimia, and I know from some personal experience how destructive that can be.

    BTW, I’m not sure that I would have chosen the phrase “heavy-set starlet” to describe Queen Latifah.

    Published on: April 14, 2008

    • Last week, there were numerous stories about how a video production company that worked for Wal-Mart for almost three decades, only to be replaced by the retailer about a year ago, now is peddling footage of internal company events to lawyers and news organizations.

    The company, Flagler Productions, was miffed because when it was replaced it lost 90 percent of its revenue, and it felt empowered to sell the footage because it did not have a contract with Wal-Mart that prevented it from doing so. And the Wall Street Journal reported last week that Flagler offered to sell the material to Wal-Mart for several million dollars, and that Wal-Mart reportedly countered with an offer of about $500,000 – on the premise that nobody would really be interested in the videotapes.

    Well, the original Journal story may have been just a bit off on the number – because Bloomberg this morning reports that the actual figure floated by Flagler was $150 million.

    Wal-Mart reportedly continues to consider its legal options.

    KC's View:
    Not sure about the legal implications, but when I see the number $150 million and read the circumstances, the word extortion does sort of come to mind.

    Published on: April 14, 2008

    The BBC reports this morning that “the rapid rise in food prices could push 100 million people in poor countries deeper into poverty, World Bank head, Robert Zoellick, has said. His warning follows that from the leader of the International Monetary Fund, who said hundreds of thousands of people were at risk of starvation.

    Mr. Zoellick proposed an action plan to boost long-run agricultural production.”

    According to the BBC story, “Food prices have risen sharply in recent months, driven by increased demand, poor weather in some countries that has ruined crops and an increase in the use of land to grow crops for transport fuels.

    “The price of staple crops such as wheat, rice and corn have all risen, leading to an increase in overall food prices of 83% in the last three years, the World Bank has said.”

    And Bloomberg has reported that the global cost of wheat has increased 130 percent during the past year, while during the same time soya has gone up 87 percent, rice is up 74 percent, and corn is up 31 percent.

    KC's View:

    Published on: April 14, 2008

    The Environmental Affairs Council said last Friday that it has filed a complaint with the Federal Trade Commission (FTC) urging that it investigate Whole Foods’ environmental marketing claims surrounding its paper grocery bags – a move that challenges the retailer’s much publicized environmentally themed marketing efforts.

    According to a statement released by the council, Whole Foods “directly and by implication claims, without appropriate scientific support, that shopping at Whole Foods as opposed to other supermarkets is better for the environment, because Whole Foods provides only '100% recycled' paper grocery bags and has phased out plastic bags. This paper vs. plastic debate is a serious, complicated, and unsettled scientific issue undeserving of such simple and deceptive treatment. Whole Foods further compounds and supports this scheme by falsely identifying the recycled content of its paper shopping bags.

    "By embarking on its false and unsubstantiated anti-plastic publicity stunt, Whole Foods is seeking to boost its profit margin and enhance its manufactured image as an environmentally friendly corporation. Whole Foods publicity stunt is yet another example of a purportedly environmentally friendly corporation 'Greenwashing' the general public by deceiving consumers about the environmental benefits of its products.”

    KC's View:
    The paper vs. plastic debate may indeed be “serious, complicated and unsettled,” but what seems irrefutable to me is the notion that canvas, reusable bags are much better for the environment than any of them. So, rather than argue around the edges, why can’t the food industry simply embrace the big move…and work diligently and quickly to eliminate all disposable bags from the system?

    Published on: April 14, 2008

    In the new edition of Facts, Figures & The Future, Phil Lempert writes that a recent visit to the Pacific Life Open tennis tournament in Indian Wells, California, taught him a valuable lesson about food marketing – one that should be taken to heart by supermarket retailers.

    Forget the tennis. What interested Lempert was the various and varied food tents. “The offerings far exceeded my expectations (as did some of the prices): salads made on the spot with exotic or organic ingredients from Melissa's Produce, fresh meats grilled on outdoor barbecues to be added to a colorful array of Mexican sauces and peppers for one of the best fajitas I ever tasted, a shrimp burger (which was a tasty alternative to a more traditional beef burger) and even a delicious Maine style lobster roll.

    “I knew I was in for a food extravaganza when I noticed that rather than the traditional Budweiser everywhere stands, there were Don Julio tequila margarita thatched huts in their place.

    “So what could food retailers learn? To celebrate! What I found the most important was that the people working in the food venues at the Pacific Life Open were enjoying themselves as much as those attending the matches. Trying to feed thousands of people at a time (3 meals a day) is certainly a daunting and tiresome task as anyone who has worked in a food stand or attended a county fair would attest; but the folks standing behind their counters weren't rushing the customers, they took the time to explain some of the more unusual offerings and actually seemed to be happy to be there.”

    Which is not something that could be observed of a lot of supermarket employees.

    In other stores, F3 reports:

    • About the current state of spinach sales, a year and a half after E. coli contamination of the product sickened and killed a number of people.

    • About the new product introductions that took place in 2007…which once again skewed toward brand extensions that weren’t exactly “new.” This report also notes that there is a huge chasm between the products that were extremely successful and those that were not…and there were a lot more that fit into the latter category.

    • About the fast and even unexpected penetration that Internet shopping is showing worldwide, as it become an integral part of modern life…and one that more retailers need to make an integral part of their marketing strategies and tactics.

    And, there’s much more.

    To get your copy of F3, go to:

    http://www.factsfiguresfuture.com/

    F3 is a joint production of the Food Marketing Institute (FMI), ACNielsen, and Phil Lempert.

    (Full disclosure: MNB’s Kevin Coupe is a regular contributor to F3.)

    KC's View:

    Published on: April 14, 2008

    • The Stamford Advocate reported over the weekend that after almost 12 years, Stew Leonard’s – which currently operates four stores in Connecticut and New York State – is getting closer to being able to open yet another unit, in Orange, Connecticut.

    While the retailer bought the property back in 1996, it has faced a series of legal and environmental battles in its attempt to build a store there. Now, according to the story, “the Connecticut Supreme Court is scheduled to hear a citizens group's appeal of Orange's Inland Wetlands and Watercourses Commission approval of the proposed store.” If the hearing goes the company’s way, construction actually could begin by the end of the year.

    KC's View:

    Published on: April 14, 2008

    • BJ’s Wholesale Club reports that its March sales increased 8.5 percent to $858.1 million, from $790.9 million during the same period a year ago. Same-store sales were up six percent for the year, including a 3.4 percent increase just from gasoline sales.

    • Groupe Danone SA, the world's largest yogurt maker, reported a 19 percent gain in first- quarter revenue, to the equivalent of $5.8 billion.

    KC's View:

    Published on: April 14, 2008

    MNB had a story – and a lot of follow-up emails – last week about how food prices in poor neighborhoods often can be more expensive than in more affluent communities, which can have the effect of heightening the impact of the recession on people who can least afford it.

    To which one MNB user responded:

    I was disappointed today that the emails regarding stores in low-income neighborhoods focused so much on blaming the poor. "Undesirables", high shrink, "scary neighborhoods." What about "high density population", "less competition", "less likely to be eating out"? It's all in how you look at it. There have been several studies by economists that say grocery stores can be MORE profitable in inner city, lower income neighborhoods. Poor inner-city folks are more likely to go to the store more often, too, as they are less likely to have cars or the money to stock up. That is an opportunity if you ask me. It just requires understanding the audience and meeting their needs, which the rich white folks running the grocery store chains may have a hard time doing.

    Some people see high risk, and others see opportunity. The problem, it seems to me, is that if you only see poorer neighborhoods as high risk, you can't have ever reverse the trend.

    MNB user Liz Schlegel wrote:

    I was saddened to read David Livingston's comments this morning (though glad, as always, that you provide a forum for discussions like these!).

    "Low income residents basically get their food for free with WIC, Food Stamps, etc. It's only natural that stores would charge higher prices."

    The idea of a social safety net is that it is there for people who need it - and poverty is a very real fact of American life. The food stamp program, inadequate as it is (the numbers for poverty level have not been adjusted in decades), pays full price for the groceries - the stores aren't giving a discount on the products purchased, and they are compensated for the effort (minimal) required to set-up acceptance of the swipe cards. Why would the method of payment - food stamps, credit card, cash, gift certificates - justify an increase in the prices charged? That's not a logical answer.

    Mr. Livingston went on...

    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.

    Classifying people who are currently utilizing government assistance - food stamps, Medicaid, disability - as "undesirable" also exposes some unpleasant assumptions. The reality in America - as the study you referenced pointed out - is that people who have less money also have fewer food choices at higher cost - and that has a terrible impact on dietary choices, nutrition, and successful learning for the children in these households. And however folks may feel about the adults in poverty, it's unconscionable to keep putting these negative stereotypes onto the next generation.


    MNB user Dave Tuchler chimed in:

    I was floored by a reader's comments grocery prices and availability in lower income areas. It is a tragedy that in areas where disposable income is hardest to come by, that the basic necessities are harder and more expensive to come by than elsewhere.

    Some interesting generalizations made, most of which, to be charitable, seem really myopic -- but mostly are depressingly cynical.

    To your point, I'm sure a lot of low-income people would be ecstatic once they realize they're getting their food for free. (If they subscribed to MNB they'd have found out like I did.)

    • Food purchasing is not a closed-loop system - - money saved with WIC/food stamps might be currently used for trivialities like utilities or clothes or school supplies or rent - - or for higher quality food, for that matter, and no guarantee that amount of food purchased would stay the same if WIC/Food stamps were eliminated.

    • By eliminating school meal programs, the assumption is what? - that all parents would of course regularly provide these meals, which would benefit supermarkets? a) people don't always do the right thing - they may choose not to provide a good breakfast and pack a lunch for their kids, especially when cost is a challenge b) it's obvious that the welfare of supermarkets should supercede that of school-age kids, for whom breakfast and lunch may be the only reliable meal of the day

    • It should also be obvious to everyone that lower income people who use WIC or Food Stamps are 'undesirable'.

    Unfortunately there are realities like security and rent and lack of scale that drive overhead and therefore the need for higher prices. And while I agree that this is a difficult problem, I don't have any brilliant ideas about how to fix it. And yes, ultimately it would be great to get to a point where welfare is not needed and indeed, does not encourage apathy among some people. Maybe providing temporary incentives to supermarkets and ramping down welfare programs over time could work. But we're talking about people and families in challenging situations who often struggle to put food on the table. Removing the means by which a lot of people are able to not be hungry FIRST and then hoping that the market will jump in and provide a solution will do nothing short-term (and maybe longer) other than eliminating the means to fulfill a basic need.





    There also was a story last week about how the word “neighborhood” is being embraced by marketers looking to create stronger connections between communities and the retailers – even the chain retailers – that serve them.

    Which led one MNB user to observe about one of the examples cited:

    Applebee's has been using the term "neighborhood" for a long time. They used to call themselves a "Neighborhood Bar & Grill" and touted the slogan "Eating Good in the Neighborhood."

    That slogan made for great fodder for a Boston area food critic a few years back when he remarked "If Applebee's is 'eating good in your neighborhood', it's time to move!"

    I don't think the chain will ever be able to escape that quip in my mind!





    On the subject of plastic bag usage, MNB user Glenda Rider wrote:

    What about the plastic bags I get from Penney's, Macy's, Home Depot, Target, Walgreen's, Rite-Aid, and those that hold my produce, my delivered newspaper, and so on??? These contribute just as much to the landfill issues as the grocery store bags.

    No argument here. It seems to me that it is important to think of new options in all these areas. (Though asking the newspaper guy to actually put the NY Times in the mailbox, as opposed to just flinging it in the general direction of the house, may be more than I can hope for…)

    California reportedly is considering a plastic bag tax, which led MNB user Ron Pizur to write:

    Who gets the 25 cents and has anyone tried to quantify the amount this would generate a year at current usage rates? I'm assuming the state will get it and it will be considered a tax, although no where have I seen the word tax used. I do notice that the California Bill would forbid local municipalities form imposing a 'fee', but again not labeled as a tax. I also find the use of the word fee odd, because to me that would imply there was some service being performed and I don't see the vendor supplying a bag as a service, at least not a 25 cent service.

    I do understand the purpose is to reduce the use of plastic bags, but then why should the state benefit to the tune of 25 cents a bag? Why can't they create a system like the Northeast has with cans? Charge a deposit on the bag that could be returned when the bag is turned in for reuse or recycling. Boy would that create an industry in cleaning up litter.


    Plastic bag companies, not surprisingly, object to the tax, as does MNB user Ellen Ornato:

    Ironically, I agree with the plastics industry folks, even given what we sell for a living (reusable bags). The sea change in attitudes towards bringing your own bag is unfolding rapidly. People are doing the right things in HUGE numbers, voluntarily. Retailers are offering alternatives; people are bringing their own bags.

    Folks are recycling their plastic bags because retailers are providing an easy way for them to do it. Change is happening.

    Punitive, regressive taxes may work to make politicians look & feel good with their affluent donors but these quickly adopted regulations really hurt the people who can’t afford to pay (the poor & elderly). The jury’s out on the whole paper/plastic debate, too, and all of these regulations target plastic only.

    Finally, the retailers could do their parts by training their employees, particularly baggers, to put more than two or three items in a bag and to avoid double-bagging.

    Let’s give one regulation a chance to be implemented before layering another on there at the expense of consumers.


    No argument here.

    And while she didn’t ask for it, I’ll give Ellen’s company a plug – check them out at www.ecobags.com.




    There was a story last week about Hannaford deciding to stop advertising on a television station that it felt had been unfair in its coverage of the credit/debit card security breach that the company was dealing with, and I commented that this is “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.”

    Which prompted one MNB user to write:

    I disagree. A company, particularly a public company, should support advertising venues that make sense from a business standpoint and ignore the news reporting. Otherwise they look as if they are attempting to censor free speech, and also are cutting off their nose to spite their face if that advertising was providing a proper return on the expense.

    I don't think that there is anything censorious about deciding not to advertise in a certain venue. You just make choices about where you think your ads are most effective, and go from there…and there is nothing wrong with factoring in how a company covers your company.

    From personal experience, I can tell you that I have often encouraged manufacturers to advertise elsewhere if they question whether the sometimes provocative coverage here on MNB is good for their companies. I have an opposing argument, of course – that my brand of punditry draws in readers, and that this is the best kind of environment in which to be seen (as opposed to more vanilla venue). But I don't hold it against anyone when they go elsewhere. And it certainly doesn’t feel like censorship.

    By the way, on the subject of the security breach, another MNB user observed:

    I have to say that Hannaford's is losing a bit of ground with me, I feel they're progressive in their field, but enough belly-aching already. They didn't handle it perfectly, it took weeks for them to at least send some type of note to their customers and even then they screamed victim. I understand that they were not wholly responsible, but if not for the news coverage it may have taken even longer for customers to know their cards had been compromised…it seemed a bit quiet over there in Scarborough for too long!




    Finally, after reading MNB’s wine recommendation in “OffBeat” last Friday, MNB user Guy P. DiCenzo wrote:

    Not that you don't have enough to do, but could you put your wine recommendations in an archive?

    Tell you what. I’ll ask the folks at Webstop to look into it…and if there is a wine manufacturer/distributor out there that would like to sponsor it, send me an email and we’ll figure out an attractive package for you.

    KC's View:

    Published on: April 14, 2008

    Tonight, I’ll be flying to Spain, where I’ll be giving several speeches to a couple of trade groups…which means that the time zone differences may play havoc with the normal MNB posting times. I’ll be in Spain all week, and will do my best to stay on schedule…but in the event that airlines, WiFi and time zone issues get in the way, I want to thank you in advance for your patience.

    Salud!
    KC's View: