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    Published on: June 2, 2008

    MorningNewsBeat would like to thank ConAgra Foods, which joins us starting today as a new sponsor not just of our daily news reports, but also as the exclusive sponsor of the MNB Wake Up Call, showing up each morning on your desktop to alert you to the arrival of our “news in context, analysis with attitude.”

    We encourage you to check out ConAgra’s site, which focuses on something very much at the heart of the MNB approach – the need for both balance and the right kind of momentum in developing an intelligent approach to food. It’s very good stuff, and also is a good role model for retailers looking to change the tenor of their conversation with consumers.

    And, we think there’s another good reason to support ConAgra – because it is supporting MNB, and helping to make it possible for you to get these reports each day.

    So check it out:

    KC's View:

    Published on: June 2, 2008

    “Liberal” and “Wal-Mart” are words that never used to appear in headlines or news stories together, unless the occasion was one attacking the other. But Newsweek has a piece in which it examines the accusation that Wal-Mart has become too liberal, with conservatives charging that its policies are hurting profitability.

    “With its deep roots in Red State America and a reputation for upholding ‘family values,’ Wal-Mart seems an unlikely target for conservative criticism,” Newsweek writes. “It's the company that banned sales of CDs with offensive lyrics, refused to stock racy magazines like Maxim and declined (until 2006) to sell the Plan B emergency contraceptive pill. But in recent years, as it faced growing pressure from liberal activists, Wal-Mart has begun to make changes. It began offering more-robust health-insurance coverage to workers. Its CEO voiced support for raising the minimum wage. It has launched an ambitious environmental program. As a result, while Wal-Mart continues to face criticism from liberal groups, it's now simultaneously being criticized by some conservatives, who say the company's concessions to liberals are hurting its business.”

    One of the chief critics is what Newsweek describes as “a tiny right-wing think tank called the National Legal and Policy Center (NLPC). The magazine reports: “In a 46 page report the NLPC will release this month, staffer John Carlisle writes that Wal-Mart customers aren't buying many of the organic products it's begun stocking; that the energy-efficient compact fluorescent light bulbs it's been touting aren't really good for the environment (because they contain mercury), and that its support for legislation to cap carbon emissions will only hurt consumers and its bottom line. (Wal-Mart responds that its environmental initiatives ‘are not only good for the environment—they are good for our business, too.’) The NLPC says Wal-Mart is naive to think incremental compromises will ever really placate liberal critics. ‘The more Wal-Mart tries to appease the Left, the more the Left demands,’ the report concludes.”

    KC's View:
    The thing about gadflies is that they never are satisfied – no matter which side of the political aisle they occupy. And the reason that so many of these people are described as occupying the so-called “lunatic fringe” is that they are, in fact, lunatics.

    This is a fascinating charge against Wal-Mart, especially because no matter what the company has done, I never have believed for a moment that the company’s top priority has been anything other than sales and profits. It’s just that sometimes it makes sense to think about long-term profits…and a short-term approach, which often is more appealing so some folks, often can be at odds with extended viability and profitability.

    One of the most important things that a retailer can do is try to look around the corner, to see what other companies don't see, and to act in a way that can preempt the competition. That’s what Wal-Mart is doing with its environmental initiatives, and, I believe, in most if not all of the other strategic decisions it makes.

    By the way, this may be the other problem that the NLPC and its lunatic brethren may have. They are thinking tactically, and Wal-Mart is thinking strategically. In any extended scenario, it is the latter approach that makes the most sense.

    By the way, Wal-Mart got positive coverage from Reuters over the weekend, as the company prepares for its annual meeting later this week. CEO Lee Scott, the news service notes, “comes into this year's meeting with the wind at his back. Last June, Wal-Mart faced anemic U.S. sales growth, it was trying to clear through heaps of unsold apparel, and it was battered by negative publicity, including a legal battle with ex marketing communications chief Julie Roehm, who was fired after less than a year on the job.

    “A year later, the scandals have largely faded, and Wal-Mart is showing renewed vigor. It has slowed its U.S. expansion plans and gone back to basics, emphasizing low prices as U.S. consumers try to eke more out of every dollar. Through Thursday, its stock was up 22 percent this year.

    “Analysts expect the world's largest retailer to emphasize ways it can grow by exploiting overseas opportunities or building new, smaller store formats in the United States. But they also want to know that the improvement Wal-Mart is showing is not simply a function of a tough economy driving cash-strapped shoppers into its U.S. stores, but a real turnaround that will stick when times get better.”

    While there will be plenty of challenges remaining for Wal-Mart, it seems to me that the current economic downturn, which makes its low price approach seem more appealing, gives the retailer some breathing room in which it can develop tactics that will support the broader strategy. It has nothing to do with being liberal or conservative. It has to do with being profitable, products…and permanent.

    Published on: June 2, 2008

    The Boston Globe reports that “confronted with soaring commodity costs, a shrinking juice market, fierce competitors, and consumer health concerns,” the 139-year-old cooperative known as Welch's “is finally shaking things up to survive.”

    The tactics: “Over the past year, with a new chief executive at the helm, Welch's has accelerated the introduction of new products, rolling out lower-calorie beverages, bags of dried fruit, and lickable ads promoting the great taste and nutritional benefits of the sweet purple liquid (twice the antioxidant power of orange juice). At the same time, the … business has consolidated distribution plants, changed the formula of its juices and packaging to lower costs, and assembled a panel of moms to help figure out the future … Welch's has invested heavily in researching the health benefits of Concord grapes, a slightly frustrating task, company officials concede, when red wine has already had success convincing consumers about grapes' good-for-you perks. Welch's, with about $650 million in sales last year, has redesigned labels and its website to prominently feature the high antioxidant properties of grape juice, including a section that shows how other fruits, such as pomegranates and oranges, stack up against the almighty grape.”

    KC's View:
    I’m not in the target demographic, but I have to be honest – while I eat a ton of grapes and consume my share of red wine, it never occurred to me to buy grape juice for the health benefits. Maybe I have to pay more attention, but maybe Welch’s has to do a better job of communicating this message.

    One thing, though. No matter what anyone says, I’m not sampling a lickable ad.

    Published on: June 2, 2008

    In an interview with the Los Angeles Times, Starbucks chairman/CEO Howard Schultz, conceding that his company “led a pretty charmed life” for the past 15 years, got specific about the challenges facing Starbucks.

    For the first time in our history . . . we have less traffic in our stores this year than we did last year,” Schultz said. “The frequency of visits is being directly linked to the consumer not having as much disposable income as they did in years past. If you talk to the economists -- people much smarter than me -- they are saying that the next six to 12 months could be worse than the last six to 12 months.

    “Across the board, consumers have less money than they had before, they are quite concerned . . . and as a result we have to be better than we were before to capture that market and to satisfy the customer … We have to be ultrasensitive to providing value for our customers. And 50 million customers a week are coming through Starbucks stores.

    “We have to innovate and provide more value to the customer, but the customer comes into Starbucks not only for coffee, [but also] the sense of community, the sense of humanity in our stores. We really have become this third place between home and work. We have managed through different downturns in the economy before, and we will again.”

    Beyond the “third place” approach to retailing, Schultz said, the company will be focusing more on new product introductions. “There's more innovation coming at Starbucks over the next six to 12 months than we've had in the last five years,” he said. “In July we will introduce a fantastic new summer product in Los Angeles. . . . We found a fantastic new cold-beverage platform in Italy, and as a result of that we are bringing it to the market. It is a product that is both indulgent and refreshing. . . . It is steeped in Italian heritage.”

    Speaking of innovation…

    While the LA Times story doesn’t mention it, there is a story in the Puget Sound Business Journal saying that Starbucks “is experimenting with selling espresso drinks from a machine, sans barista … The machines, which grind their own beans, crank out lattes, mochas, chai teas, hot chocolates and drip coffees. There are 86 machines installed in Albertsons stores and other groceries in Washington, Oregon, Idaho, Utah, Illinois, Wisconsin, Maryland and Tennessee. The machines take credit and debit cards, cash and coins.”

    KC's View:
    It is worth noting that the Times did the interview with Schultz on the occasion of his receiving the first John Wooden Global Leadership Award from the UCLA Anderson School of Management. Time will tell if and how Schultz is able to navigate the perilous times his company faces – ubiquity (which has its downside), an economic squeeze, and a growing perception that the Starbucks brand is at least tarnished.

    Schultz seems to have made it a clear priority to tell the world that he’s back as CEO, and that everything is going to be fine. Whether or not you agree with the decision to return him to the CEO’s office, there seems to be just the slightest tinge of desperation in all the announcements and stories coming out about the company. Maybe it will all add up to a Starbucks revival, and certainly nothing has happened that will keep me from drinking its products regularly. And maybe I’m just imagining things…

    Published on: June 2, 2008

    Brand Week reports that Unilever has developed a new approach to healthy eating in Europe based on the notion of color.

    According to the story, “The company launched a line called Eat in Color as a Knorr sub-brand last year and is in the midst of a global launch. The line includes Red soup, Green soup, Yellow soup, Orange soup and White soup. Each was made using vegetables of only one color,” which is linked to a specific health/nutrition benefit. “The color nutrition link has been established in some cases. For example, tomatoes are red due to the presence of lycopene, an antioxidant that has been linked to lower rates of cancer as well as decreased rates of heart disease.”

    Unilever reportedly is tweaking the line in Europe and hasn’t yet made up its mind about a US launch.

    KC's View:
    Love the concept. Hope Unilever decides to bring it here.

    By the way, at the risk of seeming self-referential, “eating in color” is one of the trends that we discussed in our inaugural edition of FoodWireTV, which currently can be seen at:

    Published on: June 2, 2008

    United Fresh said yesterday that the New Mexico Department of Health (NMDH) has issued an alert linking a recent Salmonella outbreak in the state to uncooked tomatoes, and recommended that individuals and restaurants that bought tomatoes from the Wal-Mart in Las Cruces or Farmington, the Lowe's in Las Cruces, or the Bashas' in Crownpoint since May 3 should not eat them uncooked.

    "We have determined that eating uncooked tomatoes is the likely source of this outbreak, and we hope to provide more specific information about the type of tomatoes as the investigation proceeds," said New Mexico Health Secretary Dr. Alfredo Vigil. NMDH has reported 31 illnesses and no deaths related to this outbreak.
    KC's View:

    Published on: June 2, 2008

    The Boston Globe reports this morning that Staples, the office supply chain, will “begin offering a limited selection of DVD movie rentals at its US stores in mid June.”

    The story quotes an internal memo saying that “a new in-store 'no-return' DVD rental service, called Flexplay, will let customers rent the latest movie titles without having to return them to the store. Ideal for business travelers and busy small business owners on-the-go, Flexplay will offer a fresh selection of hit movies for viewing anytime, anywhere, and uses a patented technology that erases the DVD after 48 hours of opening the inner package. Customers can safely recycle the DVDs with their other plastics."
    KC's View:
    Interesting technological idea, and it is intriguing to watch as Staples expands into categories that expands its value to customers.

    I cannot help but think, however, that technology such as this one is just a stopgap, and almost on the verge of being sort of old-world. After all, the new generation of consumers (30 and younger?) may view physical CDs with the same skepticism that they view 33-RPM records. In a virtual and digital world, they will download their movies, just as they download their music. And companies such as Staples and Flexplay will have to figure out what role they can and should play in that environment.

    Published on: June 2, 2008

    • The Northwest Arkansas Morning News carries an interview with former Wal-Mart executive vice president Don Soderquist.

    One noteworthy excerpt:

    “I was totally in tune with Sam's vision. And Sam's vision wasn't to become the wealthiest person in the world or wasn't to become the largest company in the world. Sam's vision was to provide an opportunity for people in small, rural communities to be able to enhance their standard of living by reduced prices and really do it with a group of people who believed in the same thing. So his vision was very intriguing to me and it wasn't focused don the bottom line. Now, we did focus on the bottom line in order to sustain it, we had to. But the vision was something that was bigger than bottom line stuff. It was to help other people reduce their cost of living.

    “The second thing was values. My personal values were very much in line with Sam's values. We lived them out everyday. And one of those values was treating your customers better than anybody else treats them. There was a focus on who your customers really were and then treat them extremely well. And then there was a focus on our people. And pull the people together in a team so that everybody knew that their role was important. Those were the elements that were extremely important. I could go through a whole list of things, but those were really important.”

    KC's View:
    I wonder if it could be fairly argued that when Wal-Mart has run into tough times, it has been because it has lost sight of those primary values established by Sam Walton so long ago? It probably is the fate of almost all big companies that the bigger they get, the more likely it is that they focus on the bigness and not on the values that propelled them in that direction. And I suspect that the list of companies that resisted the siren call to be big for the sake of being big is far longer than the list of those that resisted.

    Published on: June 2, 2008

    A report out of The Netherlands says that three former Ahold executives convicted for their roles in that nation’s biggest accounting fraud case – ex-CEO Cees van der Hoeven, ex-CFO Michiel Meurs and ex-board member Jan Andreae – today will begin their appeal of the suspended sentences and fines that they received in connection with the case.
    KC's View:
    Seems to me that these guys should be thankful that all they got were suspended sentences and big fines. But arrogance persists and, apparently, so does self-delusion.

    Published on: June 2, 2008

    Reuters reports that Tesco will spend close to $2 billion (US) to buy out the Royal Bank of Scotland’s stake in a personal finance joint venture. According to the story, “under the terms of the sale RBS would continue to provide banking services to Tesco Personal Finance during a handover period, after which Tesco will seek its own banking licence from UK regulators.”
    KC's View:

    Published on: June 2, 2008

    Fascinating piece yesterday in the New York Times about the acquisition of Pixar, the innovative animation studio that created “Toy Story,” “Finding Nemo” and “Cars,” by Walt Disney Co. – a deal that many experts expected to end as a cultural and financial disaster.

    The Times writes: “When Disney bought its rival, Pixar, in 2006 for $7.4 billion, many people assumed the deal would play out like most big media takeovers: abysmally. The worries were twofold: that either Disney would trample Pixar’s esprit de corps…or that Pixar animators would act like spoiled brats and rebuke their new owner.”

    Two years later, however, not only have most of these fears not been realized, but Disney’s stock has been outperforming most of its competitors’.

    The important lesson here – and the one that seems most applicable to other industries, therefore making this story worth noting here on MNB - is that Disney made a conscious decision to respect the culture and individuality of Pixar.

    “There is an assumption in the corporate world that you need to integrate swiftly,” Robert Iger, Disney’s CEO, told the Times. “My philosophy is exactly the opposite. You need to be respectful and patient.” Disney decided to let the Pixar people keep their old email addresses (which is a very big deal), maintain their health benefits plan (which was better than Disney’s), and even leave the sign on the front gate as-is. In doing so, Disney not only engendered trust, but loyalty.

    “Key to the successful integration, analysts say, has been Mr. Iger’s decision to give incoming talent added duties … In Disney’s case, Pixar was assigned the difficult task of turning around a storied animation department that had fallen into disrepair as it struggled to find its footing in a new world of computer-generated pictures.”

    KC's View:
    We can all think of cases where an acquisition was made, and the company doing the buying not only didn’t respect the value and culture of the institution it was buying, but drained the acquired company of everything that made it worth buying in the first place.

    You make an acquisition, and you aren’t just buying real estate and sales. If you’re doing it right, you’re also adding heart and soul and brains to your own organization…and it seems silly not to take advantage of the addition.

    Published on: June 2, 2008

    Agence France-Presse reports that a new study suggests that the Mediterranean diet - which consists mainly of are olive oil, fish, grains, fruit, nuts, vegetables, and red wine, and is believed to be good for the cardiovascular system – also may help prevent diabetes.

    • The Associated Press reports that the Food Marketing Institute (FMI) spent $1.4 million on lobbying during the first quarter of 2008, working to influence government policy on food safety, credit card interchange fees, and other retail issues. The expense report was filed with the House of Representatives clerk’s office.

    KC's View:

    Published on: June 2, 2008

    I got the following email late last week from an MNB user; it expresses sentiments that clearly must be taken seriously:

    This past year Congress passed an onerous labor bill commonly referred to as Card Check or Free Choice Act which is a description that belies the real message. Unions are using their horsepower with the Democratic Congress to create legislation that will, in fact, eliminate the ability of employees to vote in a NLRB supervised election if the union gets signed cards from 51% of the people. Management would have to recognize the union without an NLRB election, and if an agreement was not reached within 90 days, a binding contract would be presented to management by law. For non-union companies this is devastating.

    For over 1½ years, I have been trying to get FMI tor react to this major issue without success. Tim Hammonds and John Motley have acknowledged that the negative response from membership was significant and, yet, they idly sit by waiting for the next Congress to convene. It is clear to this observer that this bill will be another slam-dunk even though the President vetoed the first bill. Likely, it will be among the first to be presented during the next Congressional session.

    I have repeated posed questions to FMI that we need to re-brand the Free Choice Act or the Card Check to something more provocative, i.e., the Union Payola Bill. I have repeatedly requested that FMI look at the employee signature card that unions hand out and consider a warning that would tell employees that they are likely giving up their right to a free, open election. In other words, they are losing their vote to a union who will make the decision for them.

    Thus far, FMI has been unwilling to proactively deal with this issue … a very serious problem for all non-union operators, no matter what business they’re in. This is forcing me to seek other alliances.

    FMI is, of course, invited to respond.

    Plus, further discussion of last week’s hog farmer email:

    If they cared about animals they would have chosen a different line of work. You won’t find any true animal lovers in the slaughter business. Obviously they care about food safety and wouldn’t want to put sick meat into the market but I think that’s the extent of their concern for the well-being of the animals.

    That hog farmer said something about giving the animals “the hand-on care they deserve.” What did they do to “deserve” to be raised in confinement then killed at a young age besides having the poor judgment to be born a hog?

    I know I’m going to get into trouble for this, but…

    I agree completely that animals should not be treated cruelly before being slaughtered for food. But let’s not lose track of the fact that they are, in fact, food. Being slaughtered is their role in the food chain. It has nothing to do with judgment or the treatment they deserve. It has to do with being meat that is going to end up on my grill.

    Again, I am not advocating cruelty to animals. But I have trouble with the notion that people in the meat supply business all hate animals (though it may be overstating the case to say that they are animal lovers). I just think they understand their role in the food chain…which is to provide it.

    Responding to last Friday’s rant about the Rachael Ray controversy, in which Dunkin’ Donuts knuckled under to pressure to remove an ad from the Internet because some people though she was wearing a scarf that resembled a garment worn by terrorists, MNB user Steven Ritchey wrote:

    In light of the Rachel Ray controversy, some people do have way too much time on their hands, too little common sense … I can understand Dunkin’ Donuts quandary, do I tick off the conservative right, the moral majority, or do I pull an ad that won’t matter that much in the first place. Though of course, regardless of how much noise they may make, I don’t think the moral majority or conservative right is that large of a group. I’m too much like George Carlin anyway as I heard him say one time, “I like to (tick) off any group that takes itself too seriously”. My suggestion to this lady, save your outrage for the CEO who loots his company and leaves his employees holding the bag, or the company who makes record profits off a product the American economy is built around ( put in your favorite oil company here) yet says in yesterdays paper that fossil fuels are the fuel of the future. Those are the people I want to see the religious right go after.

    Had a brief mention last week about how a California company was looking for ways to recycle cork….which led to several emails.

    MNB user Amy O’Hara wrote:

    Was interested to see the mention about recycling cork -- there are a number of manufacturers now producing cork floor tiles -- it's warm to the touch, soft underfoot, and comes in gorgeous colors! (I don't work for any of them -- but work for a green building material manufacturer, so I see it regularly.)

    At the moment, I'm still using mine to make trivets, bulletin boards -- and a decorative wreath (no, I'm not going to be mistaken for Martha Stewart any time soon...the bulletin board and trivets are particularly good uses for corks -- they're heat-resistant, and are a constant conversation starter for the wines you've tried…)

    And MNB user Kat Chociej wrote:

    In your column today you mentioned you weren't sure what recycled wine corks may be used for. I believe cork is being used as an environmental option for flooring. Someone should come up with some collaborative effort in having consumers return their corks to the stores or to a central repository that the flooring makers can then use and sell at "green" home improvement stores, like one we have here in Seattle called ecohaus, formerly The Environmental Home Center prior to it being burned down.

    Also mentioned last week that while the newspaper stories seem to be focusing on teenagers who cannot find summer jobs, my 19-year-old son Brian has three…which led MNB user Joe Cannon to write:

    Jobs are available for those who want to work. I’ve reminded Brandon often that I put myself through school by working day and night, sleeping but 4-5 hours. My Ohio Wesleyan University son Brandon a Spanish major is also working 3 jobs this summer. He is working a property maintenance job in Columbus inner city putting his Spanish to good use as he cleans and paints property in some Hispanic neighborhoods. (he came across a live copperhead last week in some overgrown grass, and also inadvertently helped to shut down a prostitution house where he noticed guys coming/going every hour) . He is also loading trucks at night at a local appliance store, as well as doing some lawn mowing and babysitting on the weekend. While he won’t be studying abroad this fall, he will be heading to Spain in the spring of his senior year. ( I would like to join him.)

    My daughter is the “cart girl” at a local country club as well as waiting tables at night during her summer break. Next summer will be booked with a marketing internship for her.

    As my second grade teacher in Greenfield OH Mrs. Richardson stated many times, “can’t died in the poorhouse”

    Wait a minute. It’s only June 2, and your son already has found a snake and helped to shut down a brothel?

    What the hell is going on out there in Ohio?

    KC's View: