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    Published on: July 14, 2008

    The US Department of Agriculture (USDA) has decided on a policy shift that will result in consumers being informed about which food stores have stocked meat or poultry products identified as being contaminated and recalled. The move comes months after USDA refused to publicly identify the schools and stores that received contaminated meat from the Westland/Hallmark Meat Co., even though those products were involved in the largest beef recall in US history. In recent weeks, there also have been smaller recalls involving Kroger and the Nebraska beef company.

    However, there are limitations to the new policy. The Los Angeles Times reports that “Agriculture Secretary Edward T. Schafer announced that the rule change would apply only to recalls involving ‘a reasonable probability of serious health consequences or death for those with weakened immune systems’.”

    The Times also notes that “the new policy, which will take effect in 30 days, drew faint praise from lawmakers and food safety advocates. Food retailers were critical, arguing that it would not give consumers accurate enough information.

    "’The most important information for consumers to have in a USDA recall is the brand name, container size and manufacturer coding information marked on meat and poultry products,’ said Robert Brackett, chief science officer of the Grocery Manufacturers Assn., citing information that is already made available during a recall.”

    KC's View:
    Here we go again…

    At the risk of repeating myself, it simply doesn’t make sense in this day and age not to be completely transparent in such cases. If a product has been identified as being tainted or is being recalled, it is up to government and industry to provide as much specific information to consumers as possible – the name of the product, the sizes of the product, any relevant coding information, and where the product has been sold.

    To do otherwise is not just bad public policy and irresponsible. It also is bad business.

    Technology makes it possible to be completely transparent and to have accurate traceability systems. The rest of the world is becoming more transparent…and yet for some reason people in the food chain think that resistance is a legitimate and reasonable strategy.

    It makes no sense.

    Published on: July 14, 2008

    Anheuser-Busch, which just a week ago seemed to be resisting the possibility of a sale of the company to Belgian brewer InBev – with some stories suggesting that there was much familial debate about the mater within the Busch family – has completed a deal that will sell the company that is something of an American icon for $52 billion.

    InBev is the maker of Stella Artois, Beck’s and Bass, and the addition of Anheuser-Busch gives it remarkable global marketing power in the beer category, making it number one in the segment ahead of SABMiller.

    According to the New York Times, InBev upped its original unsolicited bid for Anheuser-Busch from $65 to $70 per share, and a number of A-B shareholders urged the company’s board of directors to seriously consider InBev’s proposal, which at first sparked more than a month of hostilities between the two companies.

    The companies plan to call the new brewer Anheuser-Busch InBev. Anheuser would have two seats on the board.

    The Wall Street Journal reports that since InBev and Anheuser don't overlap much across the globe, cost cuts from combining staffing and brewing operations may be difficult to achieve.

    MarketWatch writes that the deal “is deeply unpopular in St. Louis, where Anheuser-Busch is one of the region's employers, taxpayers and charitable givers – and where InBev's reputation for ruthless cost-cutting in pursuit of ever-higher margins largest has made locals nervous. Missouri's governor and two U.S. senators -- particularly Democrat Claire McCaskill - have voiced opposition to the deal and vowed to do anything they can to derail it.

    “For its part, InBev has pledged that it wouldn't close any of Anheuser-Busch's breweries --- and will even keep the iconic Clydesdales -- but it hasn't ruled out job cuts and said it would be interested in selling noncore assets, apt to include Anheuser-Busch's theme parks. At the same time, (the company) promised St. Louis it would remain the company's North American headquarters and Budweiser would become its flagship global brand.”

    The New York Times puts the deal in context, saying that “several American beer giants have already been taken over by larger overseas rivals in the last decade. The Miller Brewing Company was sold to South African Breweries in 1999, and the Adolph Coors Company was bought by Molson of Canada in 2005. (Last year, Molson Coors agreed to merge its United States operations with those of SABMiller.)

    “Anheuser’s concession caps a wave of consolidation within the beer industry. InBev and SABMiller, themselves the products of mergers this decade, have led efforts to gain distribution channels across the globe. The rising cost of beer ingredients like grain has also driven companies to seek greater scale and purchasing power.”

    KC's View:
    Can't help but feel conflicted about this. I’ve always felt that globalization is not only inevitable, but needs to be embraced by US companies as a way of being competitive on the world business stage…and this kind of deal reflects modern realities that are inescapable. But there’s also something sad about this St. Louis icon being sold to a non-US company.

    Next thing you know, A&P will be sold to a German company, Giant of Landover will be sold to a Dutch conglomerate, Chrysler will be sold to a German automaker (though I suspect that such a deal won’t work out very well), the Japanese will begin acquiring all sorts of major New York City real estate, and the Chinese will begin loaning the US so much money that we’ll have diminished control over our own economic destiny.

    Published on: July 14, 2008

    Call it the “nutritional labeling system formerly known as ONQI.”

    Last Friday it was announced that the Overall Nutritional Quality Index (ONQI) developed to rate all 40,000 food products available in US supermarkets on a scale of 1-100, will take on a new name – NuVal – and will roll out this September in three as-yet unidentified US supermarket chains.

    "Consumers want clear information about the nutritional value of the foods they eat, and NuVal scores are going to give it to them," said NuVal president Nancy McDermott. "We've got the scientific foundation, the logistical ability and the retail partners needed to bring this important education to consumers coast to coast." McDermott said the newly-formed company is focused on reaching all U.S. markets and scoring all 40,000 of the products available in the average grocery store by September 2009.

    NuVal's double-hexagon emblem, bearing the score of each individual product, is designed to appear on shelf tags next to the price. Retailers will use banners, shelf-talkers, brochures, associate training and other forms of in-store communication to tell the NuVal story.

    The NuVal system is based on a proprietary algorithmic formula to score the nutritional value of foods on a scale of one to 100, weighing some 30 different nutrient factors; the higher the score, the higher the nutrition value. NuVal LLC, the independent company formed to bring the system to market, is a joint venture of Topco Associates, LLC, and Griffin Hospital, home to the Yale-Griffin Prevention Research Center and a teaching affiliate of the Yale University School of Medicine.

    The NuVal system is different from the Guiding Stars program developed and being licensed by Delhaize USA in that the latter approach rates all products but only gives one, two or three stars to products that qualify as good, better and best.

    KC's View:
    I suspect that while the three chains that have committed to using NuVal this September have not been identified, one of them almost certainly will be Hy-Vee. I’ve had conversations with Hy-Vee CEO Ric Jurgens in which he has been extraordinarily passionate and persuasive about the system; he believes completely in the program’s ability to “change the world” when it comes to how shoppers think about the supermarkets, food and nutrition.

    Not sure whether consumers are more likely to embrace the NuVal system or the Guiding Stars system (which already has shown itself to be extremely effective at Hannaford Bros. and Sweetbay Supermarkets in terms of moving rated products). I’m not even sure that both can't work together.

    But I am sure that better and more transparent nutritional labeling is the right move.

    Published on: July 14, 2008

    In London, the Sunday Times reported that Tesco is developing a new line of private label products that are designed “to tackle the so-called Aldi effect which has seen thousands of hard-pressed families defect to the German discounter. The top-secret project, which is due to be unveiled in the autumn, aims to drive down prices of hundreds of items in the grocery giant's standard own-brand range.”

    According to the story, “Tesco said this weekend that it was too early to discuss the own-brand project, but confirmed it was examining ways to ‘make things easier’ for customers affected by the credit crunch and that would involve looking closely at own brand.

    “Tesco’s own-brand products fall into three ranges: Value, at the budget end, Finest, a premium brand, and standard products in between. The chain’s research has found that 80% of customers regularly buy from the Value range, 70% buy from the Finest range and most cherrypick from both.

    “Tesco is concentrating on ways to bring down the cost of its standard range significantly without compromising on taste.”
    KC's View:
    So much for “top secret” projects…

    Seems to me that while it remains to be seen whether Tesco’s new private label program will have the desired effect, the smartest thing about it is that the effort does two things – addresses the price issue while still providing Tesco with a potential differential advantage.

    It makes the most sense to do both – just providing lower prices isn’t enough, in my view.

    Published on: July 14, 2008

    The Washington Post yesterday carried a story saying that Kroger is “reaping the benefits” of an economy that “means more dinners at home in front of the TV and fewer nights on the town at the swankiest eateries.”

    According to the story, “Food inflation is running higher than it has in more than 17 years, but that actually helps Kroger. The company is able to pass increases on to its customers yet remain less expensive than its competitors because of a price-slashing program it implemented five years ago … Aside from its attractive food prices, Kroger also benefits from the high cost of gasoline. With some 700 gas stations (at about 30 percent of its stores), Kroger offers incentives at the pump. The company noticed a trend among its customers to combine gas and grocery trips to save on fuel. Kroger now offers a discount of 10 cents per gallon on gas for every $100 spent at the store.”

    KC's View:

    Published on: July 14, 2008

    MorningNewsBeat would like to once again thank ConAgra Foods, which is sponsoring not just our daily news reports, but also is 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: July 14, 2008

    • The New York Times reports that NBC Universal has signed a multimillion dollar deal with Walmart that will have the retailer’s commercials appearing in what are being called “momtourage” segments that are designed to help people be better parents.

    The “momtourage” segments will appear in a number of NBC Universal venues seen as being family-friendly, such as the “Today” show, the iVillage website, and the Oxygen cable network.

    KC's View:
    But probably not on “Law & Order.” Though that’s one I’d personally want to see…

    Published on: July 14, 2008

    The Chicago Sun-Times reports this morning that Starbucks will look to re-energize its sales today with “a new line of made-to-order protein shakes called Vivanno. The product name, which Starbucks created, comes from the Italian word for life (‘viva’) and is intended to evoke a feeling of healthful vitality … The new Vivanno drinks will come in flavors such as Orange Mango Banana and Banana Chocolate and will be made with the same equipment used for Starbucks' trademark Frappuccino coffee drinks. The Vivannos will include ingredients such as whey protein and fiber powder, as well as fresh bananas. Customers can customize their Vivannos via the addition of a shot of espresso or green tea powder too. The drinks will retail in the U.S. for between $3.75 and $3.95.”

    The Sun-Times suggests that this new product could work against CEO Howard Schultz’s stated plan to return the company to its coffee-driven roots: “Not only does it infringe in a big way on Jamba Juice's well-defined turf, but it also seems to shift focus from the coffee drinks that are the heart and soul of the Starbucks brand. When he retook the reins as CEO of Starbucks last winter, Schultz suggested he was going to intently work on improving the brand's coffee and the whole coffeehouse experience. Now he seems to be veering from that course with this protein shake tactic.”

    KC's View:
    If Starbucks starts thinking tactically instead of strategically, it could end up making mistakes. If Starbucks mistakes tactics for strategy, it potentially is looking at what the great Bob Murphy used to call “nine miles of bad road.”

    Published on: July 14, 2008

    There are three big issues on the menu this month in Facts, Figures & The Future:

    • Todd Hale, senior vice president of consumer and shopper insights at Nielsen Homescan & Spectra, addresses the current economy and the impact on retailing. An excerpt:

    “Rising gas prices and inflation across a number of fast moving consumer goods categories are having a tremendous impact on how U.S. consumers shop. Comparing changes in channel shopping trips and average per-trip basket rings during the first quarter of 2008 versus year-ago, total outlet trips were down 1.1% and average basket rings were up 2.3%. This is supporting evidence to the increasing trend of consumers combining errands and trips to deal with a tough economy. Retail channels winning shopping trips came from online (+6.6% in trips), supercenters (+4.1%), drug stores (+2.4%), and dollar stores (+0.7%).

    “Retail channels benefiting from stock-up trips were grocery (+3.6% in average basket rings with shopping trips flat versus year ago), convenience/gas (+8.8% with gas price impact), warehouse clubs (+2.5%), and liquor stores (+3.3%). Retailers focused on nice to-have, not need-to-have, assortment experienced significant declines in shopping trips. Trips to electronic stores were off 2.3%, toy stores off 4.1%, apparel stores off 4.9%, department stores off 5.6%, office supply off 6.4%, mass merchandisers (regular formats, not supercenters) off 7.7%, and do-it-yourself or hardware home improvement stores, also feeling the pain of the housing crunch and drop in home equity loans, were off 9.9%.”

    • Anne-Marie Roerink, director of research at the Food Marketing Institute (FMI), writes about the role of sustainability “in operations, transportation, landscaping, packaging, recycling and building” as retailers, wholesalers and suppliers change the way they do business.

    “Large numbers of food businesses are becoming more interested in this issue and finding ways to respond proactively to rising consumer demand, to comply with new regulations and to create competitive advantages,” Roerink writes. “Retailers are starting to hire people specifically for environmental sustainability and corporate responsibility and no less than 42 percent already have corporate level sustainability policies in place. Another 15 percent are looking to develop such policies in the next year or two.”

    • And Phil Lempert writes that while David Acheson, food safety chief at the US Food and Drug Administration (FDA) is trying hard to investigate the causes of the recent salmonella outbreak, “this now three-month-old ‘investigation’ seems more like one under the command of Inspector Clouseau.”

    And, Lempert writes, “If nothing else comes out of the confusion surrounding this Salmonella outbreak, I can only hope that the food world: retailers and manufacturers alike finally demand a unified and well-funded food service agency.

    To get your copy of F3, go to:

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

    KC's View:

    Published on: July 14, 2008

    • The Chicago Tribune reports that a Whole Foods store in the Lincoln Park section of the city has finally reopened after failing two health inspections in three days because of a rodent infestation. According to the story, the store was “shuttered on Wednesday after health inspectors found mouse feces and a dead mouse,” and then “flunked another review Friday after inspectors found more of the same in other parts of the supermarket.”

    • The Times of London reports that “the Co-operative Group is poised to jump back into the supermarket big league” and has completed an agreement to acquire Somerfield for the equivalent of about $3 billion (US). The deal would create a combined company that is the fifth biggest supermarket chain in the UK and that “is central to its hopes of reviving memories of the 1960s, when the group … became Britain's biggest grocery retailer with about 13 million customer-members.”

    KC's View:

    Published on: July 14, 2008

    • Costco Wholesale reported June sales of $714 billion, up 12 percent from the same month a year ago, on same-store sales that were up nine percent in US stores and 11 percent in the company’s international stores.

    • Family Dollar stores said that its June sales rose 10.7 percent to $715 million, with same-store sales up eight percent.

    • BJ’s Wholesale Club reported that its June sales were up 1 percent to $1 billion, with food sales up 11 percent for the month and same-store sales showing a 16.5 percent increase.

    KC's View:

    Published on: July 14, 2008

    Here are some of the stories that popped up last week while I was kicking back and sleeping late, and that I thought worth taking note of…in cases where I have some commentary, it is in italics

    • The Centers for Disease Control and Prevention (CDC) and the US Food and Drug Administration (FDA) said late last week that they now are focusing on jalapeño peppers as a possible source of the recent salmonella outbreak, and not just tomatoes.

    According to a statement released by the United Fresh Produce Association, “This announcement narrows the scope of the investigation, which FDA said last week focused more broadly on ‘other items commonly consumed with tomatoes.’ The CDC and FDA's statement about jalapeño peppers should end speculation about other produce items not ever associated with the outbreak.”

    As noted above, Phil Lempert says that it is like the whole investigation is being run by Inspector Clouseau. He’s got that right…and it’s also like the people working for him are the Gang That Couldn’t Shoot Straight.

    • Ahold announced that it has promoted Carl Schlicker from his position as CEO of Giant-Carlisle to the same role at its bigger Stop & Shop/Giant-Landover chain.

    Jose Alvarez, whom Schlicker is succeeding, has been named executive vice president of global business development.

    Good luck to Schlicker, who has run what is generally perceived as the best of Ahold’s US businesses. He’ll have his hands full at Stop & Shop/Giant-Landover, if the people I talk to are right about the situation up there…

    • The Seattle Times reported that Town & Country Markets in the Seattle plans to open a new 50,000 square foot Central Market unit in Issaquah Highlands in 2010. It will be the fourth such store operated by the company, which also has them in Poulsbo, Shoreline and Mill Creek.

    Not a well-known company outside the Seattle market, but a terrific retailer with wonderful stores.

    • The Washington Post reported that Chevy Chase Bank is closing 54 mini-branches that have been operating in Giant Food stores in the DC area, “ending a decade-long initiative to add banking to customers' shopping lists. The closings coincide with the expiration of a 10-year contract that Chevy Chase Bank signed with Giant. The shutdowns will begin next month.” Ahold-owned Giant reportedly is seeking another banking partner.

    • The San Diego Union-Tribune reported that “Encinitas, a beach town where crosswalk signs show pedestrians carrying surfboards, could become the first city in San Diego County to ban single-use plastic bags.” The City Council has been presented with a petition signed by 1,500 residents supporting the ban, and it is thought that “the idea would quickly gain traction in the city of 63,000, which includes a contingent of environmental activists.

    “In California, the cities of San Francisco, Malibu and Manhattan Beach have banned single-use plastic bags.”

    Fox Business reported that c-store chain Sheetz has opened a new $46 million kitchen facility that will serve as a new distribution center for the chain to make and ship fresh, ready-to-eat foods to all of its 350 locations – a considerable investment in food service as a cornerstone of the company’s operations in the future.

    Advertising Age reported that Starbucks has announced that “it is offering prolonged and far-flung sampling of summer beverages to assuage consumers and boost traffic through the season. The promotions, which vary by region, are focused in major cities.”

    However, Ad Age says that some analysts believe that the sampling program signals even deeper-than-believed problems at Starbucks, which recently announced that it is closing 600 underperforming units.

    On the other hand, maybe the company is trying to do exactly what it says – generate more traffic, more sales and higher profits. Which I think is what retailers need to do more often.

    Advertising Age reported that while Constellation Brands expected the sales of its Corona Extra brand to rebound this summer, that hasn’t happened – leading analysts to suggest that “new domestic competitors such as Bud Light Lime and Miller Chill, as well as stronger import brands -- are taking a toll on the leading import beer.”

    According to the story, Corona Extra “is still a juggernaut: It sold 8.3 million barrels last year, making it the largest import,” and analysts expect “the brand to pound the sand harder through packaging innovations similar to the ‘cold’ emphasis Coors has employed via color-changing labels and cooler boxes to emphasize its ‘Rocky Mountain refreshment’. They also expect greater emphasis going forward on Corona Light, which is the largest imported light beer despite being something of an afterthought in Corona's messaging.”

    I guess it isn’t a big deal yet from a market share point of view, but I have to say that one of my new favorite summer beers is Landshark Lager, which is made by Anheuser-Busch for Jimmy Buffett’s Margaritaville Brewing Company. It is similar to Corona, but I like it more…and it may be worth noting that before he had his own beer, Buffett used to have Corona as a concert tour sponsor. But not now, and Corona is having its problems. Coincidence? I think not…

    KC's View:

    Published on: July 14, 2008

    • Tony Snow, the conservative pundit and journalist who spent 17 months as a happy warrior for the Bush administration, serving as press secretary for the White House and restoring civility to the distrustful pressroom that had developed during the tenure of Scott McClellan, died over the weekend at age 53. Snow was suffering from colon cancer, the same disease that had killed his mother; he had been remarkably straightforward and eloquent about the disease and how he was dealing with it right up until the final weeks of his life.

    • Bobby Murcer, the native Oklahoman who faced the unenviable task of replacing Mickey Mantle as the New York Yankees’ center fielder back in the late sixties, died of brain cancer at age 62. In his later years Murcer had become a broadcaster with the Yankees, and was a source of seemingly indefatigable good cheer even as he dealt with the effects of his disease.

    KC's View:

    Published on: July 14, 2008

    Responding to our story about the newest Fresh & Easy opening across the parking lot from a Trader Joe’s, one MNB user wrote:

    Here in Southern California when there is a Trader Joe's in range I have a real sense F&E is struggling. TJ's just has the field nailed down and F&E looks like a weak second player. Lots of F&E fresh merchandise on markdown the last time I went in. Not many customers either. It is not that F&E is bad it is just that TJ is so good.

    MNB user David Livingston had a thought about Tesco’s plans for opening Fresh & Easy stores in under-served inner city neighborhoods:

    It’s as if they are intentionally making fools of themselves. Fresh & Easy has now opened about 62 stores operating at Winn Dixie-esqe levels of sales per sq. ft. Now they want to take a failed concept and open where most chain stores have failed. Seems like we would expect better judgment from a smart company like Tesco.

    Maybe you’re right.

    But I try to always leave open the possibility that the folks at Tesco and Fresh & Easy are smarter than me and are seeing opportunities that I could be missing.

    MNB had a story before we went off on vacation about how the Organic Trade Association (OTA) and the International Dairy Foods Association (IDFA) have gone to court to challenge labeling rules imposed by the Ohio Department of Agriculture.

    According to a statement released by OTA, they are “challenging as unconstitutional an ‘emergency’ rule seeking to prevent labeling that tells a consumer whether the cows were treated with rBST, the synthetic growth hormone manufactured and sold by Monsanto under the brand Posilac. The lawsuit represents a determined effort not only to protect the consumer’s rights to receive truthful information about how organic milk and dairy products are produced, but also to protect the rights of organic dairy farmers and processors to communicate truthfully with consumers.”

    MNB user Bill Bodine – who, it should be noted for context, is director of external relations at the Illinois Farm Bureau – wrote:

    I am struggling with how the Ohio regulations detract from organic production. The regulations do not prohibit dairy companies from including labels stating that the milk was from cows not treated with rbST, whether it is organic milk or conventional milk. As the article states, if the claims regarding rbST are made, the Ohio regulations require a disclaimer in the same location that states the FDA has shown that there is no difference between the milk from cows treated with rbST and cows not treated with rbST.

    It appears that the lawsuits seem to be challenging the portion of the regulation requiring the disclaimer and designating its location and size. The disclaimer is there to provide information to the consumer. Some in the industry must only want half the story told to consumers.

    MNB user Jessica Duffy looked to put the issue in context:

    To clarify: “Conventional” milk can be produced by cows treated with production hormones and/or antibiotics; “All Natural” milk comes from cows that receive conventional feed, but no hormones or antibiotics; and “Organic” milk comes from cows that receive no hormones or antibiotics, and which eat only organic feed.

    Which seems like the info that ought to be presented to consumers. Doesn’t it?

    I made a little joke before going off on holiday about the price of gas meaning that it might be a good time to get into the hay business – because horses are going to start looking good when we hit six and seven dollars per gallon.

    To which one MNB user responded:

    We know you don't even pretend to know anything about agriculture, but hay prices started climbing long before gas prices. Another key ingredient to feeding horses is corn, and we all know about the ramifications of that. In a morbid way, it was kind of a relief when our last horse "rode off into the sunset" earlier this year.

    Once again, my timing leaves something to be desired. Though, on balance, I feel worse for your horse.

    MNB user David Zahn saw only opportunity here:

    For years I have used the example with clients of companies that refuse to embrace innovation, recognize market shifts and changing industry nuances as being "in the buggy whip" business. How incredible is it now that GM may be going bankrupt and there may just yet be a place for buggy whip manufacturers to carve out some market share!

    At least metaphorically.

    KC's View:

    Published on: July 14, 2008

    The year 2008 has been, to say the least, memorable. We started the year with industry concerns about the soon-to-retire Baby Boom generation, and how that knowledge and experience base would be replaced. And we end the year with a recession, and headlines that trumpet cost cutting, layoffs and increased unemployment.

    But through it all, two things have remained constant:

    1. There are some wonderfully innovative, talented and experienced people on the market.
    2. Companies are hiring – because they know that the quality of leadership within their organizations is the greatest differential advantage they can have.

    At Samuel J. Associates, we’ve been privileged to help both retailers and manufacturers identify and hire the right people, who will provide them with experience and thought leadership into 2009 and beyond. We thank you for giving us these opportunities…and we look forward to working with you in what we believe will be an exciting, prosperous – and yes, memorable - New Year.

    Season’s Greetings, from all of us at Samuel J. Associates.

    KC's View: