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    Published on: July 31, 2008

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    “Is there such a thing as virtuous inflation?” That’s the question asked recently by Chris Grisanti of the management investment company Grisanti Brown & Partners. And I find the white paper in which he posed this question interesting enough that I’d like to share some of it with you.

    Essentially the arguments being advanced by Grisanti are that “first, the movement to higher prices for oil, corn, steel, iron ore and many other commodities is … a secular and permanent event, caused … by increased global demand. Second, the causes of this inflation are basically benign, and you ought to be happy about it, for reasons both altruistic and self-interested.”

    There central difference, Grisanti argues, between the inflation the 1970s and the inflation we are experiencing today is that three decades ago the inflation was supply driven, but today it is demand-driven. Which means that in terms of public policy, we have to approach it differently.

    But here’s where I think Grisanti’s logic gets interesting, where he dares to take a glass-half-full approach:

    Grisanti estimates that “between 800 million and 1.5 billion people have been making a transition from poverty to the very lowest rungs of the working classes. The global dimensions are complex, but on an individual level the concept is straightforward: Before, they ate solely beans or rice; now they eat chicken or pork occasionally. Grain needs soar, as it takes four pounds of grain for every pound of meat produced. Before, they lived a subsistence, agricultural living; now they toil in a factory and earn enough to send a child to school. Steel, electricity and concrete prices rise as factories are built, and the surrounding cities are created from nothing. Before, they rode bicycles; now they have a beat-up used car. Fuel needs surge. Each incremental person adds only the slightest bit to demand. But it is our belief there are more than a billion people making this transition, aided by governments in China, India and elsewhere that are eager to stoke a wealth-producing trend.

    “From a moral standpoint, poverty reduction is obviously a good thing, though we don’t want to leave the impression that we have reached some sort of utopian ideal. Massive populations now have a chance to work very hard to start climbing out of poverty, rather than remaining on the endless treadmill of subsistence living, disease and famine.”

    In the long run, this is a good thing: “If we are anywhere near right about the 800 million to 1.5 billion new entrants to the lower middle class,” Grisanti writes, “they represent a tremendous new market for goods and services that can help offset slower growth in the developed world. Soon they will buy hamburgers from McDonalds, watch movies from Hollywood and use electricity generated by General Electric turbines. Eventually they will buy copies of Microsoft Office and fly in Boeing aircraft. This is admittedly a long-term proposition, but it is powerful nonetheless.”

    I’m clearly not in Grisanti’s league when it comes to economic and geopolitical analysis, but it seems to me that he basically is saying that the demand-driven inflation with which we all are dealing is of our own making. We’ve been talking about spreading democracy and capitalism to the rest of the world, and go figure, it ends up that we did a pretty good job of it. Now, it also ends up that things haven't gone precisely as planned – the US no longer is the center of the universe, there are new and enormous stresses on our economy, and we suddenly find ourselves having to compete on the home turf of the rest of the world, rather than having the rest of the world compete on our terms. That’s certainly a challenge we’re capable of meeting…the question is whether we have the political and moral will and imagination to recognize the fundamental problems we face and deal with them in serious and innovative ways.

    Grisanti uses a familiar image to drive his point home: “Those of us of a certain age used to collect UNICEF donations on Halloween. Many of the ultimate recipients of those donations in countries like China, Brazil and Vietnam now have children who are helping to drive up the price of oil, corn and copper. It’s hard to get too upset about that.”

    For MorningNewsBeat Radio, I’m Kevin Coupe.

    KC's View:

    Published on: July 31, 2008

    Interesting story in the Chicago Tribune that is an interesting follow-up to yesterday’s piece about how the city of Chicago has decided to ban vendors at farmers markets from handing out disposable plastic bags, apparently on the theory that this move could help rid the environment of the pesky sacks.

    The new Tribune story details the saga of Henry Brockman, who is just such a farmers market vendor, and how he recently decided that his practice of handing out plastic bags was in fact hypocritical, because it was at odds to the rest of his business, which he tried to run in a responsible, sustainable way.

    So, Brockman decided to walk the walk – and started charging consumers 25 cents for four bags.

    “Now you would think this would be a pretty harmless move, considering Brockman deals with people who go out of their way to buy organically grown food and are willing to pay a premium for it,” the Tribune writes. “Seems he would be preaching his environmental message to the choir. But the farmer learned there are varying shades of green, and some cling tight to their right to a free plastic bag,:” and that there appear to be plenty of people who drive to the farmers market in their Range Rovers or other gas guzzlers, saying they want to save the earth. Many of these folks believe that plastic bags are their birthright…and they made their voices heard to the farmers market organizers.
    KC's View:
    Big surprise. Some people are hypocrites.

    Maybe they ought to not allow people driving Hummers to even attend farmers markets. Or maybe it is just “heads on pikes” time.

    Published on: July 31, 2008

    Dr. David Acheson, the assistant commissioner for food protection at the US Food and Drug Administration (FDA), told a Congressional hearing yesterday that the agency’s investigators have detected the Salmonella saintpaul strain in irrigation water and serrano peppers on a farm in Mexico. Jalapeno peppers also are grown on the farm in question.

    In addition, Acheson said, the FDA has determined that the Mexican farm supplied peppers to a Texas distribution facility where the Salmonella saintpaul strain was detected last week.

    The announcement is the latest in a series of revelations connected to a salmonella outbreak that has sickened more than 1,200 people in 47 states. At first, FDA believed that tomatoes were responsible, and instigated a recall that ended up costing the tomato industry as much as $100 million…even though tomatoes eventually were cleared as safe to eat by FDA. The agency’s attention has now turned to jalapeno and Serrano peppers, though FDA s being careful not to paint with too broad a brush lest it be caught yet again in mistaken accusations.

    The revelation by Acheson came as the US Congress has taken it upon itself to investigate the circumstances behind the recent salmonella outbreak, with hearings schedule by both the House Agriculture Subcommittee on Horticulture and Organic Agriculture and the House Energy and Commerce Subcommittee on Oversight and Investigations.

    KC's View:

    Published on: July 31, 2008

    The Baltimore Sun poses an interesting question – once the economic downturn ends and consumer confidence and buying power returns, will shoppers become the profligate customers of old?

    “This time, experts say the new behavior -- fueled by higher gas and food prices, tightening credit and a slumping housing market -- are the most dramatic and widespread that they have seen since the mid-1970s.”And the Sun posits that “retailers, marketers and investors are all trying to figure out which habits shoppers will keep and which will they drop when the economy recovers. Will the people who switched to store-brand ice cream go back to Breyers or Edy's? Will shoppers return to department stores or keep looking for labels at T.J. Maxx? ”

    KC's View:
    It seems to me that this not an either-or situation.

    There are old habits to which people are likely to return, and there’s no reason why not. Premium ice cream instead of private label, for example. Maybe an extra latte or two each week. And there’s no reason not to indulge in a particular piece of clothing from a boutique, if the money is there to support the habit.

    That said, it is important to point out that Americans knew back in the seventies, during the Carter administration, that a gas crisis was likely to occur again, and steadily rising gas prices should have reminded us. But we forgot, and bought SUVs and Hummers and ignored for the most part the need for alternative energy sources, never spending the kind of money or time we should have in developing such resources.

    Shame on us. We should have known better, and if we return to our irresponsible habits of old in such areas, then we deserve the planet that we get. It won’t be pretty, but we’ll deserve it.

    Published on: July 31, 2008

    • Tesco announced yesterday that its US division, Fresh & Easy Neighborhood Markets, has opened its 67th store, a unit in Phoenix that is its 20th store in that market. At the same time, Fresh & Easy said that it has four more openings planned for the Phoenix market, all of which will take place between now and September 10, 2008.
    KC's View:
    Which doesn’t exactly sound like a company about to fold its tent in the US, which is what some folks think Tesco will be forced to do. I’ve said it before and I’ll say it again – underestimate Tesco at your own peril.

    Published on: July 31, 2008

    Business First of Louisville reports that Kroger “has joined forces with Cellfire Inc., a mobile phone marketing company, to offer customers coupons through their wireless devices … (Kroger) will offer the service in Georgia, South Carolina, eastern Tennessee and Alabama. Major consumer brands that will offer coupons include Clorox, ConAgra, Del Monte, General Mills, Kimberly-Clark and Unilever.

    “To use the service, customers must link their mobile number to their Kroger Plus savings card.”

    • The Los Angeles Times reports that the City Council there has unanimously passed a law that will prevent fast food restaurant chains from building and opening new stores in the South Los Angeles area of the city for at least a year. The goal of the new regulation is to give the city time to craft incentives that will bring restaurants serving healthier fare to South LA, an inner city neighborhood with significant obesity issues that the lawmakers relate to a lack of nutritious choices.

    According to the Times, “The law defines fast-food restaurants as ‘any establishment which dispenses food for consumption on or off the premises, and which has the following characteristics: a limited menu, items prepared in advance or prepared or heated quickly, no table orders and food served in disposable wrapping or containers’.”

    KC's View:

    Published on: July 31, 2008

    • Spartan Stores reports that its first quarter profits were up 52 percent to $9.9 million, from $6.5 million during the same period a year ago. Total Q1 sales rose almost 13 percent to $586.7 million from $520.2 million a year ago.

    The company said that Q1 net sales for its distribution business increased 5.6 percent to $298.1 million from $282.4 million a year ago, while sales for its retail operations increased 21.4 percent to $288.6 million, from $237.8 million from last year.

    • Starbucks announced yesterday that it had a third quarter loss of $6.7 million, compared to a profit of $158.3 million during the same period a year ago. The company said that its Q3 sales were up nine percent to $2.57 billion, up from $2.36 billion a year ago.

    The beleaguered coffee retailer said that its US same-store sales were in the mid single-digits for the quarter.

    Note: it was the first loss Starbucks has had since it became a public company.
    KC's View:

    Published on: July 31, 2008

    • The St. Louis Business Journal reports that Mark Goodman has resigned from his post as COO of Supervalu’s Save-A-Lot stores “to pursue other interests.” Goodman, a former Walmart and McDonald’s executive, joined Save-A-Lot as COO just last year.
    KC's View:

    Published on: July 31, 2008

    MNB reported yesterday that the Court of Appeals for the D.C. Circuit ruled yesterday that the lower US District Court of Appeals in Washington, DC, made a mistake when it allowed the $565 million acquisition of Wild Oats by Whole Foods to go ahead without issuing a preliminary injunction that would have halted the process pending a hearing.

    The case now goes back to the US District Court of Appeals, which is charged with reconsidering the antitrust implications deal – even though the purchase of Wild Oats was completed a year ago, and Whole Foods has closed 12 stores and sold off 35 others, while rebranding many Wild Oats stores as Whole Foods.

    My comment:

    From the beginning, I have felt that the FTC was completely wrong in how it assessed this deal and the role of Whole Foods and Wild Oats in the broader supermarket industry. The FTC clearly doesn’t understand that everybody and his brother has started selling natural and organic foods. The guys at the FTC probably don't even shop … Furthermore, the FTC has always alleged that the deal would cause the cost of natural and organic foods to go up, and therefore hurt consumers. While indeed food prices have gone up, the news reports that I’ve been reading have said that all food prices have gone up. And Whole Foods’ reputation for high prices – earned long before it tried to buy Wild Oats – actually has hurt its sales, and the company has been trying to promote its deals as a way of attracting customers. (Of course, it chose a slogan already being used by Stop & Shop, and then it had to change course again.) And Whole Foods’ stock price is down something like 45 percent.

    In other words, it isn’t like the deal to acquire Wild Oats turned Whole Foods into a impervious and unavoidable organic juggernaut. Far from it … Last time I checked, the federal government was forecasting a deficit of more than $482 billion. I know that the amount of money being spent to prosecute this case is a mere drop in the bucket compared to that number, but hell, you’ve got to start somewhere. Cut off the purse strings to the guys at the FTC who have taken an irrational view of the Whole Foods-Wild Oats deal…especially because these are the same dolts who decided not to challenge Rupert Murdoch’s purchase of the Wall Street Journal, which strikes me as a lot more harmful to competition and the public good than Whole Foods buying Wild Oats.


    Lots of reaction to the story and commentary.

    MNB user Brian List wrote:

    Couldn’t agree with you more. The FTC’s obsession with this merger is starting to get just plain weird. There’s got to be an underlying story here somewhere, with someone losing a lot of money…

    Another MNB user wrote:

    This really has taken on an atmosphere of “Lawyers Ego” at taxpayer expense. An old saying, “If what you are doing doesn’t work…keep doing it, but with more intensity”…oh…wait a minute…that’s the definition of insanity! If the FTC wins…what do they win? Doesn’t the government have a “Common Sense” button that they can push every once in a while?

    One MNB user wrote:

    You can come to several conclusions on the stupidity of the FTC trying to break up the Whole Foods-Wild Oats merger while allowing Rupert Murdoch to purchase the Wall Street Journal. Your conclusion is as sensible as any I have read about. You have no doubt heard that the current administration has politicized every government agency. Rupert Murdoch represents the right wing that has power grabbed the reigns of our government so of course they let him have his way --he will report their corrupt practices as if they are acceptable. But the natural products industry does not embrace GMO foods and that bothers the government whose policy on allowing GMO's into the marketplace without testing was written by those companies who created GMO foods.

    MNB user Steven Ritchey wrote:

    Years ago there were two daily newspapers in Dallas, those of us who are of a certain age will remember the Dallas Times Herald. For decades the Dallas Morning News was a morning paper, the Times Herald was an evening paper. Later the Times Herald started offering a morning edition, and then went to morning only. It was never as large as the Belo owned Morning News, and was eventually bought out by the Morning News. What I wanted to know then and now, where was the FTC in all of this. Both papers served the same market and now with the loss of competition, newspaper reporting is not nearly as comprehensive as it once was. It seems as though the FTC is picking it’s battles, and in this case, picked the wrong one, I don’t see how they have a leg to stand on here, besides, what will the courts do, make Whole Foods give back Wild Oats?

    MNB user Tim Riggins wrote:

    Re: your take on the news about the FTC reopening its case against the Whole Foods-Wild Oats acquisition, I agree that it's a waste of the government's time and (our) money. However, to whom were you directing your advice to "cut off the purse strings to the guys at the FTC"? Can you imagine the howls of protest if the Bush administration did such a thing? Interference from an imperial presidency! Disregard for the separation of powers! Impeachable offense!

    Obviously, the FTC should have enough sense to police itself. Unfortunately, sense has nothing to do with government bureaucracy (and vice versa).


    MNB user Jeff Seacrist wrote:

    I was shocked at reading this news today. Just last night I came home from my neighborhood Whole Foods, formerly Wild Oats, and was raving about the place (again!). The produce keeps getting better, fresher, and more local. The meat & seafood section has been revitalized- with tons of fresh seafood replacing “previously frozen” selections under Oats, fresh buffalo steaks, and more. The wine selection has improved. The service is exceptional (it was always pretty good). And, shockingly, the prices are pretty competitive. Lower, in fact, than I think they were under Wild Oats. The 365 line is prominently displayed in nearly every category, with prices that rival my neighborhood QFC. From this consumer’s perspective, things have only gotten better. Way to go Whole Foods!

    And still another MNB user wrote:

    It never ceases to amaze me how we continue to allow corrupt government officials to remain in office. The Whole Foods debacle sounds strikingly similar to the Sirius XM merger that was held up for almost two years due to lobbying from terrestrial radio. At the same time, major oil companies were allowed to merge after one hearing. It is time to wake up America and realize that Corporation have finally taken over this country. My question is what Corporation is lining the pockets of the FTC to allow this Whole Foods nightmare to continue.

    One MNB user wrote:

    In your commentary Wednesday about the arguably ill-advised reconsideration of the Whole Foods - Wild Oats transaction, you mentioned the forecasted federal budget deficit of $482 billion, and suggested that monies be cut from the FTC if they were intent on pursuing follies like this particular case. "You've got to start somewhere", you noted.

    Since the FTC monies in question are, as you mentioned, "a mere drop in the bucket", maybe a more-impactful place to start would be for everyone who received an economic stimulus check to endorse them back over to the Treasury, rather than keeping them for themselves. That ought to slice, what, maybe $150 billion off the indicated number? (As a show of good faith, how about you going first? I didn't get one, so can't help you there...sorry.) The whole point being, we can't lose sight of the fact that these stimulus checks -- simply returning our own tax money -- are part of the deficit equation.


    I’ll admit to some hypocrisy here. I never thought that the stimulus checks were a good idea, precisely because I saw them as contributing to the deficit. But mine is long gone…our upstairs bathroom is collapsing into our downstairs bathroom, and desperate measures were called for. And desperate measures cost money.

    MNB user Tom Thomas wrote:

    Methinks some of the FTC’s budget would be better served reallocated to the FDA…

    And yet another MNB user chimed in:

    Don't get too riled up. It will take months for the court proceedings to commence. In the meantime, Obama will probably get elected and the FTC will get new leadership. I predict this "right wing versus the hippies" case will go away by February, 2009.




    Responding to yesterday’s story about a 20 cent-per-disposable shopping bag fee being imposed on retailers by the city of Seattle, one MNB user wrote:

    Overall, plastic bags are not bad, if retailers can strive, train, and push proper bagging techniques, millions of bags could be eliminated from the system. Other bag options are good, but they don’t have to eliminate a vehicle that has helped reduce the cost of goods and enabled better prices for customers.

    Have to disagree with you here. Other bag options – meaning reusable cloth bags – aren’t just better. They’re infinitely preferable, to my mind.

    MNB user Jerry Jewett wrote:

    Seattle is acting like they speak for the whole State. They can't even speak for King County. This could send a customer on the city line across to the other town.

    Why are they picking on the grocery industry & Drug Stores. I get plastic bags at Sears, Penney, Macys, Target, Walmart.

    If you include paper Every retail store, Hardware, Paint, Auto Supply to name a few. The only store I shop at that does not use any paper or plastic is Costco.

    If the politicians are really serious about this they should pass a law for the whole State banning plastic & paper for all stores, not just a selected segment of the economy.


    I’m okay with that. If there is going to be legislation, it ought to apply to everybody and every retail venue. Supermarkets, drug stores and c-stores ought not be singled out.

    MNB user Gary Loehr wrote:

    How is it that plastic shopping bags have such a high profile, while bottled water containers have managed to fly below the radar? I would think that the shape and thickness of the plastic in the bottles is much worse for landfills than the supermarket bags. Both problems should be equally addressed.

    I’m just guessing here, but I suspect this may be because the infrastructure for recycling plastic bottles is far more pervasive…and that more consumers do it out of habit. But that’s just a guess.




    One MNB user had a thought about all the various moves being made by Starbucks CEO Howard Schultz:

    What Mr. Schultz is doing is like " rearranging the deck chairs on the Titanic.” There is change but in the end the result will be the same.

    And another MNB user had a different question about the coverage on MNB:

    Why do we have to hear so much about Starbucks?

    Because, in my view, it is a fascinating and compelling business case that combines the actions of an American icon with a lesson in brand equity and corporate leadership/management. And because the company’s actions – positive and negative – should be learned from by every retailer interested in brand equity and customer relationships.

    And, ultimately, because I think it’s an interesting story.

    MNB user Wendy Hubbard - who hails from Australia, where Starbucks has announced that it is closing the vast majority of its stores – wrote:

    You mention in your comments, why not just close all the Australian stores? And also that you love the coffee and love the shops…. Well so do I. I hope my local Starbucks will be one that stay’s open, I love the atmosphere, the coffee, the baked cheesecake, the music CD’s, the clean and friendly store. So that would be why they should keep some stores open, because hopefully I am not the only person in Australia who loves their local Starbucks.




    MNB had a story yesterday about new Country of Origin Labeling (COOL> regulations that were called an “interim final rule.” In my commentary, I wrote:

    I don't know why, but here is the only thing I want to know about this story…

    What is the difference between an “interim final rule” and a “final interim rule”?


    To which Deborah R. White – who, it should be noted, is senior vice president and chief legal officer at the Food Marketing Institute (FMI), and therefore knows about such things – responded:

    An interim final rule comes with an opportunity for public comment -- in this case 60 days -- and gives the agency an opportunity to fine tune the regulation without having to issue a new proposal. In this case, since the regulations now apply to covered commodities that have never before been encompassed -- chicken, goat meat, pecans, macadamia nuts and ginseng -- and interprets new statutory language that was passed in the 2008 farm bill, it is important to give the public an opportunity to weigh in before the regulation is finalized. Does this help?

    It does, and I thank you for the clarification.

    But you should know that when I asked about the language, I actually was making a little joke.

    Not a very good one, as it turns out.




    Finally, we posted an email yesterday in this space that objected to an ad running on MNB for the book, “Death To All Sacred Cows,” on the premise that the cover – which shows an alarmed cow with a gun to its head – is politically incorrect at a time when there is too much cruelty to animals and gun violence.

    I responded that the cover – and the book itself - is meant to be irreverent, and I think appropriately so. Besides, it’s a joke.

    But I got more emails saying that people don't like the joke.

    One MNB user wrote:

    I have to agree with your reader on this one. I wasn't excited to see the ad. I've been impressed by things on your website that have nothing to do with guns, and certainly with animal cruelty. Yes I find the ad to be somewhat cruel......guess I'm sensitive. I guess I just don't get the joke either. Go figure.

    For the record, I am not for gun violence or animal cruelty. I am pro-humor and pro-irreverence. (Don’t you remember that old National Lampoon cover that had a dog with a gun to its head, and the headline, “If you don't buy this magazine, we’ll kill this dog?” To my mind, that’s still funny. But maybe that’s just me…)

    MNB user Geoff Harper had the best solution:

    If the doomed cow bothers you, do as I did:

    1. Buy the book.
    2. Throw away the dust cover.
    3. Read the book.


    Agreed.

    And having done so, work within your organization to kill all the sacred cows. Even if you hate the metaphor, the premise is absolutely correct.

    KC's View: