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    Published on: October 1, 2008

    Delhaize-owned Food Lion is scheduled to open its first ground-up Bottom Dollar Food store today, a 20,000 square foot prototype in Mooresville, North Carolina, that the company says represents “a significant redesign” for the concept.

    The 27 previous Bottom Dollar units opened in North Carolina, Virginia and Maryland since the format was created in 2005 were all converted Food Lion stores. Paul LaCroix, vice president of Bottom Dollar Food, says that “the goal in this design is simply to right-size the store, have the right product and deliver incredible savings to our customers … Customer segmentation has been used to find the very best item selection for this store, as well as making use of the unique things learned in current Bottom Dollar Food stores, which allows us the opportunity to deliver something really special."

    According to the company, the new store will feature a walk-in produce cooler that doubles as part of the sales floor, allowing customers to shop in the cooler while still feeling like they are in the store and not the backroom.

    And, the new store will be decorated in Bottom Dollar Food's signature colors of bright orange and lime green, and store employees wear uniforms in the same colors. The stores also have humorous phrases adorning the walls, such as, "With these prices, there's no need to cry over spilt milk."

    KC's View:
    Good timing on the part of Food Lion, since a lot of customers have fewer dollars than they used to, and Bottom Dollar will seem like a pretty attractive alternative.

    I should note that I’ve had the recent opportunity to spend time with the Food Lion folks, and I’m impressed by the way they’ve segmented their stores – Bloom, Food Lion, and Bottom Dollar – to capture various segments of the marketplace. I think that’s smart marketing, especially because it keeps the company sharp on a variety of edges.

    Published on: October 1, 2008

    USA Today carries a story this morning saying that an “additional 31 batches of Chinese milk powder were found contaminated with the industrial chemical melamine,” the same poisonous industrial chemical that can artificially inflate the protein levels of products to which it is added, and that recently sickened or killed thousands of pets before it was discovered in a number of brands of pet food.

    According to the story, “The new figure, seen on the food safety administration's website, brings to at least 100 the number of tested batches of milk powder found to contain melamine. A previous round of testing, results of which were posted on Sept. 16, found melamine in 69 milk powder batches. Dozens of brands sold by more than a score of dairy firms, including some of China's biggest names, have been among those tested.”

    Meanwhile, the Wall Street Journal reports that a number of major manufacturers have stopped using Chinese dairy products in the wake of the melamine scandal.

    “On Monday, H.J. Heinz Co. said it will stop using milk from China in the baby food it sells on the mainland and in Hong Kong. Nestlé SA, the world's biggest food company by sales, said it is examining its procedures for buying milk in China, where it relies on a network of individual farmers,” the Journal writes. “The announcements came as candy maker Cadbury PLC began pulling products made at its Beijing plant from store shelves across Asia after finding traces of the industrial chemical melamine in its chocolate. In recent weeks, companies like Cadbury had found their products and operations to be free of the contaminant, but now are finding minute amounts, adding to consumer jitters.”

    The Journal adds that “the move by Pittsburgh-based Heinz to drop its Chinese suppliers comes just days after the company began to recall 270 cases of baby food in Hong Kong as a precautionary measure. Heinz said it has started testing all dairy ingredients in products made and sold in China for melamine, even if those ingredients don't originate in China. No one has gotten sick from consuming the Heinz products, the company said.”

    KC's View:
    China indeed may be a threat to the US on a variety of levels…but there also clearly are ways in which it has a long way to go.

    Published on: October 1, 2008

    The Penn Traffic Co. has been charged with fraud by the US Securities and Exchange Commission (SEC), and has agreed to settle the charges without admitting or denying its guilt.

    The charges say that Penn Traffic, which has gone through two bankruptcy reorganizations in the last decade, inflated its operating income and after-tax net income over a three year period, and either did not file required reports with the SEC or filed reports that did not comply with federal regulations.

    Penn Traffic consented to a permanent injunction against any future violations of federal securities laws, and also agreed to hire an independent auditor who will report regularly to the SEC. No fines or penalties are being levied against Penn Traffic.

    "The company has worked hard to address a number of legacy issues so Penn Traffic's resources and attention can be fully dedicated to our customers," said Daniel Mahoney, the company's senior vice president and general counsel. "The settlement is another important step in the right direction."

    KC's View:
    I can’t remember the last time I read a good news story about Penn Traffic, and have to wonder how long a company can continue to survive under the toughest of circumstances.

    Published on: October 1, 2008

    The Wall Street Journal reports that Triarc Cos., which has just acquired Wendy’s International for about $2 billion, “plans to target older customers, change its value menu and improve items like its french fries.”

    According to the story, instead of focusing on 18-to-24 year old consumers, the company will market to people 24-to-49 years old, and wants to improve the quality of various menu items – and add some new ones - in order to better attract those older shoppers. Roland Smith, president and chief executive of the new Wendy's/Arby's Group, tells the Journal that the chain also expects to adjust its value menu and will raise prices to offset higher labor and ingredient costs.

    KC's View:
    I noticed last night a new television commercial for another fast food chain – KFC – that specifically targets the supermarket shopping experience, arguing that the time and money spent to buy the ingredients for and make fried chicken can be better spent on other things…and that it is a lot easier to simply buy a bucket of fried chicken at KFC.

    I mention this because it seems to me that fast food chains – whether they be McDonald’s, Wendy’s, or KFC – probably can be expected to start marketing a lot more aggressively against supermarkets as the economic crunch continues. Which means that the supermarket industry has to do the same thing, getting aggressive about hare of stomach and not conceding any meals to anyone.

    So the advice here to the supermarket industry is simple. Play hardball. Take no prisoners. Go after every meal, with an argument that targets specific customers in focused, visceral ways.

    Published on: October 1, 2008

    The Sacramento Bee reports that California Governor Arnold Schwarzenegger has signed legislation that will compel chain restaurants with 20 or more outlets in the state to post the calorie counts on their menu boards. The goal of the legislation is to focus attention on the burgeoning obesity rates in California and elsewhere.

    According to the story, the new rules will be phased in between now and 2011 and will affect approximately 17,000 locations. California is the first state to adopt such sweeping guidelines.

    “Beginning next July, chain restaurants with 20 or more California outlets must offer brochures disclosing calories, fat, carbohydrates and sodium …. Disclosure requirements will change in January 2011, allowing chain restaurants to provide only calorie content - but on menus or menu boards, where customers are most likely to see it.”

    The Bee writes, “Schwarzenegger's signing of the menu-labeling bill came two months after he approved legislation to ban restaurants from using trans fats by January 2010. The governor, a former Mr. Universe, also has cracked down in recent years on sales of soda pop, candy and other junk food in schools. Obesity is a significant health issue nationwide, increasing the risk of diabetes, heart disease, stroke and some cancers.”

    KC's View:
    Tell you a story. While at the Mets game last Saturday, we went to one of the concession stands to get something to eat, and were taken aback by the calorie count postings next to every item. A hot dog has how many calories? (Doesn’t matter…we’re at a baseball game.) How many calories are in a pretzel? (Too many.) Is drinking a premium beer worth the additional calories? (Always.)

    The point is this. While some will argue that the legislation is unnecessary, they work because they allow consumers to make intelligent, informed choices. And I think that’s the bottom line.

    Published on: October 1, 2008

    The San Jose Mercury News reports that a San Francisco Superior Court judge has rejected an attempt by Walgreen and Rite-Aid to derail a new ordinance that bans San Francisco stores with retail pharmacies from selling tobacco products.

    The ordinance was enacted last month by the city’s Board of Supervisors. The two retailers challenged it, saying that the ban would cause them irreparable harm. Tobacco giant Philip Morris also is challenging the ban in federal court.

    According to the Mercury News, “City attorneys had contended that the public trusts pharmacies as health-promoting businesses and that the sale of tobacco by drugstores ‘sends an implicit message that smoking is acceptable’.”

    KC's View:
    While I have no idea whether the ordinance will be found to be legal or constitutional, from a broader thematic or marketing perspective it actually makes sense that retailers said to be in the health care business ought not be selling products that are designed to addict and kill consumers.

    But as mentioned here on previous occasions, I concede that I have no objectivity on this issue. (My mother, who smoked two packs a day for 40 years before quitting, died a decade ago from lung cancer.)

    Published on: October 1, 2008

    • Walmart announced yesterday that it has developed new programs designed “to make healthcare more accessible and affordable for its Wal-Mart Stores U.S. and Sam's Club associates by introducing new programs designed to keep them and their families healthy.”

    Among the improvements, the announcement said: “One new feature of the 2009 plan is ‘Life with Baby,’ an initiative designed to give associates and their spouses personalized tools and education to help them have healthier pregnancies and infants. The comprehensive program touches on all phases of maternity, beginning with pre-pregnancy and continuing through pre-natal, postpartum and child care. Throughout the phases, associates can receive immediate assistance from a registered nurse and materials tailored toward their individual needs. The plan also includes expanded benefits, such as four periodontal cleanings to help prevent the risk posed by gum disease to the mother and baby, and a new smoking cessation program.”

    • Walmart reportedly has begun cutting prices on popular toys and games stocked in its stores and already has begun opening up Christmas shops – moves that are tied to broader concerns that the tough economy could lead to the worst end-of-year holiday season in decades.

    KC's View:

    Published on: October 1, 2008

    • Albertsons LLC (which may be best described as the Albertsons not owned by Supervalu) announced a new prescription savings program on both branded and generic medications, with a 30-day supply of over 500 generic drugs available for only $4.99. It costs $10 per household to enroll in the program.

    • Starbucks said yesterday that it will begin selling a new “signature hot chocolate” drink in its North American stores, replicating a product that is described as being more chocolate and less milk and that has been extremely successful in Europe and Asian markets. The company says that the new item will satisfy people’s desire for gourmet chocolate products, but that it will continue selling the more traditional hot chocolate (less chocolate and more milk?) that it has featured in US locations.

    KC's View:

    Published on: October 1, 2008

    BrandWeek reports that a new survey from Arbitron says that – hold onto your hats – in-store sampling sells more food products.

    According to the story, “More than one-third (35%) of customers who tried a sample bought the product during the same shopping trip, per the poll of 1,857 respondents conducted earlier this year via the phone. Fifty-eight percent of those surveyed reported they would buy a product again after trying it … Eighty-five percent of retentions who sampled a product said they would purchase it again compared to 60% of conversions. Almost half (47%) said they would now look to purchase it.”

    KC's View:
    Here’s the real tragedy. (Okay, maybe “tragedy” is a little hyperbolic. But you get my drift.) There are retailers out there who probably will read those numbers and say, “Wow!”

    It doesn’t require a degree in marketing or an Arbitron survey to realize that if a food product smells good and tastes good, it is more likely to be bought by a shopper.

    And yet, I have to say that the number of supermarkets that I visit that offer aggressive, consistent sampling programs are far fewer than the ones that don't. Too many stores think that sampling is a program that needs to be funded by manufacturers, or that they are the exception only to be run on the occasional busy Saturday. Which is nonsense.

    Published on: October 1, 2008

    In a one-game tiebreaker, the Chicago White Sox defeated the Minnesota Twins 1-0, winning the American League Central Division title and moving on to the postseason.

    Here’s how the best-of-five first round of playoff games lays out:

    • Los Angeles Dodgers (NL West) vs. Chicago Cubs (NL Central)
    • Philadelphia Phillies (NL East) vs. Milwaukee Brewers (NL Central)

    • Tampa Bay Rays (AL East) vs. Chicago White Sox (AL Central)
    • Los Angeles Angels (AL West) vs. Boston Red Sox (AL Wild Card)
    KC's View:
    I said yesterday that since the Mets are out of it, I now will be rooting for the Cubs. If the Cubs get beaten, I’ll be rooting for the Dodgers. And if the Dodgers lose, I’ll root for the Red Sox. If the Sox lose, I’m just going to bed early.

    I was challenged on that, and asked why I ignored the Rays.

    Not really ignoring the Rays, which have been a great story this year. I’m just a National League fan because, of course, it is in the National League where they play real baseball. (None of the designated hitter nonsense…)

    But I can’t root for the Phillies or the Brewers because of what they did to the Mets, so I’ll switch to the Red Sox as a regional imperative since I live in New England.