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    Published on: October 2, 2008

    Now available on iTunes…

    To hear Kevin Coupe’s weekly radio commentary, click on the “MNB Radio” icon on the left hand side of the home page, or just go to:

    Hi, I’m Kevin Coupe and this is MorningNewsBeat Radio, brought to you by Webstop, your first stop for retail website design services.

    I spend most of my time writing and talking about the business of retailing and the world of food, though admittedly I do take the occasional detour into movie reviews and opining about the state of baseball and the near criminality of the designated hitter rule in the American League.

    For a moment, though, I’d like to talk about my business…though if you’ll stick with me for a minute, I’ll draw a direct connection to your business.

    There as a story the other day in the San Diego Union-Tribune that made the following observation: that “there was a time when newspapers were a monopoly business, when people had no good way to get information other than to subscribe, and when businesses that wanted to promote their products had little choice but to buy newspaper ads.”

    You know when that time ended? According to Philip Meyer, a journalism professor at the University of North Carolina, it was a little earlier than most of us probably would guess. 1923. That’s when radio became a mainstream media entity, and that’s when the audience suddenly had options.

    Today, of course, there are more options than ever before, and these options have resulted in the creation of an enormous variety of niche products that target specific consumers. We have sports talk radio, we have a selection of 24-hour cable news channels, we have mainstream broadcast networks, and a plethora of media choices tailored specifically for our interests and preferences.

    The enormity of choices means a number of things.

    First, it means that the newspaper business is in decline. People like Michael Sansolo and I, who actually started out as daily newspaper reporters for the same chain of Gannett newspapers in the suburbs of New York City in the late seventies, find this particularly upsetting because in our souls we are still newspaper people…even though we haven’t actually worked in the newspaper biz for a quarter-century. But the reality is that the number of people who buy and read newspapers each day is declining each day, which means that the advertisers are looking for other outlets, which means that newspapers are closing up shop or cutting back on their coverage.

    The irony, of course, is that according to some experts, more people than ever are actually reading newspaper articles – but they are reading them on the Internet, where few companies actually have figured out the revenue model. I’m a prime example of this – I go through something like 30 newspapers a day, looking for headlines and relevant stories for MorningNewsBeat. But I’m doing so online…which is the only way that people a lot younger than me ever access local, national and international newspapers.

    And yet, even though people increasingly are getting their information from Internet sources, advertising on the web hasn’t caught up with the size of the audience. It will, someday, of course. Then again, by the time it does, there probably will some other new technology that people will be using to access products and information, and marketers will have to catch up with that…

    There are several lessons here that are applicable to both media people and marketing people.

    One is that because change is both inevitable and immutable, you have to be flexible. I always joke that I started in newspapers, went to magazines, found myself working in video and now am in the Internet while still writing for magazines and producing videos. Before I’m done, I may be coming to you via hologram each morning. Before you’re done, you may find yourselves reaching out to customers via formats and venues that you never would have imagined just a few years ago. This is a good thing, and it certainly is better than being irrelevant.

    Another lesson is that it is okay not to be all things to all people. Customers, whether they are watching TV, surfing the Internet or shopping for groceries, are used to the idea of customization. As time goes on, they likely will even expect or demand it. So it is your best interests to step back from the “all things to all people” approach and figure out exactly who your customer is and speak directly to him or her. I’m not sure that this means a world without FSIs, for example, but I suspect that such vehicles will become increasingly irrelevant in coming years.

    Since the media revolution also has meant that consumers are able to disintermediate traditional sources of information – getting wire service reports directly from the Internet in real time rather than waiting for the paper carrying those reports to be delivered in the morning, for example – I think that retailers have to face the fact that they, too, can be disintermediated. As new sources of product and product information become available, the traditional sources can be abandoned…unless, of course, these traditional venues find new ways to engage with the shopper, create memorable events, target meaningful customers, and, in the end, drive bottom line sales that are sustainable over a long period of time.

    Doing this, I think, can give each of us a differential advantage. Not an unassailable advantage, of course, because there is no such thing. But an advantage that maybe will keep us relevant in our consumers’ eyes while we figure out what the next one will be.

    For MorningNewsBeat Radio, I’m Kevin Coupe.

    KC's View:

    Published on: October 2, 2008

    There is a fascinating piece in Fortune about Home Depot CEO Frank Blake, who is working to rebuild the company after the near-disastrous reign of Bob Nardelli, who left the company after centralizing buying to the point where local stores could not respond to local circumstances, squelching dissent to the point where a culture of fear had gripped the company, and cutting back on customer service to the point where shoppers were going elsewhere. (It wasn’t bad news for everybody; Nardelli left the company with a severance package worth more than $200 million.)

    Blake is trying to reinvigorate Home Depot at a tough time – the declining economy means that fewer people are spending money on home construction and repairs. One of his first steps was to eliminate the Nardelli-created wholesale supply division of the company, and put more attention on the stores. And according to Fortune, Blake “is not managing for the here and now, slashing jobs and expenses with quarterly earnings in mind. Instead, he's doing something counterintuitive: He's spending money on the folks in the orange aprons to prime Home Depot for life after hard times. Blake is quietly but aggressively presiding over radical change at the company…”

    Some other relevant excerpts:

    • “Blake has boiled his strategy down to a few priorities, all of which revolve around stores (engaging employees, making products readily available and exciting to customers, improving the store environment, and dominating the professional contracting business, an area in which Home Depot's closest rivals trail far behind). ‘To me, it just makes more sense to have one integrated business,’ he says by way of explaining why he sold off the wholesale business.”

    • “To spruce up the stores, Blake restriped the parking lots and improved lighting. He bulked up his merchandising team, headed by Craig Menear, which has, in turn, empowered the field merchants, whose job it is to understand local markets. Menear wants to make sure that the focus is on the customer's project rather than the product being sold. ‘Our whole job is to help customers solve their problems,’ he says. ‘You need to make sure you think about that from a project standpoint. If not, you can fall into the trap of selling commodities’.”

    • “Instead of assessing store managers on 30 metrics, the company today uses only eight, including each store's improvement in customer surveys. Blake now gives assistant managers restricted stock, has boosted the number of associates eligible for annual bonuses, and has reinstituted merit awards, which make associates who go beyond the norm eligible for a spot bonus. He also returned some of the decision-making to the stores: About 75% of the end caps (promotions at the end of an aisle) are now the choice of local and regional managers, who can use their experience to promote locally popular items.”

    • “The goal has been to boost in-store employee hours without increasing overall costs. So when Blake decided to cut the corporate staff by 10% and shuttered a call center, the savings was earmarked for putting more employees on the floor. Blake also abolished the pay ceilings that existed under Nardelli to hire 3,000 specialized in-store experts, called master trade specialists, whose job it is to provide professional-quality advice to customers.”

    KC's View:
    This is a terrific piece, worth reading in its entirety.

    The notion of making sure than in-store employees have skin in the game, with the ability to benefit from their own efforts, is exceedingly sensible if a little too rare in retail circles. The idea that stores have to operate with a degree of autonomy, ultimately responsive to local circumstances and customer, also makes a ton of sense…though we all now of plenty of companies that insist on centralization for reasons of efficiency, even though such an approach can get in the way of effectiveness.

    And listen carefully, once again, to the comment made by Craig Menear:

    “Our whole job is to help customers solve their problems … If not, you can fall into the trap of selling commodities.”

    Man, that speaks volumes about what makes a retail brand.

    This isn’t to say that Home Depot has it all figured out. The current economic straits make it tough, and it is a big company, hard to turn around.

    But it strikes me that Blake is saying the right things and doing he right things. He’s building something, and it doesn’t seem to be about ego, artifice and big severance deals.

    Attention should be paid.

    Published on: October 2, 2008

    The Knoxville News Sentinel reports on a new store build by K-VA-T stores in Maynardville, Tennessee, which is betting on population and commercial growth expected to come to the area.

    Lou Scudere, K-VA-T vice president of research and site development., tells the News Sentinel, “We feel the area is positioning itself to take advantage of the influx of retiring baby boomers that are coming to the area. We feel very positive about the prospective of growth over the next 10 to 15 years in Union County.”

    Interestingly, the situation is like the chicken and the egg. While K-VA-T’s opening of a Food City store there is predicated on expected growth, many people expect that the supermarket will itself generate interest in the area.

    "One of the first things a corporation looks for when considering a community is a branded product chain," Union County Chamber of Commerce President and CEO Julie Graham tells the paper. "It really helps when you are chasing economic development."

    KC's View:
    Two comments, if I may.

    One is that it is nice to see stories like this one even as most of the headlines are about doom and gloom on Wall Street and Main Street. Without getting into a debate here about the bailout/rescue legislation currently in Congress, it would be a shame if companies like K-VA-T were not able to continue to grow and expand and serve new communities because of a national credit crunch.

    My second point is that the importance of a supermarket to local commercial growth is always worth reinforcing. CIES has done a lot of work in this area, trying to both quantify and qualify the benefits that food stores bring to the communities they serve, believing that this is a story that is not being told often enough or clearly enough by retailers and their industry representatives. The interconnectivity between supermarkets and the broader communities they serve has to do with both value and values…and retailers ought to be proud of it.

    Published on: October 2, 2008

    The Wall Street Journal reports this morning that as wine consumption goes mainstream, Wine Enthusiast, the niche brand that “rates wines, sells wine accessories and publishes an eponymous magazine,” is embracing the opportunity, “embarking on a campaign to establish Wine Enthusiast as the go-to company for all wine drinkers -- the brand of authority for wine accessories and information for nonexpert wine drinkers as well as connoisseurs.”

    The company is looking to market a range of products, from glasses to wine refrigerators, that will appeal to people at all levels of the economic spectrum. The challenge of doing so, the Journal notes, is that Wine Enthusiast wants to broaden its audience without diluting its authority or appeal to the upper end of the market, which is where its traditional appeal has been.

    KC's View:
    It is an interesting challenge, but it seems to me that wine is one of those great categories that lends itself to providing information and product…and that a smart company can offer both at varying levels of sophistication.

    I also think that wine is one of those categories in which up-selling isn’t all that difficult. I know this from experience…my local wine merchant, through its excellent wine club, has managed to get us from buying $8 wines to $12 and $14 and $16 wines. Not all the time, but they’ve nurtured us into becoming higher value shoppers.

    This is a good lesson for retailers. A little information and a little customer nurturing can go a long way to creating a more valuable and meaningful shopper.

    Published on: October 2, 2008

    The Los Angeles Times this morning carries a story saying that Connecticut officials have discovered four stores in the state selling White Rabbit Creamy Candy – which contains Chinese dairy ingredients that contain 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.

    Tainted Chinese milk products are blamed for the deaths of four children and the sickening of more than 50,000 other people in China.

    KC's View:
    This is giving whole new meaning to the idea of Chinese food – two hours later and you’re in the hospital.

    Published on: October 2, 2008

    The Los Angeles Times reports that Yum Brands, parent company to KFC, Taco Bell, Pizza Hut, Long John Silver's and A&W, announced that it will add calorie counts to its menu boards at locations throughout the country. The decision comes as some governments – California and New York City, for example – are mandating such disclosures, but before any such mandates exist on a national scale.

    "We believe this is the right leadership role . . . to be providing more information so consumers can make better-informed purchase decisions about the food they eat," Yum Brands Inc. spokesman Jonathan Blum said.

    KC's View:
    Smart move. I agree that governmental mandates are never the best way to go…and they become unnecessary when companies are willing to step up to the plate by themselves.

    Published on: October 2, 2008

    • The Cleveland Plain Dealer reports that Giant Eagle and Heinen’s Fine Foods have come to a tentative contract agreement with the United Food and Commercial Workers (UFCW) on a new contract covering more than 8,700 employees for Ohio stores owned by the two chains. Terms of the deal were not disclosed pending ratification by unionized employees.

    • PriceSmart, which operates 25 warehouse clubs in 11 countries in Central America and the Caribbean, and one U.S. territory, announced this week that it is acquiring new properties in Panama and Costa Rica for the development of new stores.

    KC's View:

    Published on: October 2, 2008

    • Big Y Foods has hired William D. White, a former executive with Balls Food Stores and Farm Fresh Foods, to be its new CFO, succeeding the retired Herbert D. Dotterer.
    KC's View:

    Published on: October 2, 2008

    On the subject of the new California law requiring chain restaurants to post calorie counts on their menu boards, MNB user Edward Zimmerman wrote:

    This is the beginning of the type of dance that the trial lawyers used to topple the cigarette manufacturers. What did you know, when did you know it….?

    Approximately 70% of restaurant meals receive some type of customization, “Can I get extra mayo?”

    “Chain” restaurants will publish the calorie count and some unsuspecting employee will indeed slaver a bun with the extra mayo. The “customer” will run out the door, hand the sandwich to a lawyer who will have it “tested” and sue the chain because the restaurant violated the “Truth in Menu Act”.

    Once restaurants realize the game, they will refuse to customize and more restaurant food will become automated, assembled in a factory, frozen, shipped, heated and served. This will reduce quality, freshness and ultimately offer customers less choice.

    Can the government please, please stop telling us how to live and eat? Let Americans be free to live their own lives and make their own choices.

    Not sure that calorie count transparency is at odds with the ability to make choices.

    Responding to our stories about tainted Chinese dairy products, one MNB user wrote:

    I found it interesting that Heinz (one assumes others) found it necessary, on Monday last, to FINALLY check the materials they have been receiving from China that they have been putting in BABY FOOD. Hello America, hello world, where are you? Candy, pet food, dairy, toys (lead) maybe everything else – what makes any executive think that EVERYTHING coming in from China does not need to be checked for hazardous content (and every other foreign country with no safety checks)? Where is the consumer outrage towards our own companies for this delay? Is it possible that consumers are unaware of how much of their food products contain ingredients from China and other foreign countries? Do consumers know that processed food will not be covered by the new COOL enactment? It is unfortunate that situations like this continue to show that so many of our companies put profits so far ahead of people that product safety is investigated after the problem is exposed. Either that or we are incompetent. I hope that MNB continues to push on safety – for example –your stand on Mad Cow testing.

    Got the following email from MNB user Matt Nitzberg responding to my rant yesterday about in-store sampling:

    The challenge for most manufacturers and retailers is not around the conceptual appeal of demonstrations and sampling. The problem (as is often the case) is about money and the ability to calculate an ROI from what is a relatively expensive marketing effort, especially compared to traditional methods of coupons and discounts.

    What’s the problem with the calculation? Most companies account for the expense of in-store demos and sampling on the day(s) it occurs. Unfortunately, this same accounting approach is often used to calculate the benefit as well: ‘How many incremental purchases were there during the event, compared to stores where the sampling did not occur?’ Since demonstrations and sampling are typically employed to create quality trial – which in turn is meant to increase the repeat purchase rate – it’s paradoxical that repeat purchase behavior often goes unmeasured.

    As a result of the short time horizon for calculating the return, manufacturers and retailers are frequently discouraged by the appearance of a weak (often negative) ROI. Thus, shoppers are given far fewer chances to get exposed to new products in this compelling way.

    The good news is that some retailers and manufacturers are beginning to use shopper data to create a more realistic ROI model. Instead of using only the purchases during the event, these companies can evaluate the 6-month or Year 1 impact of converting shoppers via in-store demos or samples, and compare this information to the results from other means of conversion. These companies are learning what works and what doesn’t, often from small, below-the-radar efforts. They are also learning which types of shoppers react to the in-store efforts (for example, are they brand loyals, store loyals, new triers, variety seekers, etc.) and whether additional promotion activity is helpful or wasteful. And they are learning this over time, taking the pressure off the short term focus for calculating the ROI.

    My hope – as an industry member and as a shopper – is that companies will use these insights to support more demonstrations and sampling events, leading to better shopping experiences and raising the level of new product success.

    MNB user Aleta Fullenwider chimed in:

    I love the fact that you continue to report on this marketing approach. I was a sampler while in college and represented all different types of companies in the retail environment. I couldn’t agree more with your statement that “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...” Samplers that are representing a CPG are primarily concerned with that specific product and have no incentive to learn anything about the store. I remember that consumers asked me all types of questions from “Where is the bathroom ”to“ How is long is this product going to be on sale?” Unless I shopped at that store, I usually could not answer their question. I believe that if retailers had their own staff to sample food products (i.e. Private label), this could enhance the customer experience by ensuring that samplers were very educated about the store, layout, products, etc. This helps to provide a consistent image for retailers and allows them to have more control over the messages that are being delivered to their customers.

    While this email actually was about Fresh & Easy Neighborhood Markets, it relates to the discussion of sampling:

    I do have to say that I've shopped there on 4 occasions in the last 2 weeks. To dovetail on the sampling article from today.. I sampled the F&E frozen Pizza and was so impressed that we ended up with 3 varieties for dinner that night. I also sampled the carnitas (a fresh, ready to eat item) that were really good, too, and have plans to purchase them next time I go in.

    ‘Nuff said.
    KC's View:

    Published on: October 2, 2008

    In the American League Divisional Series, the Boston Red Sox defeated the Los Angeles Angels 4-1.

    And, in the National League Divisional Series, the Los Angeles Dodgers beat the Chicago Cubs 7-2, while the Philadelphia Phillies downed the Milwaukee Brewers 3-1.

    KC's View: