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    Published on: October 6, 2008

    Interesting piece in the Austin American-Statesman about how companies like Whole Foods are coping with the economic downturn taking place in the US – offering coupons, stressing deals, and doing its best to shed its image as being almost prohibitively expensive. All of these efforts, according to financial analysts, are critical if Whole Foods – and other upscale retailers such as Starbucks – are to stay viable during a time when more and more people are cutting back on their expenses.

    However, the American-Statesman writes, “marketing experts say companies such as Whole Foods and Starbucks should tread carefully lest they undermine their carefully built reputations for quality, consistency and a superior experience for customers, who have been willing to pay more for those benefits. ‘They are in a tough spot,’ said John Moore, a former Whole Foods marketing official who now runs an Austin consulting firm. ‘If they go down this lower price path, when the economy turns stronger, they are going to have a hard time regaining the pricing power they once had’.”

    KC's View:
    If it is to be a battle between marketing guys and financial analysts, and I have to listen to one of them as I develop strategies to save my business, I’m going with the marketing guys. (We all know how well the financial community has been doing the last few weeks …)

    Moore is right. Companies like Whole Foods and Starbucks have to be careful. The key is not abandon the values that lie at the core of their offerings…while strengthening the value proposition offered to shoppers. It is a tricky balancing act…but this business has never been for the faint of heart.

    Published on: October 6, 2008

    WROC-TV News reports that Wegmans has decided to close all of its in-store photo departments, a category that the company originally entered in 1984.

    According to the report, “The company said digital photography is behind the closings, as more people are printing photos or sharing them online.”

    KC's View:
    An argument actually could be made that Wegmans has made this decision too late…except that it probably is ahead of where a lot of other retailers are on this issue.

    This is just one example of a department that has been made virtually irrelevant by circumstances and technological advances. Another such department (though it isn’t quite as far gone as the photo developing department) is the video rental center…which slowly but surely will be made obsolete by on-line downloads. (And if you think that can't happen, ask one of your kids the name of the last CD he or she bought. They are as likely to think you mean certificate of deposit as compact disc.)

    The lesson is a good one. Look around your store. Try to figure out which departments might be on the road to obsolescence. And then figure out now – sooner rather than later – how you are going to replace that revenue, or create a department that might appeal to new and evolved sensibilities.

    Published on: October 6, 2008

    Leslie G. Sarasin, president/CEO of the American Frozen Food Institute (AFFI), has been named as the next CEO of the Food Marketing Institute (FMI). Her selection was announced late Friday by a search committee appointed by FMI’s board of directors.

    Sarasin’s appointment is scheduled to be ratified by the board when it meets later this month in Boston. She will officially succeed Tim Hammonds, the current CEO, in early November.

    According to the information provided by FMI, in addition to her role at AFFI, Sarasin also serves as president of the National Yogurt Association, an association that AFFI manages, and has oversight responsibility for the National Frozen Pizza Institute, Frozen Potato Products Institute, International Frozen Food Association, Texas Mexico Frozen Food Council and Food Processing Environmental Conference. She joined AFFI in 1989.
    Previously, she worked as director, government relations, and legal counsel with the National Food Brokers Association and as legal counsel and assistant to the president at Crest International Corporation. Early in her career, she worked for Salomon Brothers Investment Bankers and for Senator Wendell H. Ford.

    In a prepared statement, FMI chairman Steven C. Smith, who also is president/CEO of K-VA-T Food Stores, said that Sarasin “is well connected with our industry and brings a wealth of experience to her new post, as well as a great deal of enthusiasm and excitement. I am confident that under her leadership, we will be able to move the association forward at a critical time for our industry.”

    KC's View:
    It seems to me that one of the central questions that Sarasin will have to answer is whether the traditional roles of trade associations have to change in the 21st century.

    Trade associations tend to have four essential roles – lobbying, exhibits/conventions, education and serving as both an internal and external communications vehicle for the industry.

    • Lobbying probably isn’t going to go away anytime soon, though the profession certainly isn’t getting positive coverage in the current political environment.

    • Annual – or even every-other-year – exhibitions certainly have to be questioned; they may be revenue generators, but in a world where everybody is connected 24 hours a day, you have to ask whether these kinds of conferences are becoming obsolete.

    • Education remains a critical component, and FMI certainly seems to be working on greater relevance with its embrace of the new Future Connect format scheduled for Dallas in May 2009. (MNB’s own Michael Sansolo, who has been consulting with FMI on the development of Future Connect, remains a great person to talk to if you are looking for information about why it is a must-attend event.)

    • Communications strategies also have to be examined, I think, since in a world of transparency traditional and orthodox PR approaches may not apply.

    In other words, Sarasin has her hands full. And she’ll have to prove that despite a career spent largely in the trade association world, she’s capable of looking beyond that world for new ideas, new solutions, and new approaches that will distinguish FMI in the new century.

    Published on: October 6, 2008

    There is an intriguing story in Advertising Age suggesting that as in-store marketing becomes an ever-greater component in the branding strategies of CPG companies, as they shift spending to the environment that is close to where the shopper actually makes the decision, the broader transition may be to a climate in which food retailers may be able to improve their profit margins significantly.

    It is, according to Ad Age, a shifting in the balance of power that could have long-term implications.

    Ad Age writes: “A recent survey by Deloitte Consulting and the Grocery Manufacturers Association, in fact, gives shopper marketing higher marks for return on investment than most conventional media. It also found that big package-goods marketers are jumping on the shopper-marketing bandwagon fast, and players who had lingered on the sidelines are ramping up quickly. But retailers are ramping up their own shopper-marketing departments even faster, the survey found -- creating a crush for the same relatively small pool of experienced talent.

    “The disturbing question for package-goods players is: If the marketing talent and media budgets are flowing toward retailers, will the profit margins follow? After all, the brand power and marketing savvy of package goods have long been key justifications for higher prices that result in at least double the margins retailers that sell their goods get.”

    KC's View:
    If supermarket retailers indeed own the most valuable real estate when it comes to communicating brand messages to the shopper, then these retailers should be compensated for the use of that space. If that results in the improvement of profit margins, then good for them.

    However, I would urge retailers not to think of this real estate as a place to simply be rented out to the highest bidder, with the cash simply going to the bottom line. Because this real estate can be used as a place on which to build something – a retail experience with a solid foundation, something that could have long-term implications for the viability and vitality of a retailer.

    I don't want to stretch the metaphor too far, but simply renting out the space to people and companies that are more interested in their own brand than the retailer’s – as they should be – can result in the devaluation of the space’s value.

    Published on: October 6, 2008

    A new survey released by KPMG and CIES says that “far from regarding corporate responsibility as a cost, many leading retailers and manufacturers see sustainability as: a driver of innovation that can help build growth and profitability.”

    According to the survey, “Nearly half of those questioned (47.7 percent) felt sustainability was an important driver of innovation. This was true of companies worldwide. A majority (56.5 percent) stated that sustainability was now a core element of business strategy.

    “The results also help pinpoint the forces driving the sustainability agenda, with over a third of companies (34.9 percent) identifying ‘stakeholder demand’ over other pressures such as legal requirements, voluntary codes, taxes and carbon costs … Just over 80 percent of the companies surveyed say that the greatest challenge they face in developing a sustainability strategy lies in identifying and prioritizing issues, developing strategies to meet those issues, and measuring performance.”

    Gareth Ackerman, who is chairman of the CIES Summit Committee & Pick ‘n’ Pay Holdings Ltd., said in a statement: “Sustainability is not just about protecting the environment. It has to do with issues such as food security, food safety, job creation and individual prosperity, healthy eating, fair trade and ethical sourcing of products, labor rights, customer loyalty and poverty alleviation.”

    KC's View:
    I think that CIES and KPMG are exactly right on this. I don't think that retailers should be waiting around for governments to legislate corporate responsibility, but rather should embark on corporate responsibility initiatives that can have a profound impact on how shoppers and even employees feel about them. It can force companies to think differently about business processes and to pursue innovative solutions that are relevant to shoppers. And in the long run, that can have a real impact on the bottom line.

    Published on: October 6, 2008

    The Wall Street Journal reports that Starbucks has introduced a new scheduling system designed to have fewer employees working more hours, which it says will in part “address the longtime complaint among some Starbucks baristas, who are paid hourly, that it's too difficult to secure enough hours on the clock each week. Starbucks, which has not guaranteed full-time hours for non-management store workers, is now creating a full-time description that aims to give those employees at least 32 hours per week.”

    But there’s another rationale for the initiative. Craig Russell, Starbucks vice president of U.S. store services, tells the Journal that the move will help keep familiar baristas behind the counter for longer periods of time … which helps to nurture the relationship between the baristas and their regular customers.

    KC's View:
    There almost certainly are other motivations here; for example, Starbucks has to figure that it will achieve higher productivity out of its regular workers, which in the ling run will cut costs. And that’s smart.

    But the connections that can be achieved within the retail space between employees and customers should not be underestimated. It can, under the right circumstances, be powerful. It can be the difference between an occasional customer and a frequent shopper who becomes an advocate for the retailer.

    In other words, it can be a game changer.

    Published on: October 6, 2008

    The Washington Post reports on a US Department of Agriculture (USDA) study saying that almost a million more people participated in the government’s food stamp program between April and July, going to 28.08 million in April to 29.05 million in July. The figure is said to be the highest since November 2005, when Hurricanes Rita and Katrina drove the number to 29.8 million.

    KC's View:
    Hurricanes Rita and Katrina may seem like nothing when compared to the storms being created by AIG, Fannie Mae, Freddie Mac, et al….

    Published on: October 6, 2008

    Advertising Age raises an interesting question: “Is Wal-Mart's recent run of improved results more about the marketing or the economy? Most signs point to the economy, though economic distress has dovetailed nicely with the marketing.” And how well Walmart is capitalizing on the economic squeeze being felt by many Americans will be seen, Ad Age writes, when the retailer releases its September sales figures later this week.

    The magazine also quotes Burt Flickinger, of the consulting firm Strategic Resource Group, who “estimates that the economy is 270 days into a recession likely to last 700 to 1,000 days. He said Wal-Mart has fixed other things, such as its longstanding fashion problems. And he said he believes Wal-Mart's new advertising, customer-segmentation strategies and focus on sharp pricing on national brands over private label under Chief Marketing Officer Stephen Quinn have helped.

    “But he said results lagging behind the club stores, Kroger and CVS, as well as being the only major national retailer without a credible premium private-label program, show Wal-Mart still has a long way to go.”

    • In the UK, the Observer reports that Walmart-owned Asda Group has created an online sales business, Asda Direct, which sells a wide variety of nonfood items – including clothes, furniture, toys and appliances. The goal of the site is to generate enough high-margin business to compensate for the squeeze on margins now being seen in the food business.

    KC's View:

    Published on: October 6, 2008

    • Stew Leonard’s, which for more than a decade has been trying to negotiate community concerns so it can open a store in Orange, Connecticut, was dealt a setback last week when the State Supreme Court decided to overrule an approval for the project that was granted by the community’s Inland Wetland and Watercourses Commission.

    According to various stories, the court ruling was based on technicalities, not environmental issues. Stew Leonard’s ownership reportedly is considering their next move.

    • In Texas, the Tyler Morning Telegraph reports that Brookshire Grocery Co. plans to build a “new concept store” that will “offer food varieties and shopping experiences not available elsewhere in the region.”

    KC's View:

    Published on: October 6, 2008

    • Bob Piccinini, chairman/CEO of Save Mart Supermarkets, has confirmed the appointment of Stephen Ackerman as the company’s CFO. Ackerman has been serving as the company’s acting CFO/VP-Finance, reporting to Mike Silveira, Save Mart’s chief administrative officer.

    • Western NY-based Tops Friendly Markets announced the appointment of Mary Lewalski - a three-decade veteran of the company having served as a product specialist, merchandiser and buyer, and marketing manager - as director of deli and bakery.

    KC's View:

    Published on: October 6, 2008

    • Family Dollar Stores said that its fourth quarter profit rose to $53.2 million, from $37.8 million during the same period a year ago. Sales rose 8.2 percent to $1.77 billion, on same-store sales that were up 1.2 percent.
    KC's View:

    Published on: October 6, 2008

    Got the following email from an MNB user:

    Regarding Friday's item on Wegmans beginning a test of self-checkout at a western New York store: you commented that Wegmans’ intent here would likely be different than that of "some other retailers" in that Wegmans likely would be deploying this technology "as a way of catering to customers who want this kind of convenience...but will not use it as a way of simply cutting labor costs." Speaking here as a supermarket customer, and not as a supermarket employee, I can't help but think that your take on Wegmans’ intent is unduly biased coming into the issue.

    It would seem to me that from the standpoint of any supermarket customer, there are two possible states of the world with regard to their understanding of, and reaction to, Wegmans’ intent in making self-checkout available: a customer either knows (or can figure out) that a store can ostensibly save labor costs by offering self-checkout, or they don't know (and cannot figure out) that there are possible labor savings available. In the first instance -- they understand the possible savings -- why would they care one way or the other? If they like the self-checkout service, they use it; if they don't, they don't.

    How many customers would deliberately boycott a self-service checkout lane – which they might ordinarily want to use -- as a form of political statement against its deployment, as if to say "I won't support your doing the right thing here, because it's being done for the wrong reasons"? In the second instance -- they cannot understand the potential labor savings -- the whole point is moot anyway: if customers aren't even aware that self-checkout might reduce store labor expense, the issue of whether making such registers available can't even comprehend the "right thing/wrong reason" dimension.

    All this said, then, your comments on Wegmans test program here strike me as "since I like Wegmans to begin with, I'm almost automatically going to like a new program that they embark on" as opposed to "I like this new program Wegmans is trying out, therefore, I'm going to commend Wegmans for trying it." In other words, your position seems to be an example of "I'll articulate my conclusion first, then come up with a case to support it later", rather than the other way around.

    (By the way, though, irrespective of whether the direction of your logic is forwards or backwards, I do think Wegmans can be commended for trying this self-checkout test, and I say that regardless of their underlying reason for pursuing it.)


    Fair point.

    If I have a weakness as a pundit – and I probably have dozens – it is that I tend to give companies and people I like the benefit of the doubt…I tend to trust their actions and motivations because, in some sense, I think they’ve earned it. And I’m probably even more skeptical than I ought to be in cases where I think a company has gone off the rails. (Though I do think I have an open mind – witness the fact that I’ve said nice things about A&P in recent months.)

    Another MNB user thought I went overboard on the Wegmans praise…but had another rationale…this one about a possible jinx:

    I think you are becoming the Sports Illustrated of our industry. When a team appeared on the cover of Sports Illustrated they immediately lost or a key player was injured.

    We used to hear how great Starbucks was, almost daily. We all know what’s going on
    there. My question: is Wegmans next?


    I appreciate the fact that you think I have that kind of karmic juice…

    On the subject of self-checkout, another MNB user wrote:

    One comment you made struck me ironically. You state that there is never a lack of employees to help. I do comparison price checks for another supermarket chain every week. In three years of doing this, no employee on the floor has ever asked me if I needed help and many times I'm just standing around looking for items.

    And another MNB user chimed in:

    Here's a "wild and crazy guy" (Steve Martin) idea...... reduce costs-- install more self checkouts and then increase customer service/relations-- put more employees into sampling kiosks. The lost art of customer relations could be renewed.

    What profit conscious retail executive would want to spend time and money, at store level, to know customers first names ..... their needs/desires and even where the bathrooms are…





    MNB had a story last week about how the Conference Board’s Consumer Confidence Index rose unexpectedly to 59.8 in September from an upwardly revised 58.5 level in August, and I commented that “this is a useless statistic, in my view, because I have trouble imagining that anybody’s confidence is higher these days than a month ago. (The October numbers are likely to crater.) The only people unaffected, I suspect, are people who don't read newspapers or magazines, don't watch television and don’t have Internet access. In other words, cave dwellers.”

    To which one MNB user responded:

    The Conference Board’s consumer confidence index is led by University of Michigan research. This index has been a barometer of consumer confidence for many years and has been a very good indicator. While I agree that sometimes the index doesn’t seem to go up nor down as quickly as I think it should, I justifiably understand the lag. I like you am a trend tracker, reading and learning extensively from many different sources. Not all consumers do that. And, please understand, Sarah Palin, whether you like her or not, did energize a certain segment of the country. Kevin, due to your expansive reading, understanding of key trends and key insights into what is truly happening now and in the future may give you a different perspective on what the index should reflect.

    I wasn't doubting the accuracy of the number. Just its relevance in coming out at a time when pretty much everybody’s confidence has been shaken. (Quite frankly, anybody who isn’t a little concerned about the nation’s current direction at this point isn’t paying attention…)




    I got a number of emails last week prompted by the Chinese dairy scandal, which has resulted in the recalls of a number of products even here in the US.

    One MNB user wrote:

    I find it most interesting that we have allowed ourselves to outsource many products that we then import and not require the same checks and balances on quality that we imposed on those products that used to be "made in America" and little or nothing is done, until after the fact! Have American values sank so low that everything is about price?

    Not sure what the total value is on all foreign products imported, but bet it comes close or higher than the cost of imported oil, which is the talk of the town right now. We'll get the energy thing fixed in the next 10 years and I guess then look at the other items we import and try to fix that, all the while, more companies are moving manufacturing off shore.

    Everything is cyclical! Will we every wake up?


    MNB user Ann Thies wrote:

    Why are we importing milk products/ingredients from China to make anything?! I cannot believe there is not enough dairy production here already or reason not to create more need for it here.

    And MNB user Doug Campbell wrote:

    My very simple solution, and a great argument for COOL, is if it is made in China, I won't buy it. Not for myself, my daughter, my grand-daughter or even my dog. At least, if I know it was made in China, or if the manufacturer lets me know thru labeling if any components came from China, I can make that informed choice.



    Finally, MNB took note last week of 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.

    My comment: 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.)


    MNB user Mike Flanagan wrote:

    Although I am a previous smoker, I believe that this action by government infringes on private enterprise. Cigarettes are a legal item, so why does the government dictate who can sell it. Walgreen and Rite-Ail also sell other “deadly” items such as beer and wine, so where does it all stop. Should they stop selling snack food also?

    As a side note, some people smoke all their lives and never contract lung disease while others never smoke and die of lung cancer.


    Foe the record, I did not endorse the ordinance. I just said that from a marketing perspective, consistency matters…and I believe that stores in the business of selling themselves as a health and wellness source ought not be in the business of selling products that are designed to addict and kill people. (Even if some people manage to beat the odds.)
    KC's View:

    Published on: October 6, 2008

    In Week Five of National Football League action…

    Tennessee 13
    Baltimore 10

    Chicago 34
    Detroit 7

    Indianapolis 31
    Houston 27

    Seattle 6
    NY Giants 44

    Tampa Bay 13
    Denver 16

    Cincinnati 22
    Dallas 31

    Kansas City 0
    Carolina 34

    Atlanta 27
    Green Bay 24

    San Diego 10
    Miami 17

    Washington 23
    Philadelphia 17

    Buffalo 17
    Arizona 41

    New England 30
    San Francisco 21

    Pittsburgh 26
    Jacksonville 21



    And, in the Major League Baseball Divisional Series…

    In the National League, the Philadelphia Phillies defeated the Milwaukee Brewers to win the best-of-five series 3-1 and advance to the National League Championship Series, where they will meet the Los Angeles Dodgers, who swept the Chicago Cubs in their best-of-five series.

    Meanwhile, in the American League…the Division Series rolls on. The Chicago White Sox defeated the Tampa Bay Rays on Sunday, leaving the Rays with a 2-1 game advantage in their best-of-five series. And, the Los Angeles Angels beat the Boston Red Sox 5-4 yesterday, also leaving the Sox with a 2-1 series advantage.

    KC's View:

    Published on: October 6, 2008

    Aisle7™, the worldwide leader in wellness-driven shopper marketing programs for food and drug retail, announces the release of its new flagship product: Aisle7 IN-STORE 2009. Featuring interactive shopping guides, easy-to-use shopping tools and a new suite of applications, retailers are able to engage shoppers on the issues that are top-of-mind: wellness, sustainability and saving money. Aisle7 IN-STORE 2009 features a new campaign-driven architecture allowing retailers to create unique campaigns that adhere to their own marketing calendars and allow them to deliver relevant shopping ideas and targeted messages in high-margin departments throughout the store.

    To learn more about Aisle7 and its shopper marketing programs, please visit:

    http://www.Aisle7.net/WhatsNew

    In addition, Aisle 7 announces that Everyday Food, the easy-to-use, digest-size cooking magazine published by Martha Stewart Living Omnimedia, will participate in the Aisle7 Recipe Partner Program.

    Aisle7 will provide hundreds of healthy, great-tasting recipes from Everyday Food; with a simple tap on the Aisle7 touchscreen kiosk, shoppers can quickly select and print an Everyday Food recipe and then grab the needed ingredients from nearby grocery shelves. Designed to make family meal planning easier, the extensive Aisle7 recipe library is searchable based on shoppers’ personal tastes, food preferences, and dietary needs. All recipes comply with nutritionist guidelines for healthy diets: no trans-fats, low in saturated fat, and less than 30 percent of calories from fat.

    KC's View:

    Published on: October 6, 2008

    MNB is thrilled to welcome a new sponsor, The 2008 In-Store Marketing Expo, which will be bringing you the morning Wake Up Call this month as well as serving as the premium sponsor of the MNB home page.

    We’re particularly thrilled about the Expo coming on board the MNB Express, since the importance of the in-store experience – and the need to think both strategically and tactically - is a constant theme in both our stories and commentaries. So it makes sense for thought-leaders to attend the Expo, where innovative solutions and ideas will be found in presentations, on the exhibit floor, and in the unique networking opportunities available to attendees.

    The 2008 In-Store Marketing Expo is scheduled to take place in Las Vegas on November 12-14. For more information, or to register now, go to:

    http://www.instorexpo.com/expo/

    KC's View: