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    Published on: October 13, 2008

    Advertising Age reports that “after de-emphasizing private label for more than a year, Wal-Mart Stores is looking to ramp up its program by adding package-goods marketing talent, and the move could present a substantial new challenge to marketers who rely on the world's biggest retailer as the economy worsens … But it's not clear a new push by Wal-Mart into premium private label can succeed. Some package-goods marketers noted that having good prices on national brands is key to the retailer's core value proposition, as price comparisons among individual retailer private brands carry little or no weight.”

    The story notes that Walmart is looking for a senior executive to oversee its private label brand strategy, and is ramping up the hiring for its private label division.

    KC's View:
    While Walmart’s central value proposition focuses on low prices for national brands, there is no question in my mind that a strong private label program that emphasizes both quality and value can succeed in specific categories, especially in current economic trends continue.

    And they will continue, make no mistake. Most of the analysts I hear and read keep saying that even if the stock market reverses itself and starts to climb, that doesn’t mean that the so-called “real economy” is improving appreciably.

    It would be foolish to suggest that Walmart cannot be successful with an own label strategy that has worked for companies such as Trader Joe’s and Costco. If it develops a strategy that is c0hesive and consistent, Walmart could turn this into an enormous success story.

    Published on: October 13, 2008

    The New York Times Magazine yesterday was devoted almost entirely to the subject of food, and is worth perusing just to get a sense of cutting edge issues influencing how food is cooked, sold and consumed in the US.

    Two stories stood out.

    In one, author Michael Pollan wrote an 8,000-word open letter to the next President – whoever that may be – suggesting that food policy is something to which the next administration needs to pay attention. In essence, Pollan’s argument is that while the first impulse when confronting rising food prices might be to find ways to expand production, this is no longer as easily done as in the past, since such an approach depends on inexpensive energy, which no longer is available.

    Some excerpts:

    • “Food policy is not something American presidents have had to give much thought to, at least since the Nixon administration — the last time high food prices presented a serious political peril. Since then, federal policies to promote maximum production of the commodity crops (corn, soybeans, wheat and rice) from which most of our supermarket foods are derived have succeeded impressively in keeping prices low and food more or less off the national political agenda. But with a suddenness that has taken us all by surprise, the era of cheap and abundant food appears to be drawing to a close. What this means is that you, like so many other leaders through history, will find yourself confronting the fact — so easy to overlook these past few years — that the health of a nation’s food system is a critical issue of national security. Food is about to demand your attention.”

    • “After cars, the food system uses more fossil fuel than any other sector of the economy — 19 percent. And while the experts disagree about the exact amount, the way we feed ourselves contributes more greenhouse gases to the atmosphere than anything else we do — as much as 37 percent, according to one study. Whenever farmers clear land for crops and till the soil, large quantities of carbon are released into the air. But the 20th-century industrialization of agriculture has increased the amount of greenhouse gases emitted by the food system by an order of magnitude; chemical fertilizers (made from natural gas), pesticides (made from petroleum), farm machinery, modern food processing and packaging and transportation have together transformed a system that in 1940 produced 2.3 calories of food energy for every calorie of fossil-fuel energy it used into one that now takes 10 calories of fossil-fuel energy to produce a single calorie of modern supermarket food. Put another way, when we eat from the industrial-food system, we are eating oil and spewing greenhouse gases. This state of affairs appears all the more absurd when you recall that every calorie we eat is ultimately the product of photosynthesis — a process based on making food energy from sunshine. There is hope and possibility in that simple fact.”

    • “The food and agriculture policies you’ve inherited — designed to maximize production at all costs and relying on cheap energy to do so — are in shambles, and the need to address the problems they have caused is acute. The good news is that the twinned crises in food and energy are creating a political environment in which real reform of the food system may actually be possible for the first time in a generation. The American people are paying more attention to food today than they have in decades, worrying not only about its price but about its safety, its provenance and its healthfulness. There is a gathering sense among the public that the industrial-food system is broken. Markets for alternative kinds of food — organic, local, pasture-based, humane — are thriving as never before. All this suggests that a political constituency for change is building and not only on the left: lately, conservative voices have also been raised in support of reform. Writing of the movement back to local food economies, traditional foods (and family meals) and more sustainable farming, The American Conservative magazine editorialized last summer that ‘this is a conservative cause if ever there was one’.”

    • “There are many moving parts to the new food agenda I’m urging you to adopt, but the core idea could not be simpler: we need to wean the American food system off its heavy 20th-century diet of fossil fuel and put it back on a diet of contemporary sunshine. True, this is easier said than done — fossil fuel is deeply implicated in everything about the way we currently grow food and feed ourselves. To put the food system back on sunlight will require policies to change how things work at every link in the food chain: in the farm field, in the way food is processed and sold and even in the American kitchen and at the American dinner table. Yet the sun still shines down on our land every day, and photosynthesis can still work its wonders wherever it does. If any part of the modern economy can be freed from its dependence on oil and successfully resolarized, surely it is food.”

    • “For today’s agriculture to wean itself from fossil fuel and make optimal use of sunlight, crop plants and animals must once again be married on the farm — as in Wendell Berry’s elegant ‘solution.’ Sunlight nourishes the grasses and grains, the plants nourish the animals, the animals then nourish the soil, which in turn nourishes the next season’s grasses and grains. Animals on pasture can also harvest their own feed and dispose of their own waste — all without our help or fossil fuel … It will be argued that moving animals off feedlots and back onto farms will raise the price of meat. It probably will — as it should. You will need to make the case that paying the real cost of meat, and therefore eating less of it, is a good thing for our health, for the environment, for our dwindling reserves of fresh water and for the welfare of the animals … And while animals living on farms will still emit their share of greenhouse gases, grazing them on grass and returning their waste to the soil will substantially offset their carbon hoof prints, as will getting ruminant animals off grain. A bushel of grain takes approximately a half gallon of oil to produce; grass can be grown with little more than sunshine.”

    • “It will be argued that sun-food agriculture will generally yield less food than fossil-fuel agriculture. This is debatable. The key question you must be prepared to answer is simply this: Can the sort of sustainable agriculture you’re proposing feed the world? There are a couple of ways to answer this question. The simplest and most honest answer is that we don’t know, because we haven’t tried. But in the same way we now need to learn how to run an industrial economy without cheap fossil fuel, we have no choice but to find out whether sustainable agriculture can produce enough food. The fact is, during the past century, our agricultural research has been directed toward the goal of maximizing production with the help of fossil fuel. There is no reason to think that bringing the same sort of resources to the development of more complex, sun based agricultural systems wouldn’t produce comparable yields. Today’s organic farmers, operating for the most part without benefit of public investment in research, routinely achieve 80 to 100 percent of conventional yields in grain and, in drought years, frequently exceed conventional yields. (This is because organic soils better retain moisture.) Assuming no further improvement, could the world — with a population expected to peak at 10 billion — survive on these yields?”

    The other story worth noting is a Q&A with Robert Kenner, who has produced a new documentary called “Food, Inc.” that takes a critical look at the conglomeration of the nation’s food business.

    Noting that Variety suggested that the documentary “does for the supermarket what ‘Jaws’ did for the beach, Kenner says that “some of these chicken houses have 27,000 chickens stuffed in a room without light. They’re designed to grow as rapidly as possible, and their bones cannot keep up with growth. Some of them are too heavy to stand.” But the interview with Kenner suggests that the biggest problem he had in producing the film was legal – he suggests that the nation’s food businesses are both paranoid about too bright a light being shined on their operations, and are quick to sue in order to stifle legitimate discussion of their practices.

    KC's View:
    A couple of quick comments here.

    First of all, read Pollan’s piece in total if you can. (It is available on the Times website.) I’ve only excerpted one-eighth of the total here, and his arguments are complex and deserve attention.

    Both Pollan and Kenner clearly are at odds with the nation’s industrialized food production system, and I’m not at all certain that their message is going to find a receptive audience in a country where people have gotten used to cheap and instant food. Their solutions are complex and time-intensive, and few consumers prefer “complex and time-intensive” to “cheap and instant.” Just a fact of life.

    But I do think that the industry has to take their criticisms seriously, if only because there could be a groundswell of something happening here. It is on a small scale now, and it may not get a lot of traction when people are so concerned about other money issues that seem a lot more immediate. But it could get bigger. Maybe.

    There’s a wonderful line by author Michael Connelly in which he describes a character as staring at the ocean: “"I stared out at the waves and thought about how beneath the beautiful surface a hidden power never stopped moving."

    That’s what the nation’s food industry – and especially supermarkets, which serve on the front line, interacting with shoppers every day – needs to think about.

    BTW…Kenner, who describes himself as having been converted into a sometime vegetarian – a “flexitarian” – by his exposure to the nation’s food business, notes that he grew up in Mamaroneck, New York, and used to eat roast beef sandwiches and play in the game room at a place called Cook’s.

    Both Michael Sansolo and I found this interesting, since we grew up there, too, and ate at Cook’s. (Though I think we’re older than him.) Cook’s isn’t there anymore, though, having been supplanted by a furniture store; instead, on the same stretch of the Boston Post Road, there is a McDonald’s and a Dunkin’ Donuts and a KFC. Part of Kenner’s point is that with the death of independents like Cook’s and its replacement by chains, the nation has lost something.

    Again, this won’t be a majority viewpoint. The question the industry has to deal with is whether there will be growing appreciation for its validity.

    Published on: October 13, 2008

    Delhaize-owned Food Lion announced over the weekend that it has a new marketing program called “Dinner For Under $10,” which on a weekly basis will pull together in one place all the ingredients for a single meal – all that sell for under ten bucks.

    “We are focused on finding ways to help our customers save money in these tough economic times,” said Gene Faller, Food Lion’s vice president of Dry Category. “Our goal is to provide our customers with low-cost, quick and easy meal solutions.”

    KC's View:
    Another in a series of promotions that we’ll be seeing from Food Lion and a lot of other retailers designed to grapple with the economic hard times that we are seeing.

    Published on: October 13, 2008

    • A new website, www.WaltonInfluence.com, has been launched by the activist group Wal-Mart Watch (no relation to the MNB Walmart Watch, which actually was using the name first) as a way of chronicling the political influence being wielded by both the retailer and the family that founded it.

    According to a statement issued by the watchdog group, “Although Sam Walton believed his company should stay out of politics and stick to retailing, Wal-Mart's strategy changed immensely after his death. From 1999 to 2007, Wal-Mart's lobbying expenditures for outside firms increased 7425%. Although Wal-Mart attempts to tout its bipartisanship, the Wal-Mart PAC has given the vast majority of its over $7.5 million in the past decade to the Republican Party and other conservative groups.

    “With more than $12 billion in profits last year, Wal-Mart is the biggest and arguably most powerful corporation in America. Sam Walton's heirs, the majority owners of the company, are worth over $100 billion -- making them the wealthiest and certainly one of the most influential families in America.”

    KC's View:
    A tangential political note here, if I may…

    There was news coverage this weekend about how GOP vice presidential candidate and Alaska Governor Sarah Palin went shopping at a West Virginia Walmart, picking up a number of items (like diapers for her infant son) while simultaneously trolling for votes.

    She made the point while shopping that Democratic presidential candidate and Illinois Sen. Barack Obama doesn’t visit and understand places like Walmart and West Virginia. But it may be fair to suggest that Palin doesn’t entirely understand Walmart and some of its priorities – since she walked out of the store carrying products in two enormous plastic bags, not the reusable canvas bags that Walmart sells and that illustrate the company’s environmental agenda.

    Walmart’s influence isn’t as simple as its support for this candidate or that one, or this initiative or that one. Chronicling its influence certainly is appropriate, but assuming that everything is black and white would be a big mistake.

    Published on: October 13, 2008

    Questions are being raised in the Colorado media about a pricing program being used by Nash-Finch at its Avanza store there.

    The deal is this. Nash-Finch advertises item prices, which is also displayed on the shelves, but adds 10 percent to the basket total at checkout.

    There are signs posted in the store that explain the program, and the 10 percent surcharge is clearly indicated on register receipts, suggesting that this actually lowers prices for shoppers, but local media reports say that at least some customers are complaining that they have been deceived.

    KC's View:
    Not being in Colorado, I cannot accurately say whether the facts behind this program are being accurately and comprehensively communicated. Though it is fair to say that if the customer doesn’t get it, it is the retailer’s fault – because it is the retailer’s responsibility to make sure that shoppers get it.

    I will say this, though. None of the stories that I read about this program communicated very clearly what the shelf/advertised price represented. In other words, if the self price is “cost,” and the 10 percent is “margin,” and this is demonstrably cheaper than elsewhere, then I understand it.

    But that kind of clear, transparent communication doesn’t seem to be happening. Which makes the store look bad.

    Published on: October 13, 2008

    The Boston Globe reports that Super 88 Market, the Asian specialty food chain, plans to close down six of its stores – effectively reducing the size of its chain by half.

    However, company management resists the notion that this is a byproduct of the current economic tough times. A spokesman for the company says that the stores being closed are the smallest units operated by the company, and therefore have not been living up to expectations. “Super 88 is not only not going anywhere, we’re thriving,” the spokesman says.

    KC's View:
    The current economic environment may not have caused the closures of the stores, but it may be fair for those of us on the outside to infer that at the very least, present circumstances probably contributed to the sense that things may not be getting any better in the near term.

    That said. It also is fair to point out that not every chain sees smaller stores as being underperforming simply because of their size – there are a bunch of companies out there convinced that smaller stores answer some very specific marketing questions in certain communities.

    In this case, it apparently was just Super 88’s approach to small stores that wasn’t working.

    Published on: October 13, 2008

    Danny Wegman, CEO of Wegmans Food Markets, has been named to Fitness magazine’s top-50 list of doctors, lawmakers, athletes, business owners, activists and visionaries who effected real change in women's health and fitness.

    Wegman was cited as a “Health Grocery Guru,” and the magazine said that his “personal passion for wellness” has informed the company’s approach to food and values.

    KC's View:

    Published on: October 13, 2008

    Advertising Age reports on the surprising success of oatmeal as a new food item being offered at Starbucks, “despite unseasonably warm weather in many markets.” The paper writes that company executives concede that they’re not even sure why “oatmeal has become the best-selling food item throughout Starbucks' entire system, knocking reduced-calorie coffee cake from the top spot.”

    But a number of analysts suggest that Starbucks is enjoying oatmeal success at least in part because of the product’s appeal to health-conscious women … which could have implications elsewhere in the food business.

    • Published reports say that Archway & Mother's Cookies has filed for Chapter 11 reorganization and has shut down its Michigan headquarters and Ohio bakery. The company blamed high raw materials and energy costs for its financial plight.

    • Starbucks reportedly will roll out a new loyalty card for its best shoppers on November 4 that will give these shoppers 10 percent off most purchases.

    According to USA Today, “The loyalty card, which costs $25, has been tested in Denver and Vancouver. Holders get 10% off most items, except gift cards and digital downloads. Several thousand free cards already were mailed to the chain's best customers, Schultz says. Each store manager will be given three gold cards to hand out to customers deemed the best.”

    KC's View:

    Published on: October 13, 2008

    • Kroger has promoted Steve Young, vice president of process change at the grocery chain's corporate headquarters in Cincinnati, to be its new vice president of operations in its Central Division.

    • Tops Friendly Markets announced the hiring of Mike Lumadue to be the company’s director of health and beauty care and general merchandise. Lumadue was most recently the director of health and beauty care and general merchandise at Weis Markets.

    • Jeffrey Rein reportedly has retired as chairman/CEO of Walgreen Co., to be succeeded by Alan McNally, a member of the broad of directors, while a search for a permanent replacement is conducted.

    No reason was given for Rein’s departure, but speculation was that the board was displeased with current operating results and wanted to shake things up.

    KC's View:

    Published on: October 13, 2008

    Had a story last week about how Stew Leonard’s is thinking of starting up a farm on some Connecticut land where some local activists have prevented a store from being built, and we noted that other retailers, such as Wegmans, also operate farms as a way of being closer to the source of food.

    Which led MNB user Elizabeth Archerd to write:

    Wedge Co-op in Minneapolis has been operating 72 acres of a local organic farm, Gardens of Eagan, this past summer. We signed the lease over a year ago and will close on the sale soon. Gardens of Eagan is one of the premier organic vegetable growers in the Upper Midwest. They started selling to our co-op in the early 1970s and that was the beginning of a beautiful 30+ year relationship.

    The farm supplies Twin City co-ops and private stores, as well as shipping around the region via Co-op Partners Warehouse, a five-state wholesale perishables warehouse that the Wedge operates. Over the next several years, we will be operating the farm as an LLC and building an education program, The Organic Field School, to teach future growers and others interested in sustainable agriculture.


    MNB user Kevin Isom wrote:

    The new trend may be to get closer and even own the source of products in the stores but the direction in the past years has been the other direction. In-house sausage making went upstream for the purpose of continuity of quality and product in regional chains as well as the risk avoidance situation of food borne illness liability. There are many examples of this in the bakery and deli sections along with many preprocessed and prepackaged products in the meat and produce departments that were done previously in the store.

    The organic products do have a feel that if marketed right could counter the current trend in the other sections of the store. Hen House in Kansas City does a great job of promoting local and regional growers in their produce department. It will be interesting to see how much of a market is available to this kind of product sourcing.





    Got the following from an MNB user:

    I couldn't agree more with your views on endless scientific findings on food consumption. I've been saying the same thing for years and am happy you brought this point up. Bottom line, anything in excess is never really good for anybody. For every good decision, there will come a bad decision or two and vice versa. In the interest of full disclosure, there is a Five Guys Burgers & Fries opening up right down my street. Let's just say there is a bad decision or two in my future. It sure beats the alternative of McD's or BK, don't you think?

    Definitely.

    Sometimes bad decisions can be good for you. Or, as the great poet and troubadour sings:

    The rumors and the stories of my past I can’t deny
    I’m no Saint Ignatius but again I’m no barfly
    The wrong thing is the right thing until you lose control
    I’ve got this bank of bad habits in a corner of my soul…


    KC's View:

    Published on: October 13, 2008

    In Week Six of National Football League action…

    Chicago 20
    Atlanta 22

    Baltimore 3
    Indianapolis 31

    Oakland 3
    New Orleans 34

    Carolina 3
    Tampa Bay 27

    Jacksonville 24
    Denver 17

    Philadelphia 40
    San Francisco 26

    Miami 28
    Houston 29

    Detroit 10
    Minnesota 12

    Cincinnati 14
    NY Jets 26

    St. Louis 19
    Washington 17

    Dallas 24
    Arizona 30

    Green Bay 27
    Seattle 17

    New England 10
    San Diego 30




    In the American League Championship Series, the Boston Red Sox and the Tampa Bay Rays come out of the weekend tied 1-1 in the best-of-seven series.

    And, in the National League, the Los Angeles Dodgers defeated the Philadelphia Phillies 7-2 last night, reducing the Phillies’ lead in the best-of-seven series to 2-1.

    KC's View: