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    Published on: October 21, 2008

    by Michael Sansolo

    We Baby Boomers may be forgetting lots of things, but our cultural icons endure. You, too, may remember Charlie the Tuna, Starkist’s cartoon spokesfish, who was always trying to class up his act. As we found out in every commercial, Charlie’s self-improvement program never worked because Starkist didn’t want tuna with good taste; they wanted tuna that tasted good.

    The question is, do shoppers agree?

    At the Natural Products Expo East Show last week in Boston, Kevin Coupe and I heard the answer clearly as “Yes.” And honestly, it was a little surprising. After all, the talk is obviously all about economics these days and we walked into the session we were running fully expecting some anxiety about whether shoppers would spend extra for the natural lifestyle. Instead, we heard the opposite. And traditional retailers and suppliers would be well served to listen.

    What came across in the session and aisles of the show was a conviction that shoppers understand real value and that, in the end, will keep them buying natural foods. They talked about how the best argument for their products remains strong: money spent on food should be about getting the best food possible.

    It’s an argument worth hearing in many ways because value isn’t a synonym for cheap. In fact, it is far more complex than that.

    For instance, the business section in Sunday’s New York Times profiled Apple computers in the midst of articles on the economic meltdown. The Apple article posed the idea that the economic storm may not hit Apple as hard as others. Despite noting that Apple’s stock is down 51% and the analysts are breathlessly awaiting today’s earnings report from the company, most still rate the stock a “buy.” The reason is that Apple’s value is its premium products and that computer buyers of all sizes and types might see quality as the most important value today.

    Or consider the creative ads being run by Boar’s Head meats, which Kevin talked about a few weeks back. Boar’s Head tackles head on the paradox of value with a suggestion to consumers who are cutting back on costs by brown-bagging lunches. Boar’s Head suggests they spend a little of that savings on better lunch meats, which of course they claim to offer.

    In other words, value doesn’t only mean cheap. And those are words worth repeating.

    Tasting good, as Charlie the Tuna always found out (and, by the way, Charlie is still around), matters more in tough times. There is nothing less valuable to a shopper than buying something on special only to have it disappoint. Likewise, there is no greater value than to see a purchase used to its fullest and maybe beyond expectations.

    This is why the natural food folks have such a good argument to make on their seeming lack of concern about the economic pressures facing consumers. For an industry that built its image on selling what is billed as better products meant to be consumed and enjoyed slowly and carefully, value is self-affirming. One retailer Kevin and I talked with added that this is a great time for his store because it helps him make the point of the value and importance of family meals.

    Say it again: value doesn’t equal cheap. Value means value. But someone’s got to tell the shoppers.

    Michael Sansolo can be reached via email at .

    KC's View:

    Published on: October 21, 2008

    Tyson Foods announced this week that it plans to impose stricter country-of-origin labeling (COOL) provisions, beginning early next year, so that more of its products are sourced from US suppliers and identified as such.

    "If we do not take measures to more fully meet the desires of COOL advocates and many lawmakers, and label a large percentage of retail, fresh meat cuts as a product of the U.S., it is likely some of the flexibility in the current regulations will be eliminated," says James Lochner, senior group vice president at Tyson Fresh Meats.

    Tyson said in its statement that roughly 90 percent of its beef and pork products will be labeled as being from the US by early 2009, with the remainder identified as being from specific foreign countries.

    According to the statement, there are expected to be higher costs associated with the new COOL system, and Tyson expects to pass those costs on to retailers…who, presumably, will then pass them on to shoppers.

    KC's View:
    It will be interesting to see if the notion of higher costs associated with such transparency programs gets any push-back.

    Philosophically, though, Tyson seems to be on the right course. Transparency and traceability are going to be key values for all food products in the future, and it is important for suppliers to get ahead of the game.

    Published on: October 21, 2008

    Dow Jones reports on how a variety of retailers are ramping up their prepared food and convenience offerings as a way of appealing to consumers who have lost their enthusiasm for restaurants during the current economic malaise. Examples cited in the story:

    • “Supervalu last month completed the rollout of a private-label line of prepared foods, frozen pizzas and other products to its nearly 2,500 stores nationwide.”

    • “Safeway has expanded its own prepared food line to more than 50 stores, up from an initial test market of a dozen.”

    • “Kroger is moving to make its prepared food easier and more convenient to buy and eat. It has installed bistros at 12 of its stores where customers can take a break from shopping and eat deli sandwiches, sushi or other prepared foods, and plans to double that number by early February, a company spokeswoman said.”

    • “Whole Foods Market … whose spreads of prepared meals and buffets have had competitors playing catch-up in what has been called the ‘Whole Foods effect,’ has over the past year offered more prepared meals for two and four people, placing several courses in a brown bag for shoppers to pick up and go, said Whole Foods co-President Walter Robb. The natural grocer has also made more selections of its private-label sandwiches and salads available.”

    The key, according to both the retailers and analysts, is to maintain a delicate balance – making the food both tasty and convenient, assuring that they represent a value to the shopper, and insuring that there is not too much waste, since consumers will see this an antithetical to the notion of both convenience and value.

    KC's View:

    Published on: October 21, 2008

    UPI reports on research done by students at Rice University, discovering that there is a way to use genetic engineering to put resveratrol in beer, hence giving it properties that will help fight off cancer and heart disease.

    According to the story, “The students have focused on creating a genetically modified strain of yeast that will ferment beer and produce resveratrol at the same time.”

    The only problem – most of the students aren’t old enough to legally buy or drink beer, which means that they say that it will be awhile before they’re actually able to test the product.

    KC's View:
    If the students want to say that they haven't tested the product, I’m perfectly willing to give them the benefit of the doubt. Don't ask, don't tell.

    I will say this. How proud must the parents of those kids be? (Especially the dads.) I’m proud of them, and I don't even know them.

    Nothing like contributing something positive to the culture.

    Beer as health food? Yippee.

    The folks at Anheuser-Busch or MillerCoors ought to looking to sign these kids up to long-term contracts.

    Published on: October 21, 2008

    QSR magazine announced yesterday that the Jack In The Box fast food chain plans to sell the 61-chain Quick Stuff convenience store chain that it began developing a few years ago.

    The Quick Stuff stores were build adjacent to full-service Jack In The Box restaurants, and included gas stations.

    No deadline has been set for completing a sale, and it reportedly depends on the company being able to get an acceptable price.

    KC's View:

    Published on: October 21, 2008

    Walmart said yesterday that it is rolling out a new series of videos to be shown on its various websites that will give the two major presidential candidates – Democratic candidate Sen. Barack Obama and Republican candidate Sen. John McCain – a chance to air their views on key issues.

    The company said that the videos will be available to the 136 million shoppers and 1.4 million employees who regularly peruse Walmart’s e-commerce and corporate websites.

    "We know that, like most Americans, our customers and associates are concerned with a number of important issues, including health care and the environment, with the economy at the top of the list," said Leslie Dach, Wal-Mart's executive vice president of corporate affairs and government relations. "As so many pollsters have pointed out, the 'Wal-Mart Mom' is at the center of the election and we're pleased to offer Sen. Obama and Sen. McCain the opportunity to speak directly to her through these videos."

    KC's View:
    Anything that can get out the vote is a good thing. Kudos to Walmart for contributing to the democratic process.

    Published on: October 21, 2008

    CVS Caremark said yesterday that its $2.6 billion offer to acquire Longs Drug Stores has been accepted by longs’ shareholders, and that the deal is expected to close later this month.

    The deal adds more than 500 stores to the CVS fleet, and gives it a presence in Hawaii, Nevada and Arizona – states where the company was underrepresented.

    KC's View:

    Published on: October 21, 2008

    • Tyler, Texas-based Super 1 Foods said yesterday that it will extend its "Got Gas?" promotion for an indefinite period, continuing to offer customers a five percent savings on their total grocery bill when they spend $35 in one Super 1 Foods fuel transaction. The company said that the decision was based on strong consumer response to the initial program rollout.
    KC's View:

    Published on: October 21, 2008

    • The Chicago Tribune reports that Wm Wrigley Jr. Co. CEO William Perez is moving into an advisory role with the company, a move that comes as Wrigley has been acquired by Mars Inc. Perez will be succeeded by Dushan "Duke" Petrovich president, who the Tribune writes “has been with Wrigley for more than 30 years and will be responsible for the company's worldwide strategy, operations and business performance.”
    KC's View:

    Published on: October 21, 2008

    MNB had a story yesterday about the fact that while commodity costs seem to be coming down in a number of areas, food prices are unlikely to follow. This prompted a number of emails…

    MNB user Bill Bodine wrote:

    Food companies and their trade associations were blaming renewable fuels policies and higher commodity prices for food price inflation. The result of food price inflation, they said, was increased rates of world hunger and poverty. However, commodity prices have fallen 50% or so without any changes to the policies being blamed. So if food prices don’t fall, there could be some very difficult questions to answer.

    One MNB user wrote:

    Kevin, many of us remember the retail pricing strategy during the 70's, 80's, and even into the 90's. A case of 24 goes up 24-30 cents per case and we raise the price of each unit 1 penny. The same was true when the price went down. In essence, as a retailer we wanted to be the first in the market to take the declines. And know what, the customers knew it and it became a competitive advantage over the larger chains....they were less reactive to declines but very reactive to increases. With our warehouse they bought in and protected the retailers as far out as possible. Today on the radio, the comment went like this: "retailers don't like to reduce the retail price when its only a penny or two as then a few consumer gets get confused." Wow, what a statement to make...are retailers concerned about the "few" as this spokesman said or the "many?" who would appreciate any reduction in price.

    MNB user Tom Whittier wrote:

    The story regarding sticky prices only looks a portion of the pricing issue. If a company wanted to adjust pricing of their products downward, they would need to pay “floor stock protection” for any goods sitting on the floor of the warehouses that supply the retail outlets. Floor stock protection is not just a grocery industry issue but it crosses into all areas of manufactured goods. Additionally, manufacturers often times hold the line on prices as long as they can because they realize that once the prices go up, they can’t take them back down.

    Price increases are serious business. Any increase in price affects the base to incremental volume ratio. If this ratio gets too far out of whack, the manufacturer can actually go backwards in terms of profits. They will eventually sell nearly all of their products on deal (on ad), potentially lowering their profits. This is an unintended and unwanted impact of price increases.

    Sticky is not the right word, permanent is more appropriate.

    The only question I would ask is if any of this matters to the shopper. We all read about costs coming down, and it has to make some people ask why prices are not doing the same thing. Issues like “floor stock protection” may be important to retailers, but it is gibberish to shoppers.

    And we need to think about them.

    Just a thought.

    Had a story the other day about how Pizza Hut has created an application on FaceBook that allows people to use that site to actually order food. Which led one MNB user to write:

    Pizza Hut's entry into FaceBook doesn't surprise me at all. In fact it falls nicely in line with their strategy for branding themselves as one of the most accessible delivery services available to gamers everywhere. By creating an exclusive arrangement with online communities such as Second Life and Everquest they establish themselves as 'in the know' about gamers and their needs. While many users may mock their services or note that it is nothing more than advertising, I would bet that delivery orders increased a fair amount when the services became available. Most notably, in Second Life you can convert the fictional currency of Linden dollars into real world goods such as pizza.

    When you translate this idea into the supermarket, retailers need to focus on gaps in the market. Places where they can be one of only a few companies addressing an audience. Video gamers, online communities and the out of the way consumer may be a great way to reach out to a demographic typically ignored.

    While there are quite a few corporate FaceBook pages I would bet that you could bring just as much buzz to your store by running an in store FaceBook promotion. Invite customers to friend your store or run discounts for FaceBook friends. In essence you create your own focus groups and develop a more involved customer base. Additionally, teens and young adults can get more involved in shopping and parents might be paying more attention to who their kids are friends with online. Nothing wrong with a little awareness.

    Going back to the pricing issue for a moment, the Wall Street Journal noted yesterday that “some food companies' costs remain higher than this week's commodity prices because the companies locked in contracts this summer when, for example, corn was selling at more than $7.50 a bushel. This week, corn dipped below $4 a bushel for the first time since last December. It closed Thursday at $3.84 a bushel.”

    In my commentary, I wrote: I can certainly relate to the corn scenario. In the Coupe Household, thinking that oil prices would continue to rise, we locked in a heating oil price about three month ago…and now, as oil prices drop, that looks like a pretty stupid move. Who knew?

    Which led MNB user Geoff Harper to write:

    Don't feel too alone about the locked-in oil price decision. We did the same (stupid?) thing.

    MNB user Ken Simard chimed in:

    Kevin, Thanks for all your interesting and honest viewpoints over the years. I can’t help but wonder, nevertheless, how a man of your intelligence is still using fuel oil to heat his house? Wood pellet stoves are almost 100% efficient, provide a beautiful flame and use pellets that are sustainable, renewable, carbon neutral and at less cost than other fuels with the only possible exception being natural gas, which I know is rarely available in the northeast.

    Good question. I wish I had a good answer.

    Research obviously is called for on this end.

    KC's View:

    Published on: October 21, 2008

    In Monday Night Football action, the New England Patriots smacked around the Denver Broncos 41-7.
    KC's View: