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    Published on: October 31, 2008

    The Wall Street Journal reports this morning of an incipient increase in tension between food retailers and manufacturers. It lays out like this:

    Because of increased commodity costs, manufacturers raised their prices. Which forced retailers to increase their prices. But now, as costs such a fuel come down, many manufacturers seem to be showing no inclination to lower their prices, which is creating some conflict with retailers that want to respond to toughened competition and an economy in decline with lower prices and deals for shoppers.

    According to the story, “Some retailers are using food companies' earnings reports as leverage to reject price increases, according to industry analysts. Others are pushing for more promotional allowances -- such as buy-one-get-one-free deals -- to help move higher volumes of goods … Traditional supermarkets are under growing pressure to compete on price with low-cost grocers such as Wal-Mart Stores Inc. and Germany-based Aldi Einkauf GmbH. Some retailers have suffered as consumers trade down to discount stores and cheaper store-brand goods.”

    Walmart, for one, has made its position perfectly clear.

    The Journal reports that “during a meeting with analysts earlier this week, Eduardo Castro-Wright, chief executive of the Wal-Mart Stores division, said declining oil prices should affect the prices of store items. ‘We will aggressively look for opportunities’ to share cost savings with customers, he said.
    "’We're always having discussions with our major suppliers about cost prices – either because they've approached us about an increase or we've approached them asking them to review their prices,’ said Dominic Burch, a spokesman for Asda, the U.K. unit of Wal-Mart. ‘As a retailer that is growing its volumes significantly, we also expect our suppliers to invest in that growth, sharing the economies of scale they are making with our customers’.”

    KC's View:
    Both sides of the street in the food industry have to be aware that shoppers are extremely cognizant of the fact that commodity and energy costs are coming down, and will react with displeasure if they see companies reaping increased profits that seem out of line with a down economy.

    It is the rare US household, for example, that is looking at headlines this morning and saying, “Gosh, isn’t it wonderful that Exxon Mobil had record profits of $14.8 billion in the third quarter.” Gas prices may be down now, but the wounds of four dollar-per-gallon gasoline are recent and still open…

    Food retailers and manufacturers need to be cautious.

    Published on: October 31, 2008

    • The Star Tribune reports that CobornsDelivers – the e-grocery business that used to be known as SimonDelivers before it went out of business and had its assets acquired by Coborns – began operations on Tuesday.

    “Coborn's inherited Simon's customer list of 19,000 people, but it's not immediately clear how many resumed service,” the Star Tribune writes. “Those that do are being greeted with expanded product line, lower prices and a flat delivery fee of $5 for orders of $50 or more. The fee under Simon Delivers was $9.95 … In an effort to attract new customers, the company is offering promotions for free delivery. For current or former customers, Coborns is honoring all Simon Delivers gift cards and free delivery passes until the end of the year. In the near future, the company will include ‘totenotes’ with orders to alert customers of upcoming specials before they are announced online.”

    KC's View:

    Published on: October 31, 2008

    The Los Angeles Times reports that CVS Caremark has announced that “it would sell 90-day supplies of more than 400 medications for $9.99 and offer discounts for cash-paying patients at its in-store medical clinics … In order to get the $9.99 generic deal, customers must enroll in the program by paying an annual fee of $10. Members paying cash can save 10% on visits to the retailer's in-store MinuteClinics. The $9.99 CVS offer is just a penny less than Wal-Mart's $10 charge for a 90-day supply.”

    The program is a response to similar cuts initiated by Walmart a few years ago.

    “The price competition makes generic drugs just about the only healthcare bill that isn't escalating,” the Times writes. “The lower prices provide a measure of relief to consumers who are struggling with rising health insurance premiums and other out-of-pocket expenses or have lost coverage altogether.”

    KC's View:

    Published on: October 31, 2008

    The Wall Street Journal reports that “Walgreen Co. plans to cut costs, overhaul stores and change the way it fills prescriptions as it shifts gears to respond to rising competition and slowing drug sales.”

    According to the story, Walgreen is counting on “an ambitious plan to fill one-third of its prescriptions at central facilities, shipping them back to stores the next day. The chain wants to rout its insurance processing and nearly all its phone calls through call centers rather than stores. It says the moves will save money and give pharmacists more time to spend with patients.

    “The new process is in place in 150 Florida stores, and Walgreen expects it to cover all stores in the state, which equals 10% of its roughly 6,500 U.S. locations, by the end of next year. The company said it still has to persuade legislators and boards of pharmacy in other states to approve the changes.”

    KC's View:
    If this change in process being advocated by Walgreen means that customers may have to wait as long as 24 hours for certain prescriptions, I think it sounds like the company is pursuing efficiency instead of effectiveness. As a customer, I don't want to wait that long…and I would choose to avoid a pharmacy that believed its own operational needs were more important than consumer needs and desires.

    Published on: October 31, 2008

    The Baltimore Sun reports that Maryland’s Klein’s Family Markets “is joining the Wakefern Food Corp.'s retail cooperative, which owns the ShopRite banner. Klein's membership in the co-op means that its seven stores will be known as Klein's ShopRite.
    KC's View:

    Published on: October 31, 2008

    CIES announced yesterday that the Global Food safety Initiative (GFSI), which it manages, has gotten a new governance structure:

    • JP Suarez, Senior Vice President and General Counsel, International Division, Wal-Mart Stores, has been elected to serve as the new GFSI Chairman for a one year term of office. JP Suarez replaces Roland Vaxelaire, Director of Risk, Responsibility and Quality, Carrefour Group in this position.

    • Yves Rey, Corporate Quality General Manager, Danone Group and Cindy Jiang, Director, Worldwide Quality, Food Safety, and Nutrition, McDonald's Corporation, USA have been elected to serve as Vice-Chairs for a two-year term of office.

    In a prepared statement, Suarez said, “By creating the position of Vice-Chair to support the role of the GFSI Chairman, we will ensure that the key partners in the supply chain are equally represented in the decision-making process of the GFSI Board of Directors, in their drive for further harmonisation of best food safety practice and use of common food safety standards world-wide.”

    The GFSI Board of Directors is now composed of the following companies, reflecting this transition phase, as more food service and manufacturers become involved:

    • Terry Babbs, International Trading Law and Technical Director, Tesco Plc, UK;
    • Hugo Byrnes, Product Safety and Consumer Affairs Director, Royal Ahold, Netherlands;
    • Marcos Campos, Quality Assurance Director, Bertin SA, Brazil;
    • Kevin Chen, Vice President, China Resources Vanguard Co., Ltd., P.R. China;
    • D.V Darshane, Director Policy & Standards, Global Quality, The Coca-Cola Company, USA;
    • Bryan Farnsworth, VP Quality Management, Hormel Foods Corporation, USA;
    • Hervé Gomichon, Quality Director, Carrefour Group;
    • Cory Hedman, Food Safety and Quality Assurance Director, Hannaford Bros. Co. (Delhaize Group), USA;
    • Cindy Jiang, Director, Worldwide Quality, Food Safety, and Nutrition, McDonald's Corporation, USA;
    • Hans-Jürgen Matern, Division Manager Quality Assurance, Metro AG, Germany;
    • Payton Pruett, Vice President, Corporate Food Technology & Regulatory Compliance, The Kroger Co., USA;
    • Yves Rey, Corporate Quality General Manager, Danone Group;
    • John P. Suarez, Senior Vice President and General Counsel, International Division, Wal-Mart Stores, Inc.;
    • Johann Züblin, Head of Standards & Social Compliance, Federation Of Migros Cooperatives, Switzerland.

    KC's View:

    Published on: October 31, 2008

    • Ruddick Corporation, parent company of Harris Teeter, reported that consolidated sales for fiscal 2008 increased by 9.7% to $3.99 billion from $3.64 billion in fiscal 2007, as consolidated sales for the fiscal fourth quarter ended September 28, 2008 increased by 8.8% to $1.03 billion from $0.94 billion in the fourth quarter of fiscal 2007.

    The company reported consolidated net income of $96.8 million, an increase of 19.9% from the $80.7 million reported for fiscal 2007. Consolidated net income for the fiscal fourth quarter was $24.8 million, an increase of 17.2% from the $21.2 million reported in the fourth quarter of fiscal 2007.

    Harris Teeter sales for fiscal 2008 increased by 11.1% to $3.66 billion from $3.30 billion in fiscal 2007. Sales for the fourth quarter of fiscal 2008 were $948.8 million, an increase of 10.2% from the $861.1 million in the fourth quarter of fiscal 2007. The increase in sales was attributable to incremental new stores and comparable store sales increases of 2.86% for the year and 2.16% for the fourth quarter.

    KC's View:

    Published on: October 31, 2008

    Yesterday, in an MNB Radio commentary about the need to make ordinary things exceptional, I used the hamburger as an example, and listed some of the places where I most enjoy the burgers.

    In the piece, I said that the first 25 people who sent me the names of burger places that I’d never heard of would get a free limited edition MorningNewsBeat canvas shopping bag,

    Well, I got deluged with emails…and have decided that the more than 60 people who wrote in yesterday will all get bags. Just because I’m that kind of guy.

    I will compile the list of burger joints and post it next week. And the people who won bags should get them by the end of November.

    KC's View:

    Published on: October 31, 2008

    Just FYI…I’m not exactly sure how this is going to play out, but the delivery times for the MNB Wake Up Call and the actual posting of MNB may be a little off-schedule next week. I’m heading to Argentina tomorrow night, where I will be working both in Buenos Aires and the seaport town of Puerto Madryn on a video project that will be shown at the CIES Food Safety Summit, scheduled for Barcelona, Spain, next February. (One of the best conferences out there, attended by real thought leaders in this area. If you aren’t planning on going, you should.)

    I’m hoping that Internet access won’t be difficult, but I’m not entirely positive. So I hope you’ll be patient with me, and I’ll do my best to hold up my end of the MNB bargain.

    KC's View:

    Published on: October 31, 2008

    ...will return.
    KC's View:

    Published on: October 31, 2008

    Say what you will about Barack Obama. It seemed noteworthy the other night that in his 30-minute infomercial, the mom in the first family that was profiled was shown opening her refrigerator and explaining how difficult it was to feed her family in this time of economic strength. The husband in the second family that was shown was identified as a Walmart employee. The single mom in the third family was shown shopping I the supermarket. And the dad in the fourth family was shown taking his family out to a buffet-style restaurant (which seemed to be a bad decision since the voiceover was making the point that times were tough, and he might have been able to do better feeding his family at home – this doesn’t mean that he’s necessarily irresponsible, but it did imply that he is misinformed).

    My point is this. The act of feeding one’s family and of shopping for food has a kind of primal power. It is something that almost everyone has in common, and how we accomplish these tasks goes a long way toward defining who we are and how we are fulfilling our responsibilities.

    Forget for a moment about who you are going to vote for on Tuesday. That’s important, but it isn’t my point.

    The specific nature of the shopping and feeding experience is what creates opportunity for people who are in the food business, whether they are in manufacturing or retailing. Connecting with that experience, and defining the relationship between food and the shopper in unique and compelling ways, can get the consumer to vote for one retailer over another.

    That’s change you ought to believe in.

    The pace and extent of change became abundantly clear this week when the Christian Science Monitor announced this week that next year it will suspend the publication of its daily print edition and become a web-only news service.

    According to a story in the Boston Globe, “The news comes at a time when major dailies nationwide struggle with sharp drops in circulation and advertising dollars as more readers turn to the Web for their news and other information. Newspapers nationwide suffered an average circulation drop of nearly 5 percent, according to data released yesterday by the Audit Bureau of Circulations.”

    This reminds me of the recommendation made by Marc Andreessen, the co-founder of Netscape, earlier this year that the New York Times shut down its print edition and become Internet-only. His reasoning was that while this would cause a lot of immediate pain, it would avoid the longer and tougher pain of death by a thousand cuts that would take place over the next decade…at the end of which the Times would have to become an Internet-only publication.

    At some level, I hate this. I’m a newspaper guy, and love the feel and smell of newsprint.

    But you know what? That’s progress, and we can't ignore it. We need to embrace it.

    It may be that print publications with the word “news” in their title will be perceived instead as having the word “snooze” in their cultures. They will be seen as being regressive instead of being progressive. And they will be adrift in a sea of irrelevance

    I think I speak for a lot of people when I say that Mike Singletary, the interim head coach of the San Francisco 49ers, is my new hero.

    Singletary instantly became such when last Sunday, frustrated with the attitude and play of tight end Vernon Davis, he ordered Davis to hit the showers during the middle of the game. And then, during the post-game press conference, said that he’d rather lose with 10 players on the field than have a full complement of 11 players like Davis.

    I hope that the fans and ownership stand firmly and resolutely behind Singletary.

    One of the benefits of reading as many newspaper websites as I do each week is that I see all sorts of headlines that catch my attention.

    Here’s one of my favorites from this week:


    The story actually was about the employee of a restaurant in suburban Buffalo illegally butchering a dead deer in the kitchen. Doesn’t matter, really. I think closing the restaurant was a good idea.

    Here’s my other favorite:


    This story is fairly explanatory. A man propositioned a woman, she said no, so he urinated on her dog.

    I read this, and I thought to myself, he should have tried flowers. Maybe a good bottle of wine. Dinner at a nice restaurant.

    Or maybe just take “no” for an answer.

    If you get a chance, read the op-ed piece in last Friday’s New York Times about how to reinvent the health care system.

    It is notable not just for its approach, but for the authors.

    One of them was Billy Beane, general manager of the Oakland Athletics, who is well known for getting maximum effect for minimum budget and who feels that the same approach can be applied to health care.

    But it was his co-authors that really grabbed my attention.

    They were Newt Gingrich. And John Kerry.

    Just for the confluence of divergent political opinions, the article is worth checking out.

    And in a broader sense, it is reassuring when people of differing opinions can come together, talk, and reach agreement.

    I recommend to you the new Robert B. Parker Spenser novel, “Rough Weather.” Some of the reviews have called it “formulaic,” and in all fairness, it has to be said that Parker has his formula down pat. Spenser is tough but caring. Susan Silverman is ever-present and occasionally annoying. Hawk is, well, Hawk. The repartee is funny and stylish. The language has a kind of musicality to it. The plot is pretty good but doesn’t break new ground for the characters or the genre. And there are just enough surprises and twists to keep you turning pages.

    But I loved it. Not in the way that I loved Parker’s books when I first discovered them three decades ago, but in the way one loves old friends that have carved out a permanent and cherished place in one’s heart.

    My wine of the week is a serious “WOW!”

    The 2003 Zaca Mesa Syrah from California’s Santa Ynez Valley, which is smooth and robust and just about perfect. It needs to be repeated: “Wow!”

    That’s it for this week. As noted above, I’ll be in Argentina next week…and will try to share the experience as best I can.

    Have a great weekend.

    KC's View: