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    Published on: November 24, 2008

    Less than a week before the official beginning of the end-of-year holiday shopping season, The Conference Board has published a new report saying that it almost certainly is going to be a blue Christmas for retailers, as consumers plan to spend significantly less on presents this year than a year ago.

    According to the report, “US households are expected to spend an average of $418 on gifts during the holiday season, down from last year’s estimate of $471 … Only 27 percent of all households intend to spend $500 or more on Christmas gifts, down from 33 percent last year. Thirty-seven percent plan to spend $200-$500, and 35 percent are planning to spend less than $200.”

    Other points made in the study:

    • “Households headed by individuals 65 and over intend to spend the most this season, with a $469 average spending budget. Households headed by those aged 35-44 intend to spend $419 on gifts. Households whose incomes top $50,000 intend to spend $551 for Christmas gifts.”

    • “The top Christmas spenders will be East North Central households (Illinois, Indiana, Michigan, Ohio, Wisconsin) who intend to spend an average of $550. Lowest Christmas spending will be in the West South Central region (Arkansas, Louisiana, Oklahoma, Texas) where consumers intend to spend an average of $330 on Christmas gifts.”

    As for holiday shopping on the Internet:

    • It is projected that “39 percent of all consumers will buy Christmas gifts on the Internet. Books top the list of online Christmas buying, with 38 percent saying they will buy books as gifts. Toys and games came in second with 36 percent of consumers intending to purchase these gifts online. Apparel and footwear rank third as online Christmas buying choices, followed by movie videos and DVDs.”

    • “Of the 41 percent who said they purchased Christmas gifts last year on the Internet, 94 percent said they were satisfied with their online buying experience.”

    KC's View:
    At the risk of sounding like a greeting card, I really do think that we have to view the dramatic change in economic circumstances as a real opportunity to focus on the important stuff, and pay less attention to the more commercial aspects of the season. In our household, there will be six days spent together as a complete family, something that is rare with both sons off at college and the eldest having pretty much moved his life to Chicago.

    The supermarket industry ought to take advantage of the moment, and market to families that will be looking for the silver lining of the economic hard times.

    Published on: November 24, 2008

    Published reports say that the US Circuit Court of Appeals for the District of Columbia has rejected a call by Whole Foods to revisit its earlier decision that revived efforts by the Federal Trade Commission (FTC) to stop the retailer’s $565 million acquisition of Wild Oats – a deal that actually was completed more than a year ago.

    What this means is that consideration of the deal goes back to district court, which originally ruled against an FTC request for an injunction that would have stopped the deal before it was completed. Despite the fact that the deal has been finalized and that, in fact, most Wild Oats stores have been converted to the Whole Foods banner, the FTC continues to seek judicial approval of attempts to unravel the acquisition – though it has never been said exactly what such an unraveling would mean and how it would be accomplished.

    Whole Foods continues to express public confidence that the FTC efforts will be fruitless. A trial is scheduled to take place next February.

    KC's View:
    This continues to be one of the dumbest examples of bureaucratic activism that I’ve ever heard of. I don't understand the point, especially because the original rationale for the FTC objections – that Whole Foods would raise its prices because it would have a monopoly in the natural/organics business – seem to be completely moot and irrelevant at this point.

    It is worth pointing out that during the past 52 weeks, Whole Foods’ stock price had a high of more than $44 per share. On Friday, it closed at $8.19.

    So here’s what probably is going to happen. If the FTC gets its way and manages to get judicial approval to try to unravel the deal, it’ll probably send Whole Foods into bankruptcy. And then, Whole Foods is going to go to the federal government for bailout money.

    Just to make the circle complete.

    Published on: November 24, 2008

    The Washington Post weighs in with the latest story about how, despite the fact that energy prices have plummeted in the current economic climate – becoming pretty much the only bright spot in a recessionary period – food prices show little sign of coming down.

    “Earlier this year, oil prices reached record highs, setting off a chain reaction of price increases that has rippled through the economy, ultimately showing up on grocery receipts,” the Post writes. “In recent months, some of those trends began to reverse. With a gallon of gas now closer to $2, the cost of nearly everything has also decreased. The Labor Department reported this week that the Consumer Price Index, a closely watched inflation gauge, fell 1 percent in October -- the biggest one-month drop in more than 61 years.

    “One exception, however, was food prices, which rose three-tenths of 1 percent compared with the previous month. Although prices for several types of food, including produce and dairy, dropped last month, categories such as cereal and meat continued to grow. According to the CPI, the cost of food has increased 6.1 percent over the past 12 months, not adjusted for inflation, though the rate of growth has slowed since this summer.”

    KC's View:
    As the Post notes, some retailers – Wegmans is the best example – have begun lowering prices, saying that it was important to their shoppers to anticipate lowered costs.

    While I think that some manufacturers may try to keep their prices up for the time being, I also believe firmly that a lot of retailers will be putting pressure on those suppliers to lower their prices…and if they don't, they will increasingly be pushing private label alternatives to save shoppers money.

    If the industry doesn’t do this on behalf of shoppers, then a lot of consumers are going to develop their own strategies for lowering their food costs. Better to be on the side of shoppers than to be seen as exploiting them in tough times.

    Published on: November 24, 2008

    As reported here on MNB last Friday morning, Walmart has announced that CEO Lee Scott will step down as the company’s president/CEO as of February 1, 2009, to be succeeded by Mike Duke, the company’s current top international executive.

    Scott reportedly will continue as chairman of the board of directors’ executive committee.

    Eduardo Castro-Wright, who runs Walmart’s US operations, has been named vice chairman of the corporation.

    Most articles about the executive shift say that it reflects Walmart’s increasing dependence on international markets, and that Duke’s experience there will make him an ideal leader at this time.

    The Financial Times this morning assesses the move, writing that “Mr. Duke will bring an entirely different style to the highly political position of head of the world’s largest company.

    “He has been less comfortable in dealing with the media than Mr. Scott and has rarely acknowledged company shortcomings in public. However, he has won the loyalty of colleagues with his open management style, effectiveness and concern over poverty and social issues.”

    FT also notes that “he will be Wal-Mart’s fourth chief executive, and the first not to have worked with Sam Walton, the late founder who died in 1992.”

    Business Week writes that “the change as more of a victory lap than a forced departure for the 59-year-old Scott, whose tenure had been marred by disappointing results and controversy until this year.” While the slumping economy has helped Walmart’s sales and profits – it is a good time for an “always low prices” message – the general feeling seems to be that Scott’s vision for the company, even when unpopular, positioned it to be in the right place at the right time.

    The magazine also suggests that the move could have repercussions elsewhere in the company. “Duke's appointment is disappointing news for two other executives considered candidates for the top job,” Eduardo Castro-Wright, who runs the company’s US stores, and C. Douglas McMillon, who runs the Sam’s Club division.”

    Fortune puts the shift in political terms, noting that Walmart is getting a new CEO at the same time as the US is getting a new president.

    “Not since the mid-term elections of 1994 has Washington seen such a seminal power shift, and that change is unlikely to favor the nation's largest employer,” Fortune writes. “President-elect Barack Obama and a Democratic-led Congress are widely expected to champion issues that Wal-Mart has long opposed, such as expanded health care insurance and labor reforms … Wal-Mart has not exactly had a cozy relationship with Democrats over the years. In 2000, when Scott was named CEO, 85% of Wal Mart's political donations went to Republicans and 14% to Democrats, according to the Center for Responsive Politics, a nonpartisan group that tracks political contributions. Although that gap has narrowed this year (53% to Republicans, 47% to Democrats), Wal-Mart's funding of political action committees still skews overwhelmingly Republican by a margin of more than 2-to-1. The company disputes those numbers, saying 55% of its PAC donations go to Republican organizations with 45% going to Democratic ones.

    “By ushering in a new CEO, Wal-Mart has an opportunity to clean the political slate. At the moment, there is little to suggest that Duke, 58, a former department store executive who joined Wal-Mart in 1995, will be vastly different from Scott in his political dealings.

    “He has personally donated money to the presidential election campaigns of Mike Huckabee, George Bush and John McCain as well as to other Republican candidates, such as Alaskan Congressman Don Young, according to Political Moneyline, a web site that tracks political contributions.

    “But sometimes a symbolic gesture is all it takes to shift the debate.”

    KC's View:
    Now that I’ve had the weekend to think about it, here’s my take on the Walmart executive shift.

    It proves that while a lot of companies wait until the last possible moment to make such critical changes, Walmart gets there early…and makes the move in a way that in forward-looking, not reactive.

    That’s a critical difference.

    I can’t help but think that Walmart resembles nothing so much as the Borg from ‘Star Trek” – the people in the company think and act as a collective, they assimilate and conquer pretty much at will, and no single person is bigger than the whole. It is all about momentum and singularity of thought and purpose.

    And in most cases, “resistance is futile.” Unless, of course, one employs some “brilliantly unorthodox strategy” that Walmart cannot or will not replicate.

    For the record, I’ve actually had the opportunity to interview Mike Duke … on the subjects of food safety and sustainability … and I found him to be personable, engaging and open.

    One other suggestion. President-elect Barack Obama ought to call Lee Scott today. After all, he’s going to have some time on his hands, and he’d bring a unique and experience perspective to the new administration’s efforts to turn around the economy.

    Published on: November 24, 2008

    The Chicago Tribune reports that the mislabeling of food products is causing life-threatening and avoidable allergic reactions in American children.

    The paper ran its own investigation and reports that “in effect, children are used as guinea pigs, with the government and industry often taking steps to properly label a product only after a child has been harmed.

    “ The Tribune investigation revealed that the government rarely inspects food to find problems and doesn't punish companies that repeatedly violate labeling laws. In disclosing ingredients, labels must clearly identify major allergens such as peanuts, milk, eggs and wheat. Millions of parents, teachers and baby-sitters scrutinize these labels to ensure that they are not giving children unsafe food.

    “But an alarming number of products sold as allergen-free actually contain harmful amounts, the Tribune found. Many of the problems occur with foods marketed to children--candy, cookies, cakes and ice cream. Iconic childhood favorites such as Oreos, Pop-Tarts, Frosted Flakes, Jell-O and Campbell's Spaghettios have been recalled for hidden allergens in recent years. ”

    The bottom line: “ An estimated 30,000 Americans require emergency-room treatment and 150 die each year from allergic reactions to food. A large percentage were children, researchers say … The newspaper found that roughly five products a week are recalled because of hidden allergens, making it one of the top reasons any consumer product in America is recalled … The Tribune examined 260 complaints to the FDA since 2001 where people with known food allergies - many of them children who had to be treated at hospitals - reported a reaction from products they claimed were mislabeled. Yet just 7 percent resulted in recalls.”

    KC's View:
    The broad point made being made in the article is that the food industry and the government are culpable for allergy-related maladies being suffered by many children, and that they are both guilty of being less than vigilant about the ingredients included in their products and less than transparent about recalls.

    If this kind of attitude gains any traction, it will almost certainly result in calls for greater legislation and government oversight – which are more likely to be implemented now than in recent years with the swearing in of a new Congress and administration. Which means, it seems to me, that the food industry has to address these issues and complaints quickly and comprehensively…and, where necessary and appropriate, introduce new voluntary safeguards that could preempt government intervention.

    Published on: November 24, 2008

    The Food Marketing Institute (FMI) announced late last week that it is developing guidelines, best practices, case studies and other resources to help the supermarket industry address seafood sustainability issues.

    According to the announcement, FMI’s “Sustainability Task Force formed a working group to identify issues that can be resolved on an industrywide basis. This group is consulting with the Conservation Alliance for Seafood Solutions, composed of the world’s leading environmental organizations and is developing guidelines to help companies create seafood sustainability programs,” and is “gathering case studies of retailer best practices, including initiatives certified by independent agencies and developed with non-governmental organizations (NGOs).”

    “We seek to provide a wide variety of seafood to help consumers maintain a healthy diet, while also recognizing that sustaining the world’s fisheries is critical to preserving the environment,” said Leslie G. Sarasin, FMI president and CEO.

    KC's View:

    Published on: November 24, 2008

    • The Business Courier of Cincinnati reports that “Procter & Gamble Co. reduced its water and energy consumption by 6 percent to 8 percent in its last fiscal year, increasing its reductions since 2002 to roughly 50 percent (and) also cut its waste disposal by 21 percent in the year ended June 30.” P&G’s latest sustainability report says that the company “reduced its water consumption by 7 percent, its energy use by 6 percent and its carbon dioxide emissions by 8 percent.”

    • Published reports say that local government officials in Connecticut have approved a 16,000 square foot expansion of the original Stew Leonard’s that will include a two-story addition at the front of the building and an enlarged entrance to the “world’s largest dairy store.”

    KC's View:

    Published on: November 24, 2008

    • HJ Heinz reported that its second quarter revenue was up four percent to $2.61 billion, noting that while volume slipped 1.3 percent because of consumers’ economic concerns, a 7.1 percent price increase created the revenue increase.

    • JM Smucker said that its Q2 sales were up 19 percent to $843.1 million, and similarly cited price increases as the primary driver.

    KC's View:

    Published on: November 24, 2008

    In Week 12 of National Football League action…

    NY Jets 34
    Tennessee 13

    Houston 16
    Cleveland 6

    New England 48
    Miami 28

    Philadelphia 7
    Baltimore 36

    Tampa Bay 38
    Detroit 20

    Chicago 27
    St. Louis 3

    Buffalo 54
    Kansas City 31

    San Francisco 22
    Dallas 35

    Minnesota 30
    Jacksonville 12

    Carolina 28
    Atlanta 45

    Washington 20
    Seattle 17

    Oakland 31
    Denver 10

    NY Giants 37
    Arizona 29

    Indianapolis 23
    San Diego 20

    KC's View:
    J-E-T-S…Jets…Jets…Jets!

    Published on: November 24, 2008

    MNB had a story last Friday about a new study saying that a dramatic reduction in fast food advertising to young people could have a significant impact on the nation’s childhood obesity crisis.

    My comment:

    There will probably be a call for legislation that will control the amount of advertising that fast food companies can use to target children…though maybe not in the immediate future, since one hopes that Congress has a few more important things on its collective minds at the moment. While I am sympathetic to the cause, I wonder if we could also craft legislation that would force parents to actually be parents, not contestants in popularity contents with their kids as judges. After all, if parents exert some control over what their kids eat, maybe we wouldn’t have to worry about television commercials.

    Then again, it is easier to ban the ads.


    One MNB user responded:

    While I agree somewhat with you on your stance on parents’ role in being parents and exerting control over what their kids eat, I do think you are being too hard on parents here. Or perhaps, just not addressing the true problem. I do think that some parents may be trying to be “contestants in popularity contents with their kids as judges” but I think the real challenge is that parents are just busy (and tired). They are working a lot (and probably even more – if they still have a job – in this economy) and they get home and fast food is easy and for the effort it takes, relatively cheap. And since their kids see ads on it all day long, it also eliminates a fight with the kids.

    Now, eliminating ads is one thing but this only points to the opportunity grocery stores continue to have but also refuse to capitalize on. They need to figure out ways to make shopping and cooking quick, easy and relatively healthy (it doesn’t take much to be healthier than fast food). Teach their consumers how to meal plan, how to shop, how to make cooking fun for the whole family.

    The grocery store is one of the few places most of us still go to at least weekly. Grocers need to capitalize on that. Why shouldn’t every grocer have an end cap on display right now that says “feed your family for $XX tonight” with all the ingredients right there and maybe a recipe card to top it off!!!


    MNB user David White wrote:

    Once again I am flabbergasted by the thought that we can enact legislation to take the place of good parenting. The problem is not advertising, but too many parents unwilling to be the “bad guy” and make decisions that are in the best interest of the child.

    Just the other day, my 6 year old and I were having a daddy-son day and he wanted to go to McDonald’s for a Happy Meal. I had a choice – I could give in and be his buddy, or I could do the right thing and say no, which would mean he would be unhappy. I informed him, gently but firmly, that we were not going to McDonald’s but would have lunch together at home so we could eat something better for us. He was unhappy and whined a little, but he was over it within a few minutes and we had a great day.

    It is my job to make sure that he eats well and learns to make wise decisions. It is not a hard job, but I can’t worry about being popular. As he grows up, he will appreciate it.


    MNB user Pat Patterson wrote:

    For decades the people of this country have used the legislative process attempting to force the populace into changing their lifestyle. The intent of this legislation is well intended but has never proven especially effective. It failed with prohibition, hasn't stopped part of the nation from committing suicide by smoking and global warming by all reports is real. With this history of failure, why do we think legislation limiting fast food ads will correct or slow obesity? If you were to consider hiring our legislators as a group to run your company you would pass given their history of failure and mis-decision.

    Legislation isn't the answer, parents are. Whatever happened to adults like my Mom, "we don't have the money for you to be eating that trash," or "get off your lazy butt and go outside and play." Parents have to be the enforcing agency, they are the ones who have to step up to their responsibilities and teach children proper habits including eating, morals, ethics and education, just to name a few areas. But then, I was an infantry sergeant and was trained to simplify everything, get to the heart of the matter.

    Several years ago I had a conversation with a set of parents complaining about what their teenaged son watched on TV. I observed that they had the final control, just turn the thing off. "Oh no," the dad said, "then I have to listen to him complain." Do we see the problem?

    Parents get involved.


    MNB user Ellen Ornato wrote:

    Kids don’t drive, right? And last time I looked all the food in our house was purchased by either my husband or me, not by our daughters. I won’t get into the politics of our nation right now but it’s absurd to think that our lawmakers will spend one iota of time on this “issue” while Rome is burning.




    On another subject, MNB user Nicole Schubert had some thoughts about last Friday’s assessment of the new James Bond movie, “Quantum of Solace”:

    I totally agree with your assessment of the new Bond movie. As a life-long fan of the films, I was blown away by Casino Royale - I thought it was the best Bond film since Goldfinger (and had one of the best theme songs ever!). I thought Quantum of Solace did a great job of staying true to the brave new Bond world that Casino Royale created.

    When I hear the complaints about Quantum, they all boil down to the same thing: People miss the familiar clichés they could always expect from a Bond film. Well, familiarity often leads way to complacency, and that is exactly what most of the more recent Bond movies had been about: a litany of sorely out-dated clichés, over-acting, winks at the audience... and not much else.

    The new Bond movies have a firm grasp on how the world has changed, and how audiences expect those changes to be reflected in Bond's world. I've read criticism of the lack of "gadgets" in the new Bond movie...but the Apple-inspired plasma computer wall in M's office in Quantum - that's what gadgets are today, not invisible cars and exploding pens. I've read criticism that the villain in Quantum is so physically puny that he's no threat. But that's what villains look like today - they're greedy CEOs and corrupt politicians, not muscle-bound Cold War spies. The people behind these new Bond movies, and the new Batman movies as well - they get it. Be true to the iconography and the fantasy, but make it compelling by making it current. There are business lessons in all of this, of course. Don't underestimate the consumer's openness to the new and different. Ignore the changing consumer world at your own peril.

    Deliver more than is expected, and engender loyalty.

    P.S. As I write this, I am wearing the Dr. No watch from the new line of Bond Villains watches from Swatch. Super cool!


    And another MNB user chimed in:

    Great point on the Re-branding of Bond. It was a risk, but necessary, as the franchise was fading in my opinion. I would point out, however, that the producers didn't abandon the old brand altogether. Yes, they re-tooled the character and tone, but they acknowledged the Bonds of the past. In Casino Royale, the shot of Daniel Craig in swimsuit at the beach and the "shaken or stirred?" comment from the bartender were both sly references for long-time fans. In Quantum, the recipe for Bond's favorite martini is described but not named. Those who read the books know he named it The Vesper.

    These may seem minor, but they provide reference points for those who grew up with Bond. They help make us feel "in" with the new franchise. When looking to update an older brand, marketers can do well to have some ties to the past in order to keep the old audiences, while re-invigorating the brand to appeal to new ones.


    Precisely.
    KC's View: