retail news in context, analysis with attitude

Published on: December 18, 2008

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Hi, I’m Kevin Coupe, and this is MorningNewsBeat Radio, brought to you by Webstop, experts in the art of retail website design.

Normally, I like to be upbeat and optimistic at this time of year, but events have transpired that, I’m afraid, have chilled my normally warm and sunny personality.

It is sort of like a real-life version of the old Johnny Carson game show, “Who Do You Trust?”

We know that we cannot trust Marc S. Dreier, the Manhattan attorney who has been charged with multiple financial frauds in both the US and Canada, with allegations that he brazenly swindled investors and clients out of close to $400 million.

Of course, that pales next to the activities of somebody else we know we cannot trust – investment king Bernard L. Madoff, who is charged with ripping off his clients and investors to the tune of $50 billion.

And I’m not even sure how these frauds rank on the scale when compared to the apparent attempts of Illinois Governor Rod Blagojevich to sell the Senate seat formerly held by President-elect Barack Obama – which isn’t just a matter of money, but of violating the public trust. (As I record this, the defense is saying that Blagojevich didn’t actually do anything, but rather just talked about it and that the most he can be accused of is being a blowhard. Well, it’s true…he is a blowhard. But whether he gets convicted or not, we all know he is guilty of being a sleazy, slimy excuse for a politician.)

The thing is, these aren’t isolated incidents.

Dreier and Madoff may have committed fraud on a grand and grander scale, but if the last few months have taught us anything, it is that there were an awful lot of people and companies on Wall Street that were engaged in questionable behavior that focused more on their personal rewards than anything else.

It isn’t really a surprise, but when those three CEOs from General Motors, Ford and Chrysler flew on separate private jets to Washington, DC, to beg for taxpayer money - and did so without a real plan on how to spend it or any willingness to accept personal culpability - it was clear they were tone-deaf to notions of business ethics or even, I would submit, responsibility to shareholders.

I’ve been arguing for months that the Federal Trade Commission (FTC) has proven that it is untrustworthy when it continues to spend taxpayer money to fight a merger that was completed over a year ago for reasons that are at best unclear, and that both the US Department of Agriculture (USDA) and Food and Drug Administration (FDA) have demonstrated themselves to be untrustworthy by putting business before consumers…even though I think it is abundantly clear that such an approach to food safety ultimately will hurt business.

And consider the ethical and legal travails of so-called public servants such as Ted Stevens, William Jefferson, Elliot Spitzer, Randy “Duke” Cunningham, and…well, the list is too long and too depressing to continue.

At the same time, questions constantly are being raised about e fairness and impartiality of the legal system, whether too many doctors are more concerned with getting paid than curing patients, and even, though I breaks my heat to admit it, whether the press does its job in a fair and objective enough manner. In each of these cases, there are more than enough examples of where institutions – and the people who occupy privileged places within those institutions – have let us down.

I would argue that public trust in almost all of our institutions may be at an all-time low. If not, it may be just a matter of time…because in my darkest, most cynical moments, I am absolutely convinced that there are dozens of Marc Dreiers and Bernard Madoffs and Rod Blagojeviches out there. And it is getting to the point that when they are revealed, we shrug our shoulders. No surprise, we say.

But it seems to me that we cannot allow ourselves to be lulled into acts of misbehavior and breaches of the public trust by the fact that people aren’t shocked by them. Especially in the food business, we have to be paradigms of trust…we have to represent the best interests of the consumer with complete and utter transparency.

We have to establish and maintain a trusting relationship with our shoppers. “Trust” has to be job one…because out of that will flow the values and value that they cherish as part of the shopping experience.

“Trust, like the soul, never returns once it goes.” That’s the Latin proverb, oft-quoted here on MorningNewsBeat.

But I have to be honest. I hope it isn’t correct. Because if our public and private institutions cannot regain the trust that they have lost in recent years, then I fear we will remain adrift in a sea of cynicism, unable to find a port in the storm.

That’s no way to live. And we have to begin the fight against such a scenario right here, right now.

For MorningNewsBeat Radio, I’m Kevin Coupe.

Published on: December 18, 2008

The Wall Street Journal reports that Whole Foods has won a legal battle to subpoena confidential marketing and financial information from a Portland, Oregon, competitor, New Seasons Market.

Whole Foods maintains that it needs the information to do battle with the US Federal Trade Commission (FTC), which is trying to unravel the retailer’s $565 million acquisition of Wild Oats one year after it was completed. By getting New Seasons’ market information, Whole Foods says, it will be able to prove that it has not created a monopoly that will diminish competition and result in increased prices.

New Seasons isn’t the only competitor that Whole Foods is targeting; published reports say that it is looking for similar information from more than 90 competitors around the country, and New Seasons’ attempt to challenge Whole Foods was seen as a barometer of how courts would rule in the case.

Whole Food has maintained that only its lawyers would see the information, and that it would not be made available to its marketing people.

According to the story, “New Seasons said Whole Foods' document requests were burdensome and estimated that it could cost at least $250,000 to produce everything Whole Foods requested. The grocer also said that it was not confident that its trade secrets would be protected as promised. The FTC accidentally disclosed confidential business information earlier in the case, while other sensitive information was given to a Whole Foods in-house lawyer, New Seasons said.

“An FTC administrative law judge rejected New Seasons' request Tuesday, saying its information would be protected and that turning it over was not an undue burden.”

No word yet on whether New Seasons CEO Brian Rohter plans to appeal the ruling.

Published on: December 18, 2008

Crain’s Chicago Business reports that Walmart’s sole Chicago store has generated $10.3 million in sales tax revenue during its first two years of existence, including $5.3 million during the past 12 months.

The irony is that many Chicago officials have fought Walmart’s attempts to bring more stores to the city, because of concerns that they could put smaller stores out of business and that the retailer’s anti-union bias is bad for workers.

According to the story, the Chicago Walmart has 426 employees, paid about $11.30 per hour.

Not everybody is happy, of course. “This report card left out some key components that impact the residents and taxpayers of Chicago,” a spokeswoman for Local 881 of the United Food and Commercial Workers International Union tells Crain’s. “They should be setting the standard in terms of wages and benefits, but instead, what’s happening is, they’re lowering the bar.”

Published on: December 18, 2008

The U.S. Commodity Futures Trading Commission (CFTC) announced that the Dairy Farmers of America, Inc. (DFA), its former Chief Executive Officer Gary Hanman, and its former Chief Financial Officer Gerald Bos will pay a $12 million civil monetary penalty for attempting to manipulate the Class III milk futures contract and exceeding speculative position limits in that contract.

The Commission's DFA order finds that, from May 21 through June 23, 2004, DFA, Hanman, and Bos attempted to manipulate the price of the Chicago Mercantile Exchange's (CME) June, July, and August 2004 Class III milk futures contracts through purchases of block cheddar cheese on the CME Cheese Spot Call market. The order finds that the pricing relationship between the CME block cheese market and the Class III milk futures market is well known throughout the industry, and the CME block cheese market price plays a significant part in establishing Class III milk futures prices.

Published on: December 18, 2008

Interesting piece in the Cincinnati Enquirer about how Macy’s is using vending machines in select locations to sell high-end electronics such as iPods and digital cameras, plus accessories, with price tags that range from $14.99 to $349.99.

According to the story, while Macy’s – like many other retailers – is seeing declining sales figures during the current holiday shopping season, the sales-per-square foot for the machines are much higher than the company’s stores are generating. “The good news for retail is that the 28-square-foot vending machines have average sales per square foot of $3,000 to $10,000,” the Enquirer writes.

The “e-Spot” vending machines have been developed by Zoom Systems.

Published on: December 18, 2008

MarketWatch reports that the US Food and Drug Administration (FDA) has approved two versions of a stevia-based zero-calorie sweetener.

Both Coca-Cola and PepsiCo have said they will use the sweetener in new beverage lines.

Published on: December 18, 2008

• The Wall Street Journal reports this morning that following on the successful introduction of oatmeal as a menu item at Starbucks, smoothie chain Jamba Juice plans a similar move, and will have oatmeal at all of its 749 locations by next month.

Published on: December 18, 2008

• Supervalu announced that it has named Robert V. Johnson, the former vice president of investor relations at JC Penney Corp., as its new vice president – investor relations.

• Pilgrim’s Pride announced that Clint Rivers, its president/CEO, and Robert Wright, its COO, have resigned from the company as part of its ongoing bankruptcy process.

Don Jackson, formerly president of Foster Farms, is scheduled to take over as president/CEO, pending approval from the bankruptcy court that is overseeing its affairs.

Published on: December 18, 2008

• General Mills said that its second quarter profit was down three percent to $378.2 million compared to the same period a year ago, Q2 sales rose 8 percent to $4.01 billion from $3.7 billion last year.

• ConAgra said that its second quarter profit was down 31 percent to $168.1 million, on Q2 revenue that was up 10.6 percent to $3.26 billion.

Published on: December 18, 2008

MNB reported yesterday that as part of its effort to increase tax revenues, the state of New York will consider allowing supermarkets to sell wine…which I said I thought was a good idea.

Prompting MNB user Jim Klump to disagree:

Good for retailers? Well, speaking as the owner of an independent wine & liquor store in New York state, a move like this will probably put 75% of stores like mine out of business. Why, so Neil Golub can make millions of dollars more than he does now?

There are over 1200 independent liquor stores in the 54 counties of upstate NY half of which gross less than $1.5 million per year and net their owners a decent, but not extravagant living for the 70 hour weeks that they put in to make a go of it.

When supermarkets start selling "commodity" wines in boxes and jugs at a markup much lower than the industry standard of 50%, people like me will see 25 to 35% of our gross revenue vanish overnight. When the rent comes due, the going out of business signs will go up.

Most of our stores are virtually co-located with supermarkets today, so don't tell me that this will provide greater convenience for the consumer. In fact, show me a supermarket where the staff can help you with your wine selection the way people like me do eleven hours every day.

Governor Patterson thinks this will raise millions in licensing fees. What about the reduction in sales tax revenue when the price of a 5 liter box of White Zinfandel drops by $3 on the supermarket shelf. Based on the amount that I sell, the loss in sales tax revenue would exceed the meager $500 annual licensing fee that I pay.

That's right, with NYS sales tax at 8%, the loss of 24 cents on a $3 price reduction of a single SKU in one store exceeds the annual license fee for that store.

Governor Patterson gives new life to voodoo economics.

Sorry, but with all due respect, I cannot agree with you … because what you essentially are asking for is to be a protected monopoly.

If you get that, then Walmart could be prohibited from selling food, supermarkets could be prohibited from selling prescriptions, etc… Newspapers could be protected from the Internet. It doesn’t make sense. It doesn’t reflect progress.

What you are describing is called competition. It also is called life.

If you are as good at offering a broad selection and an informed sales staff as you say, then it is your job to market those qualities aggressively and turn them into a differential advantage.

It also is possible that by allowing supermarkets to sell wine, it could increase the overall market for wine…and could even improve your sales because more people would be drinking it and developing a taste for better wine.

But that’s up to you.




New York also announced that it will consider a tax on sugared beverages, saying that this would simultaneously raise revenue while encouraging people not to consume products that help cause obesity.

One MNB user wrote:

We tax liquor, beer and cigarettes, why not tax sugar drinks? Taxing something that is not good for a person sure beats taxing healthy foods. This will reduce consumption and increase revenue. This tax should also be on donuts, candy bars etc. Maybe New York can tax obesity, diabetes and heart disease out of existence in NY. When no one purchases those products the newly lost revenue would be more than made up for by reduced spending on health by the state. Wouldn’t it be great if we could tax away these killers, obesity – diabetes and heart disease? We probably could reduce them, it has been working with cigarettes.

MNB user Dale Tillotson wrote:

While New York is not alone in its financial difficulties, the solution can simply be more taxes for this reason.

By putting a tax on sugared drinks especially a large one, it will start cutting into more and more revenue for retailers as consumers start buying more and more bottled water until their becomes a huge tax on that.

With that huge tax on bottled water comes more consumption of tainted tap water, because we have been taxed out of buying a filtration system we consume more tap water that leads to more diarrhea.

Now comes the revenue raiser that will get the country out of its woes. With increased diarrhea we jack the toilet paper tax up to a million % and people will pay it for the toilet paper and thus solve the fiscal crisis, because no one wants to use a sears catalog anymore and newspapers are becoming extinct, the toilet paper tax will save us all.

Are you saying that the toilet paper tax will wipe out all our revenue problems?




We had a story yesterday about how President-elect Barack Obama has proposed freezing the estate tax – popularly known as the “death tax” – at 2009 levels, a move that would neither eliminate it completely nor return it to 2001 levels, at which point it began what was to be a decade-long phase out on the way to complete eradication. In 2001, the maximum estate tax was 55 percent on estates valued above $675,000. The 2009 rate, which would be locked in by the Obama administration, would be 45 percent on per-spouse inheritances of $3.5 million or more. According to various stories, the proposal is likely to find critics at both ends of the political spectrum – conservatives who want to see the death tax eliminated completely, and progressives who believe in what they call “fair tax policies” for lower class and middle class families.

The best email from an MNB user:

If no one is happy, I think it must be good policy.

Agreed.




Lots of reaction to yesterday’s story about how Burger King has introduced a new men’s body fragrance, “Flame,” which is said to smell like hamburgers. I thought a better name would be “Delusional.”

The emails were all over the map…

One MNB user wrote:

Oh come on, this is sheer genius. Think of the line extension possibilities . . . pickle mouthwash, mustard antiperspirant, lettuce bikinis, ketchup couture. Just selling burgers is so pedestrian; so yesterday. The person who thought of this, no, . . . the person who approved it is clearly a visionary - possibly even qualified to head the FDA.

Another MNB user wrote:

Thanks for the tip, Kevin, you gave my co-workers and I several minutes of entertainment (on the lunch hour of course!) and between a couple of us, we ordered 5 bottles. At 3.99 each it will make a GREAT stocking stuffer or Valentine ’s Day gift.

The pricing, the “love scenarios” on the link above and the retail stores (Ricky’s Costume Shop) through which it is sold clearly indicated that Burger King is doing this tongue in cheek and based on the reviews on the website, we are not the only ones who think it is hilarious! Burger King may be on to something with the young adult demographic by taking their ridiculous corporate icon “the Burger King” and mocking him via screen saver style.

However, we disagree with the target market. We think it should be marketed as a woman’s fragrance. I have teased my husband many times by threatening to smear bacon grease on my person to get his attention. As for me, he should wear a scent that smells of chocolate or cookies!

MNB user Kevin Tryon wrote:

“Delusional” is the wrong word. Try “funny” or “brilliant”. It fits with their quirky ad campaigns and is generating a lot of free publicity. Google “Burger King Flame” and check out the number of hits you get from media sites.

But another MNB user, describing herself as “a red-blooded American female not out to be seduced by my meatloaf,” had one word for the new scent:

Gross!

MNB user Steve Sullivan wrote:

Burger King got another mention that it would not have without the introduction of something as inane as hamburger-scented cologne.

Publicity is publicity.

Coming soon. MNB Menage. The scent for the over-worked scribe. Lemony with undertones of the scent of discarded Starbucks cups.

I’m not sure. We have canvas bags. We have coffee. Not sure we’re ready to get into the after-shave and cologne business…

Then again, I’m open to some sort of co-marketing deal.

Still another MNB user wrote:

I can’t help but respond to Burger King’s new “fragrance”, Flame… I’m looking forward to our municipal sewer treatment company to “extend” their brand with a new fragrance with “a hint of that earthy aroma that will have the women running” (they fail to say that the women will be running away from you. Oh, it is easy to guess the new cologne’s name: “s***.”

And another MNB user wrote:

I particularly relish the idea of the Flame-wearing hunk propositioning a lovely young vegetarian!

No…”Relish” is the new scent coming out from McDonald’s…

Just kidding.

You make a good point, though.

It has been more than a quarter-century since I went out on a date, but my vague memories are that heterosexual men don’t wear cologne or after shave because it smells good to us…but because it smells good to the women we are dating.

Then again, maybe I’ve been out of the meat market so long that I’ve lost touch with what works…