retail news in context, analysis with attitude

MNB Archive Search

Please Note: Some MNB articles contain special formatting characters, and may cause your search to produce fewer results than expected.

    Published on: January 6, 2009

    by Michael Sansolo

    The main reason I love the Internet is that I’m an information junkie. Just the idea that I have access to countless articles each day just jazzes me up.

    Lately, though, the news is so dismal that it’s hard to read.

    The news, after all, is awful on every front. And the reality is that changing our calendars or our president won’t make problems go away easily. Instead, we need to start focusing on a simple agenda of progress.

    An article Monday in Advertising Age took this on, listing resolutions for the advertising industry that focused - shock alert - on providing real value in tough times. Our industry has the same need…so let’s start the New Year with a five-point plan.

    1. Don’t downplay what’s happening out there. People are scared and they see no signs of improvement. For every economist saying that we’ve hit bottom and the recovery will start by July, there is another one who behaves like the fabled groundhog, seeing his shadow and predicting two more years of recession.

    So, what can you do? Don’t tell shoppers that you are there to help. Show them. It’s more than running specials and acknowledging tough times, it’s about providing strategies for the times. Consumer reporters everywhere are talking about how to stretch dollars by shopping specials and circulars. Be part of this conversation and guide the shopper.

    2. Help shoppers find the opportunity for savings by shining the light where they need to look. The February Consumer Reports lists tips for a “downturn diet” that the retail food industry should be embracing like crazy. Gear recipe suggestions around some of these budget stretching and belly filling ideas, such as using more beans, frozen produce and bulk products. Help people return to comfort foods that help the budget, such as baked potatoes with dinner or peanut butter and jelly sandwiches for lunch.

    3. Emphasize value in all forms. Quality still matters, as do service and guarantees of satisfaction. One reason no-name generics became such a punch line in the 1970s was the inconsistent quality of the product. Value means many things, but quality and consistency are always important. Don’t forget it.

    4. Sweat the small stuff, especially where the shopper doesn’t see it. Finding improvements in supply chain issues always matters. Cutting inefficiency always matters. Well, now it matters more, especially as price deflation becomes a reality in some categories. Make sweating the small stuff a priority for your staff, your trading partners…everyone. It could pay off.

    5. Don’t get near-sighted. There are problems beyond the economy that still demand your attention and the back-burner is the wrong place for them. Like it or not, we still need to keep some focus on health and wellness, the environment and the future leadership crisis. Whether this downturn lasts six more months or two years, none of these problems are going away.

    For example…The Washington Post had a scary article this weekend on the coming demographic crisis facing virtually every industrialized country on earth in the lack of a young population to take over leadership. That’s a problem. More than 50% of Americans are now considered overweight and that’s a problem too. And despite early snows in the Midwest, global climate change isn’t turning around. In short, all of these problems still exist and all involve the food industry in different ways.

    Just because the economy is a bigger current problem doesn’t mean these others (and more) will go away.

    Michael Sansolo can be reached via email at .
    KC's View:

    Published on: January 6, 2009

    Interesting piece in the Wall Street Journal this morning saying that smarter decisions by consumers could actually be bad news for retailers and the nation’s economy.

    The argument is that a new thriftiness being embraced by many American families, is “a major reason the downturn may not soon end. Americans, fresh off a decades-long buying spree, are finally saving more and spending less -- just as the economy needs their dollars the most.

    “Usually, frugality is good for individuals and for the economy. Savings serve as a reservoir of capital that can be used to finance investment, which helps raise a nation's standard of living. But in a recession, increased saving -- or its flip side, decreased spending -- can exacerbate the economy's woes. It's what economists call the ‘paradox of thrift’.”
    KC's View:
    This reasoning – which seems entirely reasonable – is part of a broader shift in thinking that seems to be taking hold around the US. A Washington Post column over the weekend suggested that we all need to stop thinking of ourselves as “consumers,” that it creates an unhealthy mindset.

    It also creates a harder environment for retailers to thrive in.

    Published on: January 6, 2009

    The Boston Globe reports this morning that “Governor Deval Patrick is pushing lawmakers to expand the state's ability to collect sales tax on products sold over the Internet, which could add millions of dollars in revenue each year and alleviate a severe budget crisis … Currently, only Internet retailers that have in-state locations, such as stores and warehouses, collect and remit sales taxes on purchases by Massachusetts residents.”

    According to the Globe, “The proposed law would expand that to collect taxes from Internet retailers that have agreed to participate in a multistate compact, called the streamlined sales tax initiative. Because participation is voluntarily, Massachusetts officials estimate the state would collect only an additional $15 million in taxes a year. Still, state officials said passage of the law would help spur Congress to approve a broader version of an Internet sales tax that could produce hundreds of millions of dollars in additional revenue.”

    KC's View:
    At a time when so many other taxes seem likely to be lowered, not sure why it makes sense to raise sales taxes in this area. But since revenue seems scarce in so many areas, I suspect that some sort of mandatory Internet sales tax is inevitable.

    Published on: January 6, 2009

    In an interview with the New York Times Walgreen president/COO Gregory D. Wasson said that the company plans to increase its commitment to retail and employer medical clinics.

    “There are millions of Americans going to emergency rooms for care for common ailments we’re able to treat in our clinics,” Wasson says. “We feel there’s a huge cost reduction available to treat those types of conditions. We feel there’s opportunity to be a big part of this nation’s health care solution by providing nurse practitioners in our retail stores.”

    In addition, Wasson notes that employers have the opportunity to use medical clinics as a way of being both more efficient and effective.

    “Employers across the country are looking for ways to lower their health care costs and deliver better employee benefits,” he says. “This is a way for an employer to do both. The employer has absolutely no access to the patient records that we care for on their campus. We’re looking to have 800 retail and employer retail clinics open by the end of calendar year 2009.”

    KC's View:
    There’s no question that Walgreen sees these clinics as one way to generate sales that will help it survive the current economic downturn. But I think it also is a smart long-term play that will help the company develop more cemented relationships with consumers that have the potential to extend beyond the recession.

    Published on: January 6, 2009

    John Motley, for more than a decade the senior vice president of Government and Public Affairs at the Food Marketing Institute (FMI) and the architect of a strengthened lobbying presence at FMI, has left the trade association to pursue other opportunities.

    Motley’s departure comes as the political winds shift in Washington, DC, and Democrats dominate the executive and legislative branches of government for the first time in this century – a development that will present FMI and the food industry with new challenges to their agendas.

    KC's View:
    It is interesting to note that virtually every member of the FMI senior staff that was in office just two years ago is now gone…some under their own power, and some not so much.

    Leslie G. Sarasin, FMI’s new CEO, is scheduled to give a speech to the membership at next week’s Midwinter Executive Conference in Orlando. I half expect her first words to be, “There’s a new sheriff in town.”

    Published on: January 6, 2009

    The Puget Sound Business Journal reports that Costco has formed a partnership with the NutriSystem diet program, and “will put displays in its stores with details of NutriSystem’s weight-loss programs for men and women. Costco members will be able to call a toll-free number or log on to the Horsham, Pa., company’s website to enroll in the programs.

    “Costco members who enroll will receive 35 days worth of food and a meal planner from NutriSystem for $259.99 for women and $284.99 for men.”

    KC's View:

    Published on: January 6, 2009

    • The Atlanta Business Chronicle reports that Kroger is warning its 12,000 employees in Georgia that “rising health-care and pension costs could be sticky issues” in upcoming labor negotiations.

    • Weis Markets announced it has lowered prices on thousands of so-called “staple items” effective January 2 and that it has implemented a 90-day price freeze on these items – which include both branded and private label items - through April 1, 2009.

    • Reports out of Australia say that eight food and beverage companies - including Kraft, Nestle, Unilever, Cadbury, Coca-Cola and PepsiCo – have agreed to advertise their products to children under 12 only when the items represent positive dietary and nutritional choices. The agreement is part of the previously announced Responsible Children’s Marketing Initiative, which took effect on January 1, 2009.

    • Starbucks reportedly has settled a complaint that had been filed against it with the National Labor Relations Board (NLRB), charging the coffee retailer with illegally interrogating baristas before a hearing with the Michigan Occupational Safety and Health Administration. The company said that it settled the case to avoid protracted litigation.

    • In the UK, the Telegraph reports that Tesco and Walmart’s Asda Group are engaging in yet another skirmish in their long-term price war, with both companies lowering prices in a broad range of items during a time of economic crisis. Tesco reportedly has lowered prices on 3,000 “staple” items as a response to Asda lowering prices on 1,000 SKUs.

    KC's View:

    Published on: January 6, 2009

    • Rite Aid reported that its December sales were $2.16 billion, down from $2.2 billion during the same period a year ago. Same-store sales were off 0.2 percent.
    KC's View:

    Published on: January 6, 2009

    • Weis Markets announced that David J. Hepfinger, the company’s president/COO, has been promoted to the position of CEO, succeeding the retiring Norman S. Rich.

    • Tyson Foods announced yesterday that its president/CEO, Richard L. Bond, will leave the company, effective immediately. He will be succeeded by the former chairman/CEO, Leland E. Tollett, pending the naming of a permanent successor.

    Tyson has been plagued by volatile commodity prices, oversupply, and weak demand.

    KC's View:

    Published on: January 6, 2009

    MNB user Amy Buttery had some thoughts about a piece yesterday about manufacturers downsizing their packaging:

    In your piece on “downsizing packaging” you quote an article which (from the quote you provide) is clearly talking about making packages smaller without lowering price that is, selling 14-oz boxes of a product that used to have 16 oz. for the same price. This is vastly different from downsizing packaging, which I take to mean using less packaging on products (less extra plastic wrap, simpler packaging that doesn’t involve so many layers). Even your commentary suggests you are thinking of this latter meaning (“cut back on packaging to save money and...for environmental reasons.”) But reducing package volume without other changes would in fact increase total packaging. In the example of a reduction from 16 oz to 14 oz, there are 8 boxes on the shelf for every 7 boxes in the old packaging, and often the box size (thus the packaging) has changed minimally if at all (depending on the product, of course). To me, this is a big distinction because I hate the overpackaging trend we have witnessed in the past 10 years or so.

    We had a story yesterday about the pressures faced by dairy farmers, which led MNB user Jerome Schindler to write:

    Beyond your pay grade? Don't feel bad, there are only two people in the entire U.S. that understand the federal milk market order system - and they disagree.

    Milk prices have been controlled by the government since the last depression. Minimum milk prices are supported by a federal price support program. The U.S. is the buyer of last resort for nonfat dry milk, cheddar cheese and butter. The U.S. stands ready, willing and able to buy any and all quantities of these commodities at the support price. Plants producing these commodities will therefore compete for milk at a price that enables them to make at least a minimal marginal profit at these government prices. In the distant past, the support prices served to keep many inefficient smaller dairy farmers in business. The current support prices are truly a "safety net" and translate to minimum milk prices that exceed the cost of production only for the larger and more efficient dairy farmers.

    DFA is not a trade association - it is an agricultural cooperative. DFA is a large business that markets at least 1/3 of the total fluid milk in the U.S. DFA also operates manufacturing plants and have financial interests in large fluid processing operations that package fluid milk and other dairy products for sale to consumers.

    The National Milk Producers Federation is a trade association - members are the various cooperatives including DFA. NMPF coordinates massive lobbying efforts which of course includes massive political contributions. During the Nixon administration many believe these contributions "bought" increases in the support prices that increased supply and reduced demand thereby resulting in huge purchases of surplus dairy products by the government. Currently the NMPF has a program called "CWT" (cooperatives working together) that collects money from dairy farmers, part of which it uses to buy dairy cows that are then slaughtered. That helps reduce the supply and therefore increase the price of milk. This is legal - cooperatives have broad exemptions from the usual antitrust restrictions imposed on other businesses.

    Foreign competition in most dairy products is limited by quotas, tariffs, restrictive federal standards and/or some illogical requirements imposed by the Milk Import Act.

    I hope this helps your understanding a little.


    Another MNB user also sought to enlighten me:

    1) The USDA Farm Service Agency Commodity Price Support programs have been in place, on and off, going back to 1949. Not a new development. The "news" in the Times article is really the current surplus milk and dairy products we are experiencing at this time. (I suspect that other farm commodities are backing up as we speak.......i.e. wheat, cotton, etc. ) The USDA Farm Service Agency administers this among many other programs and services. Attached is a "what we do" one pager from their website regarding price support programs that cover many farm commodities. If you visit their website you will see an extensive list of services provided to the U.S. farm industry beyond price support programs. Aerial/satellite imaging just to name one other service.

    I am sure we could have a lively discussion regarding farm price support programs, both for and against. Just letting you know that these programs are not new. FYI..........the private sector also "buys back" much of these commodity stores when scarcity arises.

    2) Correction: DFA is not a "trade organization"… Dairy Farmers of America, Inc. is a dairy marketing cooperative that serves and is owned by more than 18,000 dairy farmers in 48 states. DFA is one of the country’s most diversified manufacturers of dairy products, food components and ingredients, and is a leader in formulating and packaging shelf-stable dairy products.

    Got it. I think.

    Regarding yesterday’s story about Ron Burkle’s acquisition of Barnes & Noble stock and what his intentions might be, one MNB user wrote:

    Another of Burkle’s holdings, Source Interlink Companies (SORC) is the sole distributor of magazines, CD’s and DVD’s to B&N.

    Had a piece yesterday about the evolution of McCafé shops in Europe, which led one MNB user to offer:

    First, let me make clear that I am not a fan of McDonald’s…greasy, expensive food with no taste and little nutritional value. I eat there if I’m starving and it’s the only option, but I couldn’t tell you the last time I chose to go because I wanted to. The salads over here are genuinely good – very fresh, with great ingredients, but it’s not worth a special trip!


    During our recent relocation to Europe, we didn’t have internet for the first month we were here (long story). So…after I dropped DS at school, and DH at work, I would take our Asus EeePC to the local McDonald’s, which just happens to have a McCafe, and free WiFi.

    Gotta say…they’re on to something. A cup of real coffee (I saw her measuring the coffee and tamping it…remember, here in Europe, ALL coffee starts with espresso – cafetieres and drip machines exist, but they’re not the main source of caffeine!) in a real china cup (with a saucer, no less) and a not-too-bad croissant for 2 Euros. Same price as any café around…but with a quiet corner and free WiFi (weefee, as it’s pronounced here). You can even find a power outlet to plug into without too much looking.

    Another disclaimer – I don’t care for Starbuck’s, because their coffee always tastes burnt. I realize, that with them buying so much coffee, the only way to guarantee the same taste worldwide is to roast the bejeebers out of the beans – you gotta do what you gotta do…but I don’t like burnt, bitter coffee, either. And you’ll pay a LOT more than 2 Euros (about $2.80) at Starbucks for the same thing.

    Now that everyone is watching their pennies/centimes/pence/pfennig/etc…Starbucks would do well to keep an eye on this development. (No, I don’t think McCafe is every going to kill Starbucks…but the potential of a good bruising is there.)

    Regarding Ahold’s new nutrition labels in the US, and the potential for information overload that may not help shoppers, one MNB user wrote:

    I agree with you regarding too much information. The unfortunate truth for the prepared foods business is that if it is changed by man it is probably not good for you (there are exceptions, 100 calorie Oreos are not one of them). For people to truly eat healthy they need to eat fresh, eat very little red meat (no meat is best), get away from dairy products, stop eating frozen meals loaded with salt … you know the drill. People will not make the necessary change to eliminate illness in our society. Healthy tags are a plus but are they really going to be accurate and as you question, what does “70” mean?

    I write a lot on MNB about the death of print and “traditional media,” which led MNB user Ken Wagar to wrote:

    I am a bit conflicted by the “encroaching death of Traditional Media” you refer to, not because it isn’t coming but because I for one will miss the availability of traditional media as an option.

    I recognize that any media has to be profitable to sustain its existence and I am fully aware of both the long term downward trend in Newspaper and Magazine readership as well as the 24/7 availability of alternative sources of news. Having said that however I will miss newspapers and quality magazines if they all go electronic and digital.

    I am a news junkie with a broad range of interests. I typically read two newspapers every morning. A local paper and a national paper. I can read them anywhere I want to including on airplanes and in the bathroom, or on the couch and in bed. That is difficult to do with a computer even a laptop.

    I work on a computer and spend 8 or more hours per day staring at the LCD screen and I really don’t look forward to spending additional hours on line staring at the screen in order to read the newspaper or my favorite magazine.

    I find the internet to be a wonderful tool for staying on top of “breaking news” and for scanning publications that I rarely read cover to cover to find the one or two things of interest to me but I find it difficult to read a full newspaper or complete newsmagazine on screen.

    Maybe I’m a luddite but I’m just curious if others feel the same or if I’m out there by myself? I suppose some of it is an age thing and Lord knows I don’t often fall into a “target audience” today for most marketers.

    We’re not that different, you and I.

    Hell, yesterday I got almost apoplectic when I saw that the New York Times has started putting ads on the front page. This strikes me as a horrible move…but it also points up the reality with which newspapers have to cope in order to make profitable. (No bailouts for media companies, I suspect….)

    As for reading newspapers almost anywhere, try a Kindle.

    Finally, we’ve been having sort of a discussion of how to deal with finicky eaters, which prompted MNB user Jackie Lembke to write:

    I would agree with your take on the picky eaters. I have never forced my children to eat something they truly don’t like, alternatively I didn’t become a short order cook either. There was always alternatives to what was fixed, usually less tasty than the meal I prepared but still available to those who wanted to avoid the meal placed on the table. That said I would consider my children adventurous in their eating choices because I wasn’t afraid to put something “strange” on the table. As they got older they were willing to even try things they didn’t care for when they were younger. One will now eat mushrooms without a thought because although she wasn’t forced to eat them when she was younger they were still in many of the foods she likes (spaghetti sauce). I think offering a variety is important, forcing someone to eat something doesn’t force an appreciation for the food or the experience. As young adults I don’t consider either “child” to be picky, they still don’t like everything, but they are willing to try most things at least once.

    And another MNB user wrote:

    Similar to your family, I'm usually the primary food shopper and cook. When our three daughters were young, I also made a separate entree for them or my wife when the situation called for it, when they just didn't like something I really did or when it was just a tad too adventuresome for them. Scallops and other seafood were a good example. Also did the same for my father in-law who just disliked poultry but was enamored with anything pork. Yes, a little more effort, but worth it to avoid a needless battle.

    Now that our daughters are young women in their early to mid-20s, their palates have matured and they eat almost everything and anything. They especially love curries and spicy food and seafood. My wife and I recently visited our youngest daughter doing her junior year fall semester in Barcelona, and we ordered what turned out to be a big bucket of just fantastic mussels. My wife doesn't like mussels and similar seafood, so our daughter and I thought "cool, more for us" and savored them all. A few years ago, that would have just been me savoring those mussels. Our three daughters are my favorite dining companions, along with my wife of course.

    Sometimes there actually is a pot of gold at the end of the rainbow.

    KC's View:

    Published on: January 6, 2009

    In the Fiesta Bowl, the University of Texas Longhorns defeated the Ohio State Buckeyes 24-21 by scoring a touchdown with just 16 seconds left to play in the game.
    KC's View: