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    Published on: January 14, 2009

    Notes and comment from “Content Guy” Kevin Coupe…

    ORLANDO -- Now that’s more like it.

    While the first day of the annual Food Marketing Institute (FMI) Midwinter Executive Conference here came in for considerable and deserved criticism for an relatively unchallenging agenda, the second day was a vast improvement, featuring a pair of morning sessions that focused specifically on critical issues facing the retailers and manufacturers in attendance.

    “The new transformational economy” was the subject of Thomas J. Blischok’s presentation, and the president of consulting and innovation at Information Resources Inc. (IRI) ripped into it with vigor and passion – probably because more than a year ago he was talking about the fundamental changes taking place in consumer attitudes, and the times have proven him to be prescient.

    Blischok suggested that current events actually have “no real comparable period in US history,” and he urged the audience to recognize and act upon certain realities about both the world and their businesses. Perhaps the most significant of these realities – at least when seen from the food retail perspective, is the shift in consumer priorities when going to the store – using lists to buy only what they need and will consume, using coupons and tracking sales to find the best deals, eating more at home and bring more meals and snacks from home in order to save money, and even engaging in what is called the “downturn diet,” which translates to “eating smaller portions, cutting out junk food, drinking a beverage instead of eating a snack, eating a snack instead of a meal, and even skipping meals to save money.”

    One enormous shift taking place, he said, is away from impulse buying. At the beginning of 2008, he suggested, about 40 percent of buying decisions were being made in the store, while by the end of the year that number was down to 25 percent, and is expected to go even lower this year. “This means that you have to rewire your marketing efforts to compensate for shifts away from impulse purchasing,” and the industry has to develop “highly rationalized marketing and merchandising programs” that are “customer-centric.”

    As a result of all these changes, Blischok said, manufacturers and retailers have to work together to get their assortment right, have to be more specific and relevant about new product introductions, and even have to rethink how they market to shoppers, “since there is a growing resistance to hard-sell tactics.”

    Other notes from Blischok’s presentation:

    • Unemployment and the lack of available credit “are driving more shopping decisions than anything else,” he said.

    • IRI’s “misery index,” Blischok said,” was causing a “shock to the system” that was forcing consumers to both tighten their belts and change traditional shopping rituals and patterns, and that many of these shifts could be permanent.

    • The shopper tradeoff between national brand and private label “is expected to continue well into 2009,” he said, “no matter where you are on the economic spectrum.”

    • The reduction in fuel prices is a “fundamental nonevent” in terms of how consumers see their financial viability.

    While Blischok seemed optimistic that the industry will adjust to changing circumstances, a kind of manufacturer-retailer “cooperatition” is needed, he said, “to meet shopper affordability needs.”

    The other presentation was a panel discussion about the business case for sustainability, and focused in large part on findings by the Coca-Cola Retailing Research Council (CCRRC), which brought a wide range of industry personalities together in Beijing last year to focus on this issue.

    Some of the most persuasive arguments were made by John Gummer, a member of the British Parliament and the former UK secretary of state for the environment, who noted that he is a conservative politician ho believes in global warming. “But I don’t care if you believe in climate change or not,” he said, “because the world is going to be run as if climate change is happening.” He urged the businesses in attendance to get it right when it comes to sustainability issues, because the alternative would be for governments to impose their solutions on business, “and we don't want them getting in our business.” By getting ahead of the curve, Gummer said, business can assure that legislation “works with the grain,” instead of being drafted by politicians “with no connection to real life.”

    “We won’t change the world unless it is profitable for the market,” Gummer said,” because only the market is powerful enough to change the world.”

    Gummer noted that there are a range of areas in which the food industry can make a sustainable difference – ranging from the use of water and electricity in stores to the sourcing of local products and the elimination of waste – and said that virtually all of these can be positive for the bottom line.

    Gummer said, “Sustainability is doing more with less, and I cannot thing of a better definition of succeeding in a downturn.” In fact, he said, economic downturns are actually a good time for sustainability moves because it is a perfect time “to put our houses in order, be cost effective, and actually make huge profits for our businesses.”

    There was an extended discussion about plastic bag usage by the panel, with Delhaize’s Denis Knoops, senior vice president of business and concept development and new business opportunities, saying that the company’s shift to reusable bags just in Belgium had saved in one million euros. Alfred A. Plamann, CEO of Unified Grocers, said that he had “mixed feelings” about plastic bag bans or taxes; he said that while some demographics might be ready for such moves, others would resist them, and that a one-size-fits-all approach to such issues may not be most effective.

    Gummer noted that in the UK, Tesco helped shift customers to reusable bags by offering them one point on their loyalty card for every bag they brought into the store during a shopping trip, and that they’ve already cut plastic bag use by 40 percent.

    However, it requires real commitment. Knoops recalled that he was recently interviewing someone for a sustainability-related position with Delhaize, and when the man was handed coffee in a Styrofoam cup, he actually offended and said he didn’t want to work for a company with sort of disregard for the environment. “That’s why we want you,” Knoops said, and he noted that the man has been extremely effective in bringing about sustainable and integrated change.

    Note: The complete Coca-Cola Retailing Research Council report, “Sustainability In Retailing,” can be read by going to http://www.ccrrc.org and clicking on the tab that says “Global.”

    KC's View:
    These two sessions were an excellent one-two punch focusing on how retailers and manufacturers need to change their thinking and their actions to be effective in a transformational economy going through permanent – and hopefully, sustainable – changes.

    It seems to me that a critical component of this kind of thinking is that it has to be cultural for the organizations that adopt it, and it has to be integrated into all the various components of a company’s operations. Organizations cannot afford to be less to be fully committed to rewiring their marketing or sustainability efforts…nor should they accept anything less than a “pedal to the metal” approach to momentum.

    Published on: January 14, 2009

    Supervalu announced yesterday the launching of a new program, “nutrition IQ,” a proprietary “nutrition information program designed to help consumers make better-informed, better-for-you food choices right at the store shelf. The program was developed and implemented in collaboration with Joslin Clinic, part of an academic medical center affiliated with Harvard Medical School in Boston that is recognized internationally for its work in the area of health and nutrition, particularly as it relates to obesity and diabetes.”

    The program is expected to be in every one of the company’s various banners within six months.

    According to the announcement, “The nutrition iQ program comes as research shows that consumers are having difficulty making sense of nutrition guidelines and are looking for an easier way to make informed food choices for better health. For example, approximately three in five consumers think diet and nutrition are very important, yet more than half say they need practical tips to help them eat right and 41 percent don't know or understand nutrition guidelines, according to the American Dietetic Association.”

    The announcement goes on:

    “Nutrition iQ uses established U.S. Food and Drug Administration Nutrient Content Claims as a framework to determine the nutritional benefits of items that pass a set of qualifying criteria and are, at a base level, better for you. Products meeting the threshold criteria are then further evaluated to identify their top one or two nutritional benefits, which are called out for consumers on color-coded nutrition iQ shelf tags.

    The program covers 11 different nutrient claims in seven categories with the shelf tags color-coded as follows:

    • excellent or good source of fiber are denoted by orange tags,
    • excellent or good source of calcium by blue tags,
    • excellent or good source of protein by yellow tags,
    • low or healthier level of sodium by dark green tags,
    • low calorie by a purple tag,
    • low saturated fat by a red tag and
    • whole grains by a dark orange tag.

    The tags are located in an area where consumers naturally look when making food purchases — on the store shelf right below the product's price, unit price and bar code. The at-a-glance cues are designed to help point consumers toward healthy food options. The information serves as a supplement to the more detailed information already found on the ‘Nutrition Facts’ portion of food labels, should consumers wish to compare products further.”

    Supervalu said that “the first phase of the program will focus on items found in the center-store grocery, frozen and dairy areas, where research shows that people have the most frustrations and encounter the most questions regarding food labeling. Products in the bakery, deli, meat, produce and seafood categories will be evaluated and tagged as part of phase two. The program will encompass products at all price points, making it easy to find better-for-you foods for every budget. Approximately 14 percent of the 30,000 products evaluated during phase one will receive nutrition iQ shelf tags. Long term, the company expects about 10 percent of all products throughout the store to carry the nutrition iQ tag.

    “Products and categories that do not meet the program's threshold criteria, which requires an item to have limited levels of sodium, saturated fat and, in some cases, sugar, or lack significant nutritional value, were excluded from nutrition iQ. Excluded categories include bottled water and soft drinks; candy, gum and mints; coffee and tea; cookies; dietetic foods; ice cream; salts and spices; shelf-stable juices and drinks; shortening and oils; soft drink mixers; syrup; molasses; and baby food. Some of these items, however, may still contain other important nutrients, such as vitamins, minerals or healthy fats, that can fit as part of a balanced diet.”

    KC's View:
    From my reading of the Supervalu description, it sounds like this program is closer to the “Guiding Stars” program than it is to the “NuVal” program that assigns a number to every product in the store, 1-100.

    In the past, I’ve expressed in this space a concern that too many systems with too many rating criteria will begin to confuse customers. But I think that may be changing my mind on this. After all, who shouldn’t chains have proprietary, differentiated systems that actually are part of the process of creating customer connections? Maybe people will begin choosing stores based on the kind of advice and information they provide…which actually makes sense, when you think about it.

    Not to say that customers won’t get confused. And I suspect that manufacturers are going to find all these varying systems annoying, since they’ll be trying to figure out how to qualify and get the best ratings in systems that may have different criteria or biases.

    But listen, here’s the important thing. An information-driven customer base is going to be getting more information. Transparency begins to seep into the system.

    This is good. There may be potholes along the way, but the momentum is in the right direction.

    Published on: January 14, 2009

    Interesting piece in Ad Week that further explores the changing consumer and the current economic downturn:

    “Much has been made about the everyday stuff of thrifty consumerism – coupon clipping, fewer restaurant meals, brown-bagging it to work, staying close to home for vacations. But those thumbnail sketches of a contracting economy miss the big picture: The fears among baby boomers, who account for more than half of U.S. spending and who traditionally have grown more affluent with age.

    “Eric Almquist, a Bain & Co. partner, points to the number of retirement-age individuals who are becoming more conservative with money. ‘One of the unique things in the Western world now is that you have a huge group of pre-retirement baby boomers, a huge number of people who are asking, 'Can I live off my savings and social security for the rest of my life?’’ observes Almquist. ‘This creates the potential to switch behaviors. They'll watch pennies more closely, be more careful with credit, avoid losses and be more risk adverse, preserve the status quo, rather than gain gains’.”

    Ad Week notes that there are some predictions that the US savings rate could reach between six and 10 percent this year, which would be a dramatic reversal of recent trends, and goes on, “There is, of course, the irony that as consumers do the right thing for themselves by saving more, they hurt the economy's chances of revival by spending less, the ‘paradox of thrift’ as put forth by John Maynard Keynes. To be sure, younger U.S. consumers haven't suffered the financial reversals of their elders. Their spending may be temporarily reined in during the current credit crunch, but they have a love of brands and their acquisitive tastes show little signs of giving up instant gratification and a ‘luxuries-as-necessities’ lifestyle.”

    KC's View:
    It seems to me that most Americans aren’t going to buy the “save the economy by going shopping” argument. Not for a while, anyway. If for no other reason, their reticence to do so can be traced to the fact that some of the geniuses/economists telling them to do so are the same people who got us into this mess, or at least didn’t realize that the light at the end of the tunnel was an oncoming train.

    As for the baby boomers, Thom Blischok said yesterday that a lot of them aren’t going to retire. I agree with him. (I wasn’t going to retire, anyway. Why would I? I write, read, travel, eat and drink for a living. I’m going to keep going until I drop.)

    But here’s the silver lining. The last few years, everybody has been worried about a brain drain when baby boomers retire. But if they don't leave their jobs, the rain won’t happen…or it at least gives businesses a little more time to maneuver.

    Published on: January 14, 2009

    In Rochester, Minnesota, the Post-Bulletin reports that a new Fareway Economical Food Store is scheduled to open today – a 30,000 square foot store that will be a welcome sight for local residents who have been without a supermarket since the last one there closed in 2006.

    It will be an unusual store in some ways, according to the paper: “Expect clerks to take groceries to customer's cars. The store will be closed on Sundays like retailers of the past. Special cuts of meat and bountiful fresh produce will be available for the asking.”

    The store represents Fareway’s first store in Minnesota, according to the story. The company also operates stores in Iowa, Nebraska and Illinois.

    KC's View:
    I checkout the company’s website, and noticed the following passage about the “closed Sunday” policy:

    “At Fareway, the word “value” has as much to do with the beliefs and principles of our company as it does our low prices.

    “We put these values into practice at our stores every day. For example, we believe in helping others and approaching our work with a servant’s heart. That’s why every one of our managers starts his or her Fareway career carrying out groceries.

    “As a family-oriented company, we believe in taking care of our employees and their families. So we close on Sunday and major holidays to give them the chance to spend time with loved ones, attend church, or simply recharge and reenergize before the start of the workweek.”

    Don't get me wrong. I respect a company with unique values and the integrity to put them into practice no matter what the impact on its competitive stance. But it is hard for me to rationalize the “closed Sunday” policy – it is like getting into the ring for a 15-round fight, but refusing to fight during the seventh and fourteenth rounds.

    Published on: January 14, 2009

    The Grocery Manufacturers Association (GMA) and the Association of National Advertisers (ANA), looking to head off any sort of government dictums about the advertising of certain products to children, sent a letter this week to the Federal Trade Commission (FTC) this week pointing out that “the fifteen participants of the Council of Better Business Bureaus’ Children’s Food and Beverage Advertising Initiative accounted for over 80 percent of the food, beverage and restaurant commercials that children between the ages of two and eleven saw on children’s television programming that year.”

    According to the statement released by GMA and ANA, “the Children's Food and Beverage Advertising Initiative was launched in November 2006 by the Council of Better Business Bureaus to provide companies that advertise foods and beverages to children with a transparent and accountable advertising self-regulation mechanism. The Initiative is aimed at shifting the mix of advertising messaging directed to children under 12 to encourage healthier dietary choices and healthy lifestyles.”

    Current participants include: Burger King Corp.; Cadbury Adams, USA, LLC; Campbell Soup Company; The Coca-Cola Company; ConAgra Foods, Inc.; The Dannon Company; General Mills, Inc.; The Hershey Company; Kellogg Company; Kraft Foods Inc.; Mars, Inc.; McDonald's USA; Nestlé USA; PepsiCo, Inc.; Unilever United States.

    “The food and beverage industry has been working with policymakers, non-governmental organizations, parents, advertisers and other stakeholders in recent years to restructure its marketing practices to promote nutritious choices and promote a healthier lifestyle,” said GMA President and CEO Pam Bailey. “While there is more work to be done, this updated data showcases the fact that industry’s commitment, combined with voluntary marketing changes, is having a significant impact.”

    KC's View:
    Frankly, I’m surprised the FTC has time to do anything about children’s television advertising, given its Javert-like obsession with unraveling the Whole Foods-Wild Oats merger.

    Published on: January 14, 2009

    Interbrand Design Forum has come out with a new report ranking the nation’s most valuable retailing brands, and Walmart is atop the list, followed by Best Buy, Home Depot, Target, and CVS Caremark.

    The organization ranked the retailers based on how much it estimates their brand identities contribute to company revenue.

    KC's View:
    This seems terribly subjective, and very size-conscious. Does Best Buy really have a better brand identity, say, than the Apple Store? You can probably make that argument either way…but that’s what I mean by being subjective.

    Published on: January 14, 2009

    Danny Wegman has been named as one of the nation’s 100 most influential people in business ethics, according to a new story in the magazine Ethisphere. The magazine lauded Wegman for using his family’s moral compass in making business decisions, and pointed specifically at its decision last year to stop selling tobacco products.

    Wegman came in at number 42.

    Other notable names on the list include Wal-Mart’s Lee Scott (#6), US President-elect Barack Obama (# 14), GE CEO Jeff Immelt (# 16), French President Nicolas Sarkozy (# 25), Costco CEO Jim Sinegal (# 37), retired Coke CEO Neville Isdell (# 40), Boston Beer founder Jim Koch (# 57), federal prosecutor Patrick Fitzgerald (# 74), and recently deceased actor/philanthropist Paul Newman (# 91).

    KC's View:

    Published on: January 14, 2009

    A new report from the Taylor Nelson Sofres World Panel says that Tesco’s market share in the UK continues to slip, down to 30.7 percent in the most recent quarter, from 31.3 percent during the same period a year ago.

    Sainsbury’s market share also slipped slightly, from 16.3 percent to 16.2 percent.

    Both Asda and William Morrison Supermarkets saw increases in their market shares, to 16.9 percent and 11.9 percent respectively.

    Discounter Aldi saw its UK market share increase from 2.7 percent to 3.2 percent.

    KC's View:

    Published on: January 14, 2009

    • Laura Wade-Gery, who runs Tesco’s online business, told a session at the annual National Retail Federation conference in New York yesterday that the company has seen extraordinary success in this side of its business because it picks product from stores instead of a central warehouse, which allows it to maximize existing assets. In addition, she said, staff is trained to have a customer-centric attitude, asking themselves, “would I buy it” before making a fresh food selection for a customer.
    KC's View:

    Published on: January 14, 2009

    • Walmart announced that its Sam's Club division “is hosting a Pharmacy Challenge and Savings Checkup in all of its locations through January 31 where consumers can check prices on their prescriptions and over-the-counter medications against other retailers. Sam's Club guarantees it will beat any competitor price on branded prescriptions. Membership is not required to use a Sam's Club pharmacy.”
    KC's View:

    Published on: January 14, 2009

    The five most caffeinated cities in the country?

    In order, they are: Tampa, Seattle, Chicago, New York, and Los Angeles.

    That’s right. The residents of Tampa consumer more caffeine than the people of Seattle. However, that doesn’t mean that they drink the most coffee.

    According to the survey taken by HealthSaver, people in Tampa drink a lot of tea and energy drinks, and take a lot of pain relievers that contain caffeine.

    Seattle remains number one in terms of coffee consumption.

    The least amount of caffeine is ingested by the residents of Riverside/San Bernadino, California, followed by Atlanta, San Diego, Minneapolis/St. Paul and Dallas.

    KC's View:

    Published on: January 14, 2009

    • Following the moves by retailers such as top & Shop, Giant and Wegmans, Safeway said yesterday that “it will offer free prescription antibiotics at its pharmacies in Maryland, Pennsylvania, Washington, D.C. and Virginia, through March 31,” according to a story in the Baltimore Business Journal.

    • The Wall Street Journal reports that in the UK, William Morrison Supermarkets plan to expand its workforce by four percent and create more than 5,000 jobs in 2009. According to the story, “the jobs will be created across the board in a variety of positions, such as its Market Street counters selling fresh food. Morrison also said it will train 18,000 employees in the first year of a new training program.”

    The Journal notes that “there should be no shortage of applicants, given the growing number of people losing their jobs in the U.K. as a result of the credit crunch and economic downturn.

    KC's View:

    Published on: January 14, 2009

    In the UK, the Telegraph reports that as part of a government initiative to reduce wasted food, some 24,000 homes will be visited by officials who will offer advice on cooking with leftovers and portion size. If a pilot program is successful, it could be rolled out nationwide…with officials visiting as many as eight million households.

    According to the story, “The door-to-door campaign, which starts tomorrow, will be funded by the Waste and Resources Action Programme (WRAP), a Government agency charged with reducing household waste.

    “The officials will be called ‘food champions’. However, they were dismissed last night as ‘food police’ by critics who called the scheme an example of ‘excessive government nannying’.”

    KC's View:
    I’m with the critics on this one. If some bureaucrat knocked on my door and wanted to come in and analyze my kitchen habits, I think I’d toss the bloke out on his tuccus.

    I have to be honest. When I saw this story, I went back and read it three or four times because I was convinced it was a joke.

    Published on: January 14, 2009

    …will return. I promise.
    KC's View: