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    Published on: January 23, 2009

    Dow Jones reports on increased tensions between some food retailers and manufacturers, as the retailers seek price decreases and the suppliers try to maintain recent price increases and instead offer more trade dollars, coupons and two-for-one deals.

    The “negotiations highlight how retailers are looking to their vendors for help in getting lower prices for their customers, who have less money to spend amid a deepening economic crisis and growing unemployment.”

    The story continues, “Grocers like Supervalu and Safeway Inc. are looking to move away from promotional pricing and offer lower everyday prices to improve their price perception and to better compete with low-cost food retailers like Kroger Co. and Wal-Mart Stores Inc. The gridlock over lower prices could slow plans by those grocers to realize their new strategies, analysts say.”

    While most manufacturers haven’t yet lowered their prices, “as the economic downturn draws out and consumers continue to feel pinched, food makers that hold on to their higher prices may lose more of the market share to private-label products, even in some categories like cereal, where market share for brand-name products remains strong.”

    KC's View:
    At some level, isn’t reduced trade spending and fewer promotional allowances exactly what a lot of manufacturers have been arguing for over the years, while many retailers were unable to wean themselves off such funds?

    Lowered food prices seem inevitable to me, especially as the recession spreads and deepens. (The announcement yesterday that Microsoft for the first time will lay off 5,000 people seems to be a widely accepted signal that this thing is going to get a lot worse and last a lot longer than most people hoped or expected.) So maybe manufacturers can actually use the moment to their advantage, and shift into a different economic mode that will depend less on things like slotting allowances and create a better foundation on which to build long-term.

    Published on: January 23, 2009

    The New York Times this morning reports that two Chinese men have been sentenced to death because of their role in the melamine tainted milk scandal that killed at least six children, sickened thousands, roiled the nation’s dairy industry and helped ruin China’s image in the international community. Three other men were given life sentences, while a number of other people received lesser sentences.

    According to the story, these are the first sentences to be handed down in the case.

    “The scandals erupted in September, prompting a global recall of Chinese-made dairy products, shaking consumer confidence and devastating the nation’s dairy industry,” the Times writes. “Some lawyers and victims have accused Beijing of failing to regulate the nation’s dairy industry properly. Some critics believe that the government covered up the scandal until after the Olympic Games in Beijing in August.

    “The Intermediate People’s Court in Shijiazhuang, in the northern province of Hebei, said the defendants had intentionally produced or sold dairy products laced with a toxic chemical called melamine, which was used to create the illusion of a higher protein count, but which caused kidney stones and other ailments in about 300,000 children last year.”

    KC's View:
    There is a totalitarian aspect to this sentence that makes me very uneasy, but you have to concede that the Chinese know how to put teeth in their food safety laws.

    Published on: January 23, 2009

    The Wall Street Journal reports that US District Court Judge Paul Friedman has scheduled a two-day hearing for February 17-18 that will evaluate the continuing efforts by the Federal Trade Commission (FTC) to unravel the $565 million acquisition of Wild Oats by Whole Foods, an acquisition that was closed more than a year ago.

    The FTC maintains that the deal is anti-competitive and will result in less choice and higher prices for consumers, but Whole Foods argues that this position betrays a lack of understanding of the marketplace.

    According to the story, “The FTC plans to hold a full administrative trial on the legality of the Whole Foods-Wild Oats merger in April.

    “The commission told Friedman Thursday that Wild Oats needs to be preserved as a separate brand to ensure interim competition in the market for organic foods until all legal proceedings have run their course.

    “Whole Foods argued in response that the FTC's proposal is extremely burdensome and impractical because integration of the two companies is mostly complete.”

    KC's View:
    My position has been clear on this story – the FTC is deluded and wasting taxpayer money, and the facts would indicate that there is plenty of competition in the natural and organic marketplace.

    But I got an email yesterday from someone who did not want to be quoted, but who suggested that I could be completely misguided in my objections to the FTC actions, and that there could be plenty of reasons that it wants the deal undone.

    I cheerfully admit that I could be wrong about this, just as I could be wrong about pretty much anything. But if the FTC had legitimate and convincing cards to play, you'd think that it would have played them by this point. Which best I can tell, it hasn’t.

    The problem is that even if Friedman rules against the FTC, the agency will continue to press the case administratively. Which means that this story isn’t even close to being over.

    This may be good for people like me, who rant for a living. But I can’t see how it is good for anyone else.

    Published on: January 23, 2009

    The Business Journal of the Greater Triad Area reports that Food Lion has cut 80 jobs, half of them in the company’s corporate offices, and none of them in the stores.

    “It’s our objective to continue to evaluate and improve our business in order to better meet the needs of our customers and remain a successful organization in uncertain times,” spokesperson Karen Peterson tells the Journal. “Consequently, we’ve had to make the difficult decision to eliminate some positions.”

    KC's View:
    Going to be a lot of stories like these about a lot of companies. The moves are inevitable as companies of every stripe work to gird themselves against the impact of the recession.

    Published on: January 23, 2009

    Bloomberg reports that Walmart has asked the Canadian Supreme Court to “reject a lawsuit that seeks to restrict businesses from closing when employees join unions.”

    The case refers back to Walmart’s decision to close a store in Jonquiere, Quebec, after employees there decided to join the United Food and Commercial Workers (UFCW), the first Walmart employees in North America to unionize. Walmart subsequently closed the store, saying that it was an underperforming unit anyway, and that paying union wages would make it even more of a losing proposition.

    According to the story, “Quebec’s provincial labor commission dismissed the workers’ complaint that they were fired for union activities, saying Wal- Mart showed good and sufficient cause for the decision to close the store. The commission’s ruling was upheld by a Quebec Superior Court judge and the provincial court of appeal.” But now the union is taking its compliant to the Supreme Court, which has reserved it decision for the time being.

    KC's View:

    Published on: January 23, 2009

    MNB reported yesterday that Fortune was out with its annual list of the nation’s best places to work, and among the top 100 were 10 food and retailing companies.

    Well, we missed one.

    Quik Trip, the Oklahoma-based convenience store chain, also was on the list, coming in at number 27.

    Apologies for the oversight.

    KC's View:

    Published on: January 23, 2009

    Yesterday, we posted an email from MNB user Sherri Field, who took issue with Michael Sansolo’s column about the environment’s bottom line. In essence, she argued that “green articles about energy footprints...and waste modification” were tantamount to fairy tales, and that the people saying such things were “swindlers.”

    I respectfully disagreed, and said that “to believe that man is having no impact on the environment around him, and to think that we cannot reverse our negative impact though a careful and nurturing stewardship of the planet” is the fairy tale.

    MNB user Al Kober disagreed with me.

    We agree on some things and not on others, that is what makes this so much fun.

    Man is not in charge and cannot effect the climate change going on around us. Anyone who believes that is “tantamount to believing in fairy tales.”

    It is happening, yes, man was given a lot of responsibility to take care of the earth and the animal inhabitants, but he is not in charge of weather. Not his job. Just like weathermen, they can tell us what is happening and sometimes can tell us what might happen but they do not make it happen.

    Oops, I think I just saw the Tooth fairy, or was that the Easter Bunny?

    You’re right, we disagree. Because – and I say this respectfully – I think that saying that we have “a lot of responsibility” for taking care of the earth is a cop out. If there is a deity, it seems to me that he or she put us completely in charge of taking care of the earth…it is like the final exam, and we may be graded pass-fail. Nobody is arguing that we have complete responsibility for the weather, which existed on earth before man did. But we do have culpability if the way we treat our environment – like spewing pollution into the atmosphere – causes climate change.

    Another MNB user argued:

    I mostly agree with Sherri Field. Environmentalists have gone to absurd lengths to create "The sky is falling" mentality around many environmental issues (such as man-made global warming). We need to be good stewards of the earth, but we also need to be rational stewards of our national economy, which is under assault by most
    environmentalists. They would posit that the debate over man-made global warming is over when an increasing number of scientists disagree. But the dissenting scientists don't get the press. The good that has come out of the environmental movement (recycle, re-use, etc.) is smart. In the old days we would call that being frugal. "Waste not, want not." Some balance needs to be brought to this issue.

    I would never argue that economics should be ignored in this discussion. I think we have to find ways to make environmental efforts work for the economy, not against it. I’m not all that smart, but it is hard for me to imagine that it is an either/or situation.

    As for the “increasing number of scientists” who question whether man-made global warming is factual…well, I give them about the same level of credibility that I give the scientists who argued that smoking didn’t cause lung cancer.

    Which is to say, no credibility at all.

    KC's View:

    Published on: January 23, 2009

    Talk about tone deaf.

    There was an exclusive report on CNBC and the Daily Beast yesterday about Merrill Lynch CEO John Thain, who was brought in to run the company in 2007 after “the firm suffered massive losses from investments tied to the depressed real estate market.”

    In other words, Thain was hired to help the company survive tough times.

    So what did he do last year? He spent $1.2 million to redecorate his office. According to the story, “Big ticket items included $87,000 for an area rug, four pairs of curtains for $28,000, a pair of guest chairs for $87,000 and fabric for a ‘Roman Shade’ for $11,000 … another area rug for $44,000; a ‘mahogany pedestal table’ for $25,000; a ‘19th Century Credenza’ in Thain's office for $68,000; a sofa for $15,000; four pairs of curtains for $28,000; a pair of guest chairs for $87,000; a ‘George IV Desk’ for $18,000; six wall sconces for $2,700; six chairs in his private dining room for $37,000; a mirror in his private dining room for $5,000; a chandelier in the private dining room for $13,000; fabric for a Roman Shade" for $11,000; a ‘custom coffee table’ for $16,000; (and) something called a ‘commode on legs’ for $35,000.”

    Here’s another great piece of reporting from the story: “At the time, Thain was preaching the virtues of cost control, telling employees to reduce expenses including car services, entertainment and travel. In addition to the personal expenses on his office, documents show Thain paid his driver $230,000 for one year’s work, which included the driver's $85,000 salary and bonus of $18,000, and another $128,000 in over-time pay. Drivers of top executives are often paid about half that amount.”

    While redecorating, Thain managed to find time to engineer the company’s sale to Bank of America…though it seems these days that Bank of America could be regretting that decision since it helped to create a scenario in which it needed to get tens of billions of dollars in bailout funds from the federal government.

    It wasn't just because of the tone deaf redecorating, but yesterday Thain “resigned.” Word is he was forced out. He’ll probably get a nice severance package, but if it were up to me, he’d walk away with one thing and only one thing.

    The “commode on legs.”

    A new study coming out of Finland and Sweden suggests that drinking coffee in middle age can help to stave off – or at least lower the risks – of dementia and Alzheimer’s disease. Three to five cups per day, according to the study, seemed to reduce the risk of dementia and Alzheimer’s by as much as 65 percent.

    This is very good news, especially for people like me who consume that much coffee usually between the hours of 5:30 and 9:00 am. Of course, I suspect Mrs. Content Guy would point out that I may very well be in the other 35 percent.

    I keep arguing that it isn’t that I’m more forgetful, just that I have a lot more on my mind than I used to have…and that when you are getting by on five hours sleep a night, things tend to slip through the cracks, which themselves may be getting wider.

    The other problem I have, of course, is that my sons have gone off to college, and I’m living with my wife and my teenaged daughter, and half the time when they’re talking to each other I have no idea what the hell they are talking about. (And when I ask, they shake their heads and roll their eyes, and I begin to worry that they’re going to leave me at the dog track as soon as they get the opportunity.)

    And no amount of coffee can solve this problem.

    Obviously this was a remarkable and historic week in the United States, but one industry that seems positively giddy at the inauguration of Barack Obama is the US wine business. President Bush, you see, was a teetotaler, but President Obama apparently has an eclectic and expansive taste in wine…and his Chicago home even has a wine cellar capable of holding 1,000 bottles.

    The White House has a long tradition of only serving US wines, so expect to see a number of vineyards competing for that singular honor, and to see at last some attention being paid to wine at the highest levels of the US government.

    The week was made when the 2nd season of “Mannix,” the old sixties-era detective series starring Mike Connors, showed up on DVD.

    Sure, the show is dated. But I can vividly remember watching “Mannix” when it first aired, and thinking that Mike Connors was about the coolest guy on TV. (Some people liked Rockford, some people liked Baretta, and some people liked Kojak. Me, I was always a Mannix fan.)

    One of the great bonuses of these old series coming out on DVD is that you get to relive your youth a bit. Which is what I’ve been doing in dribs and drabs over the past week.

    (Possibly another reason Mrs. Content Guy may think I have early-onset dementia…)

    My wine of the week is a terrific Italian red, the 2006 Castello di Bolgheri Varvara, which is a blend of Cabernet Sauvignon, Merlot, Cabernet Franc, Syrah and Petit Verdot. To be honest, after I opened it and enjoyed the smooth finish, I noted that experts say that it is best to hold the wine until 2011.

    But since I, unlike Barack Obama, have only a modest wine cellar – actually, it is a basement with wine racks – I have neither the storage space nor the patience to wait.

    And I’ll tell you this. This wine is so good now that it is hard to imagine it being any better in 2011.

    (I was curious, so I just went down to the basement and counted up how much wine is down there…and was shocked to find that I have 120 bottles of unopened wine! Clearly I’m all set to weather the recession…but I think it is better if we don't tell Mrs. Content Guy exactly how much wine I have…)

    That’s it for this week.

    Have a great weekend, and I’ll see you Monday.

    KC's View: