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    Published on: February 2, 2009

    Business Week reports on the ongoing tensions between food retailers and manufacturers over prices, as retailers pressure their suppliers to lower their prices and use the threat of expanded private label offerings as a wedge…or cudgel. “Private labels, used as levers, probably aren't powerful enough to pry sweeping adjustments from the manufacturers,” the magazine writes. “But analysts say they're already seeing an increase in so-called promotional dollars, or money that vendors give to retailers to subsidize temporary discounts like two-for-one offers. Those discounts can blunt price hikes, but grocers much prefer more lasting price cuts.”

    Manufacturers, of course, are sort of caught between a rock and a hard place. Last year, prompted by increased commodity prices and rising energy costs, many raised their prices and have continued to do so. And this year, while costs have come down, they are not cutting their prices…in some cases because they locked in costs with contracts last year.

    Still, retailers – ranging from Supervalu to Wegmans to Wes Markets to Safeway – are “encouraging” their suppliers to lower costs…and are prepared to do what they have to do in order to twist a few arms.

    KC's View:
    It is hard to understand why manufacturers would prefer a system that relies on promotional fees and discounts, rather than encouraging a migration to a more consistent cost-based system that gets rid of corrupting influences such as slotting allowances. If retailers actually are willing to go there, manufacturers should be willing to make the change … especially because the moment will not last forever.

    Ultimately, if they need any better reason to come together on this, they ought to look to consumers…who may have less patience than in the past with policies that obscure real values and value.

    Published on: February 2, 2009

    The New York Times reports this morning that even as the nation grapples with a salmonella outbreak that is connected to two years of peanut butter and peanut paste that has been produced by an Atlanta factory, it is ironic that irradiation - which would destroy germs and bacteria in many processed foods – has yet to become a commonly implemented tool.

    “The technology to irradiate food has been around for the better part of a century,” the Times writes. “The federal government says that it is safe, and many experts believe that it could reduce or even eliminate the food scares that periodically sweep through American society … But irradiation has not been widely embraced in this country.

    “Food manufacturers worry that the apparent benefits do not justify the cost or the potential consumer backlash. Some consumer groups complain that widespread irradiation of food after processing would simply cover up the food industry’s hygiene problems. And some advocacy groups question the long-term safety of irradiation.”

    And lest irradiation be seen as a panacea, the Times notes that it “typically does not work so well on products with high amounts of fat or oil like peanut butter because they can turn rancid during the process.” And, the paper emphasizes, it is no replacement for basic hygiene and food safety procedures.

    KC's View:
    One expert tells the Times that Americans tend to put their heads in the sand when it comes to perfectly acceptable scientific solutions to ongoing problems, and that seems to be a pretty fair assessment of the state of irradiation.

    Now, if they could only come up with another name for the damn thing that would stick…

    Published on: February 2, 2009

    Good piece in the Dallas Morning News over the weekend about how that city is a kind of microcosm of the national supermarket industry, as retailers cope with the recession, changing market realities and evolving consumer needs.

    “Last year, grocers juggled food inflation with consumer demands for lower prices,” the Morning News wrote. “In North Texas, established chains also faced new competitors, which were the only ones opening new stores. Traditional supermarkets responded with pumped-up fuel discounts, targeted coupons, 10-for-$10 specials, cookware giveaways and store remodelings.

    “The strategies worked for some but not all the competitors seeking a bigger slice of the $12.6 billion-a-year Dallas-Fort Worth grocery market.”

    Here’s how some of the retailers are positioning themselves:

    “Kroger gained market share as it narrowed its price differential with Wal-Mart. Tom Thumb held its ground, but Albertson's closed more stores. Minyard Food Stores sold off more than half the chain, including its Carnival stores, to Fiesta Mart's parent.

    “Wal-Mart, the No. 1 grocery seller, raised its local market share 0.6 percentage point to 38.4 percent, but it gained at a slower pace as it tamed expansion nationwide. Specialty food chains battled, too, as Sprouts Farmers Market took on No. 1 organics chain Whole Foods Market. Accustomed to healthy sales gains, Whole Foods saw its top line go flat in the fourth quarter.

    “HEB's Central Market aimed high with new ideas such as its Kit Kitchen, stocked with pre-washed, diced and measured ingredients ready to take home along with 50 recipes. United Supermarkets' Market Street opened drive-through mini markets in new Frisco and Coppell stores that sell everything from lemons to lemon-pepper rotisserie chicken.”

    KC's View:
    The interesting thing is that the chains cited are finding a variety of ways to differentiate themselves. Some with price, some with gasoline, some with coupons, some with new formats and some with fresh food offerings. There sometimes tends to be a lock-step approach to how to compete in tough times…which ain’t necessarily the best way to survive a recession.

    Published on: February 2, 2009

    Bruce Springsteen, in an interview with the New York Times said that it was a “mistake” to make a deal that allowed a compilation “best of” CD to be sold exclusively at Walmart.

    As the Times reports, “On Jan. 13 a $10 collection of Bruce Springsteen and the E Street Band’s ‘Greatest Hits’ — 11 songs from a 1995 hits anthology, as well as ‘Radio Nowhere’ from ‘Magic’ — went on sale exclusively at Wal-Mart.”

    Long a supporter of worker’s rights who has cultivated a blue collar image, Springsteen told the Times that he “dropped the ball” and didn’t vet the deal as thoroughly as he should have. “It was a mistake,” he said. “Our batting average is usually very good, but we missed that one. Fans will call you on that stuff, as it should be.”

    Springsteen had been roundly criticized by some fans for what was seen as betraying his principles cashing in by making the Walmart deal.

    Walmart responded to the Times story by releasing the following statement: “Millions of Springsteen fans have counted on Wal-Mart over the years to deliver his music into their lives, and we it will continue to offer those fans this 'Greatest Hits' exclusive and his other popular albums at unbeatable prices … We are proud of the good jobs, benefits and career opportunities we provide to more than 1.4 million U.S. associates who choose to work at Wal-Mart and serve our customers every day."

    KC's View:
    Good for Springsteen. He goofed and he owned up, and he made the important point – often missed in the business world – that his brand is not entirely his own, and that he needs to be consistent and cognizant of what his fans/consumers think and believe.

    Published on: February 2, 2009

    Fortune has a snapshot of the recent Costco annual meeting, noting that the event revealed that:

    • Costco CEO Jim Sinegal, who is 73, has a succession plan…but he’s not divulging details.

    • The company hopes to expand to 1,000 stores by 2019, from the 550 that it currently operates; however, that goal could be adjusted depending on how the economy ebbs and flows.

    • Sinegal believes that the time is right to steal market share from financially troubled retailers that are unable to compete in tough times, and he plans to use the company’s private label as a weapon.

    • Costco’s most popular item? Toilet paper.

    KC's View:

    Published on: February 2, 2009

    In the UK, the Telegraph reports that “is now preparing to emulate its grocery offer in America, where it sells more than 45,000 non-perishable items … This would pitch it against major players such as, and, which delivers Waitrose food.”

    For the time being, at least, Amazon is not expected to sell fresh foods in the UK; the online pioneer has been testing the sale of meat, fish, dairy and produce in the Seattle market in the US, but has not rolled it out beyond the Emerald City to this point.

    Amazon is not commenting on the report.

    KC's View:
    On the one hand, the UK market would seem to be a relatively easy one for Amazon to service because of the geographic limitations. On the other hand, they play hardball in the UK, and the competitive landscape is filled with landmines both commercial and cultural.

    (See “UK Supermarket Chains Reportedly Don't Play Well With Others,” below…)

    Good luck to Amazon if it decides to do this…it’ll need it.

    Published on: February 2, 2009

    BrandSpark International, a strategic consulting firm, has released the results of a new American Grocery Shopper Survey, which reveals the following:

    • 52 percent of U.S. grocery shoppers said they plan to eat at home more often than last year.

    • 96 percent of shoppers considered it important that any new product provide them value for the dollar.

    • Over 80 percent of consumers said they will spend the same or more on essential personal care products as they did last year.

    • 70 percent of consumers are motivated to buy products that are better for the environment, but only 40 percent are willing to pay more for those products.

    • 75 percent of consumers believe that some companies are exploiting environmentally friendly claims for marketing purposes.

    • 58 percent of shoppers consider it important for a new product they purchase to be "natural."

    • 78 percent of shoppers believe that manufacturers have a long way to go to reduce the amount of packaging.

    • Shoppers revealed health as a greater priority, with 68 percent reporting increasing concerns about their health.

    • Consumers are becoming increasingly concerned about chemicals in products: 68 percent expressed increased concern about chemicals in food products; 63 percent in household products; 57 percent in skin care products.

    • Over 80 percent of respondents believe that making better food choices can prevent illness.

    • 71 percent of consumers are concerned about the added health claims of products they purchase.

    KC's View:
    There are a lot of conclusions one can reach from these survey results, but one of the most important ones is this:

    There is no single, homogenous consumer.

    There are lots of different shoppers, with lots of different needs, desires and aspirations…and while “value” clearly is more important than it was just a few months ago, people haven't forgotten their aspirations.

    I do think, however, that the desire for information-driven and transparent marketing is a common theme through many of these findings. Which retailers and manufacturers should respond to with alacrity.

    Published on: February 2, 2009

    • The Wall Street Journal this morning notes that Mike Duke is beginning his tenure as CEO of Wal-Mart Stores Inc., “tasked with keeping his company growing in the midst of a contracting global economy,” and “expected to continue expanding Wal-Mart into new foreign markets, especially in developing nations, while remodeling domestic stores to better position the company against rivals such as Target Corp.”
    KC's View:

    Published on: February 2, 2009

    This Is Money in the UK reports that Tesco and Asda are fighting again…though this time the fight isn’t in the supermarket aisles, but rather in front of the government’s Advertising Standards Authority about what is in the supermarket aisles.

    Apparently, Tesco ran an ad claiming that alleged that Asda was more expensive than its stores most of the time, and Asda claimed that the ad was misleading. If Asda doesn’t get satisfaction, the story suggests, legal action could be taken.

    Meanwhile, Tesco reportedly is broadening its aim to include ads about Sainsbury and William Morrison Supermarkets.

    KC's View:

    Published on: February 2, 2009

    The Stamford Advocate reports that Fairway Foods, the New York City-based grocery chain, has gotten final approvals to build a 55,000 square foot store in the city’s south end, which is undergoing substantial rehabilitation.

    The store is expected to be opened early in 2010.

    Fairway, which combines a strong fresh foods orientation with a sharp pricing image, currently operates four stores in New York City but is moving into the suburbs, with a Paramus, NJ, store scheduled to be opened in the next couple of months.

    KC's View:
    Because, to be perfectly honest, this is all about me...I’m thrilled by the idea of Fairway coming to Stamford. The new location, you see, is right across the street from the gym where I take boxing lessons … so it’ll be incredibly convenient for me. Plus, I’ve always been a fan of its Upper West Side and Harlem stores…so it’ll be good to get that kind of retailing in Stamford.

    Published on: February 2, 2009

    • The BBC reports that Woolworths, which went out of business and closed all its stores late last year after being crushed by its debt load, is being reborn as an e-commerce site. The brand has been acquired by a company called Shop Direct Group, which hopes to have the new venture up and running by next summer.
    KC's View:
    With so many retailers facing extinction during this time of economic challenges, maybe this is a move that more of them ought to be considering – completely changing the paradigm in a way that alters their cost and marketing structures. Will it involve pain and suffering? Sure, probably. But in the long term, maybe the only way to survive.

    Published on: February 2, 2009

    • The Charlotte Observer reports that “Harris Teeter is cutting the number of store openings and renovations planned for 2009 and beyond because of the weak economy,” and rather than spending $245 million to open 19 stores and complete eight major remodelings, it now will spend $212 million to open 16 stores and remodel three.

    • The Wall Street Journal reports that the Coca-Cola Co. is dropping the name “Classic” from its “Coke Classic” brand – 24 years after it used the appellation to distinguish it from its disastrous New Coke product introduction. According to the Journal, “The move is part of a broader plan to refresh the brand's image as Coke launches a new global ad campaign for its famous drink, whose sales have been declining in the company's home market … The change is also one more salvo in a renewed cola war with PepsiCo Inc., which has also just unleashed new marketing for Pepsi-Cola, the No. 2 soft drink, and a sleek new look for its labels and packaging.”

    • The economy reportedly has had an impact even on Girl Scout Cookies. The Los Angeles Times reports that “as the costs of baking and transporting the group's famous sweets shoot through the roof, the Girl Scouts of the USA has decided to package fewer cookies into boxes of Thin Mints, Do-si-dos and Tagalongs and to shrink the Lemon Chalet Creme cookies.” The price, however, is not expected to be lowered.

    KC's View:

    Published on: February 2, 2009

    • Procter & Gamble said that its second quarter profit was up 53 percent to $5 billion, from $3.27 billion during the same period a year ago; the increase was boosted from profits earned through the sale of Folgers to JM Smucker Co.

    Q2 sales were down 3.2 percent to $20.37 billion.

    KC's View:

    Published on: February 2, 2009

    I have consistently been critical of the Federal Trade Commission (FTC) persecution/prosecution of Whole Foods, trying to unravel the retailer’s acquisition of Wild Oats that closed more than a year ago.

    MNB user Bill Warren takes issue with my approach:

    Fortunately in the January 30th "KC's View" regarding the Whole Foods offer for a settlement to FTC in their litigation you had the qualifier about being a pundit and not a judge in your comment. I can reaffirm that narrow-minded, retailer management bias being evident in your pundit observation.

    Your comment about public humiliation in the matter of the FTC is so misplaced, I wonder if you wear "W" underwear at night in honor of his personal role in destruction to the federal regulator role and review process in our country during his entire failed two-term presidency, which contained the Bush 11th commandment of "To Protect and Defend Corporate America".

    That said, it must have been divine intervention above the level of Bush to cause the FTC to mount the challenge to the Whole Foods deal during the waning period of his term, or we had a rogue at FTC ignoring the department's marching orders and with an intent to do the agency's job properly.

    Mr. Coupe, the FTC has moved to invalidate this transaction to protect consumers from the expected harm of the result of higher prices in the absence of bona –fide organic-dedicated retailers, as the FTC has determined a relevant market for bona-fide organic retailers. If any party should experience humiliation it is the management of both companies, Whole Foods and Wild Oats, and primarily Whole Foods, to progress with the deal without prudence when the uncertainty existed that the lower court decision could be overturned on appeal. Perhaps you have chosen to ignore the damaging e-mail memorandum and internal documents that motivated the whack job that runs Whole Foods to undertake this merger. With respect to space constraints in this e-mail rebuke of your comments, you and your readers can easily find the documentation in this regard on an Internet search.

    Your comments, however, do succeed to appeal to your base readership of management executives in retailers across the U.S., much as Sean Hannity does the same self-serving rhetoric to his right-wing and evangelical base that comprise his radio listener ship. But your comments fail in responsible journalistic analysis, based upon the facts.

    I certainly appreciate your right to disagree with me. For the record, I think I reported both sides of the issue when the acquisition was pending, and was fairly critical of Whole Foods management in those days. However – and I concede that reasonable people can disagree on this without being disagreeable – I think the FTC’s assessment of the marketplace was incorrect, and I stand by that judgment.

    I am confused by one point you make. I think you are suggesting that when the judge ruled that Whole Foods could acquire Wild Oats, and that the FTC’s objections were insufficient to block the merger, Whole Foods should have simply waited a few months to close the deal just in case the FTC wanted to object some more.

    What you are suggesting is tantamount to the Steelers deciding to allow the Cardinals an extra minute or two – after the clock ran out – just in case they were able to score another touchdown. I’m pretty sure that’s not how the game is played. Especially since the FTC is wrong. (Sorry. Couldn’t resist.)

    And finally, this may be the first time that I’ve been accused to wearing “W” jammies and parroting Sean Hannity. In some circles, you just helped my image immensely.

    Referring to the Employee Free Choice Act last week, I said that the so-called “card check” legislation was essentially un-American because it removes the requirement for a secret ballot during union certification.

    Several people objected to that characterization.

    One MNB user wrote:

    Why do you tell untruths in your post? The Employee Free Choice Act does NOT do away with the secret ballot. The people who are deciding to join or not to join a union would decide if they want the secret ballot or the card check. Right now the employer makes that decision for the people who want to join a union. Let the people decide, not the employer. The employer wants the upper hand to keep the union out. Now that's Un American. Get your facts right.

    Another MNB user wrote:

    Just a quick note on your comments about this story. The Employee Free Choice Act does NOT remove the option of secret ballots, it adds a second option which is the card check system. Not sure why this would be considered "un-American."

    My feeling remains that a secret ballot ought to be required – not just an option - before a union is certified. Every effort has to be made to assure that employers do not apply undue pressure to employees considering unionization, but the same ought to go for the people in charge of organized labor.

    My larger point was this. The numbers show that union membership went up last year, and is on the rise for the first time in decades. Card check legislation isn’t needed. Unions can stand or fall on their own merits…and a secret ballot, during which employees can make their own decision without pressure, ought to be a fundamental right and requirement.

    KC's View:

    Published on: February 2, 2009

    In an exciting Super Bowl game that came down to the last 30 seconds, Ben Roethlisberger and the Pittsburgh Steelers earned a record sixth title with a 27-23 win over Kurt Warner and the Arizona Cardinals.
    KC's View:
    Great game…but I have to say that I was mostly underwhelmed by the commercials this year. There were a few standouts, though. Among them:

    • Bud Light’s “Meeting” ad, in which a guy who proposes saving money by not buying Bud Light for every staff meeting gets tossed out a fourth story window.

    • Pepsi’s “Forever Young” commercial, which contrasted generational differences using music, film and television clips, and made the point that Pepsi has refreshed people for decades.

    • Pretty much all of Anheuser-Busch’s Clydesdale-themed commercials, which clearly – and effectively – are trying to make the point that it remains an American icon despite the fact that it is now owned by a Belgium-based company.

    •’s “Double Take” ad, which showed how bad some jobs can be.

    • Audi’s commercial featuring actor Jason Statham, who made fun of his “Transporter” image as a guy who uses an Audi to do what a Lexus, Mercedes and BMW could not.

    • And, I have to admit, the commercials for “Angels and Demons,” “Duplicity,” and, of course, “Star Trek,” made me look forward even more to those movies. But I was pretty much in the bag for them already.

    By the way, as far as I’m concerned there never has been a better half-time show than the one Bruce Springsteen did this year. Outstanding!