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    Published on: February 4, 2009

    by Michael Sansolo

    There are many reasons why sports provide a poor metaphor for business. Unlike business, the rules of sports are usually pretty straightforward, the measurements are exact and the principles of competition are limited by salary caps, player drafts and other mechanisms designed to enforce a sense of parity.

    But then there are lessons we just have to soak up again and again, which is why I wrote about basketball coach Pat Summitt yesterday and heard from readers with other notable suggestions from the sports world. And thanks to this year’s Super Bowl, one of the best lessons in sports leadership will be front and center for a while. The lesson comes from the very simple reason why the Pittsburgh Steelers deserve to be the most successful team in Super Bowl history.

    It comes down to Dan Rooney, the team’s owner.

    Hopefully on the way to the game this year, you had a chance to read a profile of this remarkable man with a leadership ethic that all of us could and should emulate. It’s a study in the right way to lead, especially in times of so much turmoil.

    Consider some comments about Rooney gleaned from one recent article in the New York Times:

    1. Rooney flies to games on the same plane as his team and doesn’t put on any airs about it. As backup quarterback Charlie Batch told the Times, “Not only was he on the plane, he was sitting in the seat that doesn’t recline, in front of the bathroom.”

    2. He doesn’t run his team from a distance. “Some owners treat you like a rental property,” said defensive end Nick Eason. “Mr. Rooney comes around. He always sticks his hand out to you. ‘Hey, Nick’— and I’m like, he knows my name?”

    3. And his involvement isn’t a cliché, it’s real. “Every team says it’s a family, but it’s bull a lot of the time,” said punter Mitch Berger said. “I’m glad I got a chance to experience the way it should be before everything’s said and done.”

    The picture is of a man who stands in sharp contrast to not just most team owners, but also to many business leaders these days. (Is anyone on Wall Street paying attention?) He is a man who seems to lead with humility and hands-on effort in a way that builds a different kind of atmosphere around his team.

    And the story doesn’t end there. There is a rule in the National Football League that requires teams to interview minority candidates for head coaching positions. It is called the Rooney Rule because Dan Rooney made it happen. It seems hard to believe that a few decades ago African-Americans were frequently called incapable of playing quarterback in football. This year, the traditional phone call between the President and United States and the Super Bowl winning coach involved two African-Americans. Times change because of people like Dan Rooney.

    In truth, there are great leaders everywhere. There are leaders who are involved, caring and down to earth. There are leaders who talk about great change and who make it happen. There are leaders who make their people feel special and important and get great things out of their team again and again.

    So in this case, sports do provide us a great metaphor. Because Dan Rooney seems to embody all the elements we all like to applaud in a leader and his team just won the Super Bowl for a record sixth time.

    Whether you manage one person or a team of thousands; whether it’s just the deli department or the Pittsburgh Steelers, the principles are the same: humility, teamwork and living up to your words. And, as Dan Rooney’s success demonstrates again, nice guys often finish first.

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

    Published on: February 4, 2009

    The San Antonio Business Journal reports that HE Butt Grocery Co. has launched a new advertising campaign around the theme, “No Store Does More.” The first commercial in the effort was seen in HEB’s markets during last weekend’s Super Bowl.

    According to the story, the program is highly focused on spotlighting how HEB is a value-driven supermarket chain: “H-E-B is promoting the fact that the company provides customers with $200 worth of in-store coupons each week. The company also sponsors in-store Combo Locos and Meal Deal programs, which offer customers free items with the purchase of a complementary item. Last year, H-E-B customers received $64 million worth of free products through these programs.”

    KC's View:
    One of HEB’s great advantages is that while it can promote price and value, it has a time-proven set of consumer-friendly values, built around fresh foods and high quality, that serve as a strong foundation for all its efforts. That’s a great place to be coming from.

    Published on: February 4, 2009

    The Nielsen Company has released a new study suggesting that the recession of 2008 resulted in a greater reliance by consumers on supercenters for their shopping needs in a wide variety of categories.

    The Nielsen report says that “the supercenter channel was the only retail channel to post overall unit sales growth at one percent. While four retail channels (drug stores, supercenters, club stores and dollar stores) recorded sales gains from consumers shifting department purchases across channels, these gains were offset by consumers cutting back on purchases for an overall decline in unit sales.”

    Todd Hale, senior vice president at Nielsen for Consumer & Shopper Insights, says that supermarkets are seeing a real impact. “Where we really start to see the expanding reach of the supercenter is in grocery, where a shift is occurring in everything from dairy and produce to meat and frozen foods,” Hale says. “While the grocery channel has traditionally been viewed as recession-resistant, it is not recession-proof.”

    That’s not to say that grocery stores aren’t fighting back. The Nielsen study says that gas promotions and prescription drug offerings are causing some consumer shifts as well, to the supermarket, as shoppers seek out both value and convenience.

    And, there is a silver lining. “All retail channels are being impacted by consumers cutting back on purchases to cope with tough economic conditions,” says Hale. “The good news for traditional retailers is that this means consumers will be spending more time at home, serving up opportunities for at-home consumption of food and non-food products.”

    KC's View:
    No real surprise here, though it is worth quantifying and qualifying. There’s a lot of consumer behavior shifting going on, and there will be more…which is why retailers have to be constantly developing and proving differential advantages. No time to take a breath and relax, I’m afraid. Not this year.

    Published on: February 4, 2009

    At the annual National Grocers Association (NGA) convention in Las Vegas, Kraft Foods announced this morning that it has established the Thomas K. Zaucha Entrepreneurial Excellence Award, created as a way to highlight and reward retailers that have shown “the most tangible example of persistence, vision, and creative entrepreneurship throughout the past year.”

    The award also is designed to be a lasting memorial for Tom Zaucha, who is entering his final year as President and CEO of NGA.

    The first winner of the Zaucha Award is Michael A. Provenzano Sr., president/CEO of Pro’s Ranch Markets, described as “one of the fastest growing Hispanic Supermarket chains in the country” and “a vital, growing, and evolving business model founded upon the principles of a good old fashioned work ethic and bolstered by a creative vision” and persistence.

    KC's View:
    Congrats to Provenzano, and especially to Zaucha…who has been a tireless advocate on behalf of the independent retailer for longer than I have been writing about this business.

    Published on: February 4, 2009

    A new study released by Colloquy, the loyalty marketing research and consulting company, suggests that word-of-mouth “buzz” for a retailer’s offerings are more likely to be members of the business’s loyalty marketing program – and that retailers not utilizing their databases to develop such enthusiasm are under-utilizing a highly exploitable asset.

    Among the numbers generated by Colloquy:

    • Reward program members are 70 percent more likely to champion a retailer, actively recommending a product, service or brand, via word of mouth than the general population.

    • Fifty-five percent of reward program members will describe themselves as word-of-mouth “champions,” vs. 32 percent of non-program members.

    • Actively participating reward program members are over three times more likely to be word-of-mouth advocates for a product or service.

    KC's View:
    In this day and age, it is hard to imagine why any retailer would not realize that its database is perhaps the most important asset owned by the company, and actively use it to listen to shoppers, reward shoppers, and target shoppers ore effectively with relevant promotions and offerings. There is no excuse for simply flinging deals or coupons at people without knowing specifically who you are talking to.

    Published on: February 4, 2009

    Tesco continues to see slippage in its UK market share, as the quarter ended January 25 showed that its percentage of the nation’s grocery business dropped to 30.7 percent from 31.2 percent during the same period a year ago.

    The big winners during the quarter, according to TNS Worldpanel, were Asda and William Morrison Supermarkets. Walmart-owned Asda Group saw its market share grow from 16.9% to 17.2%, while Morrison’s grew 11.6% to 11.9%. Aldi’s market share went from 2.2 percent to three percent, while Lidl’s share went from 2.2 percent to 2.3 percent.

    Sainsbury saw a market share decline for the quarter, from 16.3 percent to 16.2 percent, as did Waitrose, from 3.9 percent to 3.7 percent.

    KC's View:

    Published on: February 4, 2009

    • The recession may be tightening consumers’ grip on their wallets, but Peter Brabeck-Lemathe, the chairman of Nestle SA, tells Bloomberg that he expects food prices to go up in the coming year.

    “It is probable that in 2009 we have a decline in production and we will have an increase in demand,” Brabeck-Lemathe tells the news service. “This will have another push on raw materials.”

    • In Minnesota, the Star Tribune> reports that “Target Corp. intends to continue giving 5 percent of its pre-tax profits to charity despite the economic downturn that prompted it to cut 1,000 workers on Tuesday and to announce the closure later this year of an Arkansas distribution center.”

    KC's View:
    These are tough decisions all around, and Target management must be conflicted about what its priorities must be in these tough economic times. I was interested to see that much of Target’s giving is arts-focused, and I’m glad to see that it will be maintaining its charitable commitment to this area. I’ve always sort of believed that a culture is as defined by its commitment to the arts as by anything else…but that kind of thinking tends to fall out of fashion during recessionary times.

    Of course, this is of little solace to the people who lost their jobs and who may have trouble feeding their families, much less going to see a play or visit a museum.

    As I said, Target must be conflicted about this.

    Published on: February 4, 2009

    • Costco said this morning that its January sales fell to $5.10 billion, from $5.11 billion during the same period a year ago. US same-store sales were flat, while international same store sales were down nine percent.

    • Walgreen has posted January sales of 5.22 billion, up 5.3 percent from $4.96 billion during the same month a year ago. Same store sales were up just 0.4 percent.

    • Kraft Foods said that its Q4 profit was down 72 percent to $163 million, from $585 million during the same period a year ago; the company blamed the performance on costs related to its restructuring program. Revenue rose six percent to $10.77 billion.

    • Sara Lee said that it lost $17 million in its fiscal second quarter, compared to a profit of $182 million during the same period a year ago. Q2 sales were $3.34 million, down two percent from the year-ago period.

    KC's View:

    Published on: February 4, 2009

    It was suggested here the other morning that the current economic crisis may offer manufacturers and retailers an opportunity; I wrote:

    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.

    One MNB user responded:

    I would argue that manufacturers are looking out for their consumers by increasing promotional spend v. taking a price decline. Many retailers do not reflect a manufacturers price decline in whole, or sometimes at all. In the past I have often seen a retailer take the incremental margin generated by a decline straight to their bottom line. In these hard times a retailer may take the additional dollars generated by brand A's decline and apply them to category B if they think B is more important to their consumers.

    By deploying commodity favorabilities back as performance based trade dollars, a marketer can require price performance by the retailer. This ensures that the people who ultimately buy the product - the brand’s consumer - gets the savings, not the retailer.

    MNB user Bill Green wrote:

    The first thing I learned in ECON 101 was that 'prices are sticky on the down side'. A manufacturer who permanently lowers his price is not likely to see a reduction at retail. Remember, retailers have also faced rising costs during the recent past. The temptation to pad margins courtesy of a supplier price decline is too great.

    Most of us agree that reliance on short-term trade promotions is unhealthy. However, it does offer the manufacturer some ability to control the application of his 'investment'. Permanent cost reductions result in the total loss of control.....and that's just not acceptable.

    Another MNB user wrote:

    You’ve been in the business long enough to know once they ask for a dead net price and get one, then they ask for promotional money again. It’s hard to break bad habits, like smoking, drinking and graft.

    Another MNB user wrote:

    A critical issue here revolves around how job performance is evaluated and how incentives are paid - for both manufacturers and retailers.

    If buyers are judged and paid on how much money they "collect" in slotting fees, promotional allowances, flyer ad placements, displays, etc. - then they will keep on pushing the sales folks to give them more.

    If sellers are judged and paid to generate ads, displays, price features, etc. - then they will keep on pushing buyers to go down that trail.

    If careers are made on the manufacturer side by getting new products on the shelves (at "any" cost) - then slotting fees will never go away. Face it - slotting fees came to be when sales teams were told to "get this new product to 100% distribution no matter what it costs."

    A few years ago a major trade show presentation (I think that it was at NACS) highlighted that Wal-Mart and Tesco were among the leaders in retail profitability. One common theme is that both do not take slotting fees. They each control what goes on the shelves in their stores.

    We, collectively, are working on the wrong issues. Put manufacturer promotional money to use as "working funds" - to drive in-store results. New products should be purchased (or not purchased) based on the merits of the marketing behind the products.

    Another MNB user wrote:

    Take another drink of Joe and get real. While retailers have been asking the vendor community to get down to “Net Pricing” policies, I still see the retailers hitting us for marketing deductions that exceed the promised net price policy. If a vendor doesn’t keep marketing funds in the budget we will see more go away like a bad bank. It needs to start with real retail policies that can be counted on day in and day out, not just another strategy to get another pound of flesh from the vendor. We have some customers where the “Cost of Doing Business” exceeds 20% of their purchases. These are all items in that feared vendor agreements we all must sign in order to even speak with the buyer. The buyer than asks for added deals. My point is that the whole issue needs to be more transparent to all involved.

    A secondary benefit will come about if this could really happen. Smaller companies with new and innovative SKU’s could compete with the larger more established vendors. The little guy doesn’t have the war chest like funds that the retailers demand.

    Still another MNB user wrote:

    I have to disagree with your viewpoint that lowered prices would result in lesser or discontinued slotting fees etc.; the sad truth is that many (most?) retailers have raised their margins pretty significantly and are now crying because they’re getting drummed by Walmart and others. Ad fees are spiraling out of sight as well, and there is no resultant increase in case volume either from ad placement or TPR programs at store level for the most part, so part of your view was correct – manufacturers are definitely caught between a rock and a hard place!

    And, from yet another MNB user:

    In your blurb about supplier vs. retailer pricing wars you wondered why suppliers wouldn't be more willing to move to a better cost structure (doing away with slotting fees, etc.) All suppliers would move in this direction if they could trust the retailers. Suppliers trust Costco, Trader Joe's, and Walmart, thus they give everyday pricing consistent with what those retailers are looking for. When it comes to the rest of the field the retailers are not as believable. Suppliers view retailers as trying to raise the cost of doing business. For example, if Safeway were to do away with slotting fees it would be for a period of time to get suppliers to everyday pricing. Then as that took place and suppliers all were compliant Safeway would then bring back slotting fees to raise more money. So, it isn't necessarily the suppliers being resistant the burden is on the retailers to be consistent, fair, and true to their suppliers. If that were achieved suppliers would fall in line. As all things in life, it's a 2-way street.

    MNB user Mike McGuire wrote:

    The challenge for manufacturers is that retailers continue to increase the amount of product that they sell on promotion. So, lowering your everyday cost and taking out marketing money puts you at a disadvantage compared to your competition. When you see 10x lift (or more) when you promote (even at low discounts) from many retailers, there really isn’t reason to try to do true net pricing. By going to true net pricing, you are possibly tying your hands when your competition makes any move in the future.

    The CIES “Top of Mind” survey was posted yesterday, and I wondered why “human resources” was so low on the list of priorities…”because if retailing and manufacturing executives alike do not pay attention to the people on the front lines – understanding that they are no better than their employees – then they have little hope of achieving excellence in all these other areas.”

    One MNB user agreed:

    Kevin, as I was reading this article I came to the same conclusion as you. Why is Human Resources so low?

    I work for a retailer and I will tell you what the survey says is exactly how they make their employees feel. If you don’t like it, go somewhere else. (Good luck finding another job…) It is not verbalized that way but body language, directives etc sure send that message loud and clear.

    MNB user Al Kober wrote:

    I wonder how the ranking of human resources, or “people” would change if it was limited to the top ten most successful companies in the country?

    The most successful companies put people first, that is, getting the right people in the right seats, and then get out of their way so they can perform to their highest potential. You can’t go wrong with putting people first, as long as they are the right people.

    On the subject of the peanut butter-related salmonella outbreak, connected to product made by Peanut Corp. of America, one MNB user wrote:

    This whole peanut fiasco illustrates the need for all involved in the food manufacturing and distribution chain to regularly audit their suppliers' operations. FDA and USDA cannot be trusted to do it. That large food manufacturers were unaware of the filthy conditions (or did nothing, even worse) described at this plant is inexplicable. It's part of the total quality process to which lots of companies claim they subscribe. Part of the blame for this tragedy belongs to PCA's customers.

    Another MNB user wrote:

    There really is no excuse for this. All of the manufacturers using this product are culpable. Where is there oversight? Are they questioning why a supplier can undersell all of the competition? No, they are just bidding to get the best price. I have seen some very dirty, poorly run food processing plants. The FDA cannot possibly get to all of them. They concentrate on the majors and on perishables as well they should. Hold those buying the ingredients to some standard.

    If PCA had been processing a "finished" private label product, this would never have happened. Those selling ingredients are the least scrutinized of all. It's price, price and price.

    I’m not sure that the manufacturers should be blamed…though in the future, they may have to take a lot more responsibility - and demand greater transparency – in the supply chain.

    A related story suggested that the time has come for irradiation, which sounded like a pretty good idea to me, especially since it has been approved by the FDA. Which led one MNB user to write:

    I usually agree with your thinking, but your comment today was a little off-putting. Why should we trust anything the FDA says? And, please do not call me a head-sander, I have done research and find irradiation has not been fully tested. Please let me know, on which side of the issues, for the last 50 years, should I have been when the FDA approved such items from Thalidomide to the latest peanut butter disaster in order to not be called a person with their head in the sand?

    Good point. I was uncharacteristically trusting of the FDA’s opinion of irradiation.

    Not sure what got into me.

    We took note of a report the other day that Amazon was considering a move into the e-grocery business in the UK, which led MNB user Mike Griswold to write:

    I usually agree with Amazon but think they should re-think this one. The UK market is one of the most mature home shopping markets in the world. Customers know what they want, and retailers such as Tesco and Sainsbury have a huge head start. The physical shopping experience is also very different with smaller, more frequent transactions the norm due to smaller storage spaces. At the end of the day, I am not sure what differentiated experience Amazon can offer to force a switch from the well established existing alternatives (but I wish them luck).

    I got roasted pretty good the other day by MNB user Bill Warren, who thought that my attacks on the FTC over the Whole Foods case proved that I was an anti-regulatory knee-jerk conservative who wears “W” pajamas and worships at the feet of Sean Hannity.

    MNB user Terry Shirley wrote:

    Who is this know-it-all nut case that jumped all over you politically for your opinion about the Whole Foods / Wild Oats merger. Anyone in that segment of the industry knows how poorly Wild Oats ran because of the extraordinary number of varied size formats they had through questionable acquisitions over the years. He’s making a lot of unqualified prejudgments in that bitter sounding diatribe.

    It is interesting to note that in the wake of this merger that Whole Foods is looking for ways to lower their prices (counter to his arguments), rather than raise them. As more and more mainstream operators look for ways to enter that market segment, the consumer will benefit because of the increasing availability of organics – both fresh and packaged. I would suggest your reader should have done a background check on the parties involved prior to lambasting you as he did. He’ll find too that traditional operators toyed with the idea of purchasing Wild Oats, but there were just too many potential problems – and they weren’t FTC related.

    One MNB user responded:

    I can only assume that by the comments from Bill Warren that he must be related to the FTC or have an agenda that parallels that of the FTC. From everything I have read and the facts that have been shared, your analysis of the "Whole Foods vs. FTC" story has been pretty good.

    The fact that you shared his comments showed the integrity of you as a pundit and willingness to open up further discussion on this topic. I applaud your efforts but feel the topic is dead and only waiting on the new administration to open their eyes.

    Don't praise me too much. His comments burnished my credentials with one segment of the MNB community.

    MNB user Michael Phelan wrote:

    Regarding the recent criticism of your stance on the Whole Foods-Wild Oats acquisition with which you and I essentially agree:

    Critics claim that challenging the merger will "protect consumers from the expected harm of the result of higher prices in the absence of bona –fide organic-dedicated retailers." At the same time, neither the FTC, USDA, HUD or any other entity hiding behind an acronym, has taken any substantial steps to ensure that the availability of fresh fruits and vegetables – or even awareness about them - is increased in lower-income areas.

    Proclaiming to protect the rights of those of us who are fortunate enough to already have several options for natural and healthy foods, reeks of insincerity. By and large, Whole Food customers, of which I am one, are fortunate enough to have choices and choose to shop there.

    Whole Foods customers need protection but the lower income single mom who can't afford to buy fruits and vegetables doesn't even get some advice?

    Why aren't these agencies putting their efforts into making sure that more Americans have the same healthy food choices instead of wasting their time with this effort? Or better yet, what about food inspection and safety?

    MNB had a story yesterday about Nash Finch closing on an $80 million acquisition of three warehouses that will allow it to pursue and better compete the US military commissary market.

    Which led one MNB user to ask this question:

    Why is the government in the food business in the first place? If we paid our enlisted military folks a living wage, why couldn't they shop their local supermarket? We give away huge subsidies to our military for food and are competing with tax paying businesses....go figure.

    There are two competing questions suggests that we’re not paying our military enough, and the other that we’re paying “huge subsidies.”

    I think the better question is why the US government doesn’t at least consider outsourcing the whole business to a company that is in the retail game…get rid of the infrastructure, cut costs, and maybe even generate a profit. As it is, companies like Walmart often are positioned outside bases and are able to compete for customers in a way that the commissaries cannot.

    There may be a perfectly good reason not to do this, but I’d like to hear it…and I certainly think the option ought to be explored by an administration that has said it wants to do things differently.

    MNB reported the other day that Bruce Springsteen made a mistake and let it slip through the cracks when he allowed Walmart to sell a compilation CD; he noted that he has long been a workers rights activist, and Walmart’s image is contrary to his beliefs.

    But several MNB users didn’t take his statement at face value.

    One MNB user wrote:

    He didn’t goof; money trumps judgment.


    Because they’re only selling those CDs for $10 apiece, and I’m guessing Bruce must have plenty of money...

    Another MNB user wrote:

    The words “... and he will send the profits to some appropriate PC cause...” seemed to be missing from the article. Looks like the Boss was advised to put a little PR eyewash on the problem and move on. He has been profiting from CD sales at Walmart for years. Somewhat suspicious that it became an issue just before his big Super Bowl bonanza. I imagine that we will have to endure a parade of lefty entertainers acting shocked that their Asian made CD’s/DVD’s/books are sold at the world’s largest retailer so they can keep their “ blue collar” creds. Too bad they don’t use their prestige to help figure out how to make our manufacturing sector more competitive so it can employ more people at solid pay . I imagine they have little interest in the answer.

    I don't know. My inclination is to take the Boss at his word on this one. And I’m guessing that those who don't probably aren’t fans. Or just don't like “lefty entertainers.”

    I mentioned the other day, when writing about a new Fairway Foods coming to Stamford, Connecticut, that it would be going in right across the street from the gym where I take boxing lessons. Which led one MNB user to ask:

    The Content Guy vs. Danny Bonaduce?

    No way. No chance.

    I’m not even sure I could take Susan Dey.

    On the other hand, I might have a fair shot against Shirley Jones.

    KC's View:

    Published on: February 4, 2009

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    KC's View: