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    Published on: February 9, 2009

    The Chicago Tribune reports that Walmart is hoping that the recessionary environment may make Chicago officials more amenable to the notion of the company expanding aggressively there.

    According to the story, “. John Bisio, a Wal-Mart spokesman, said Friday that the company is assessing the political and financial viability of expanding in the city. Bisio declined to say how many stores or which locations were being considered but that conversations with aldermen have focused on ‘food deserts,’ neighborhoods lacking grocery stores. "

    The Chicago Sun-Times gets a little more specific: “Wal-Mart is scouting 12 properties in Chicago's ‘food desert’ neighborhoods for new stores that sell groceries, a Wal-Mart spokesman said Friday. About 500,000 Chicagoans live in food deserts with no easy access to mainstream grocery stores.”

    There is only one Walmart supercenter within the city limits, as organized labor has succeeded to creating a hostile environment for the retailer there. In September 2006, Mayor Richard Daley vetoed a so-called big-box ordinance that would have mandated by the end of the decade a $10 minimum wage and $3 per hour in minimum health care benefits for employees of stores larger than 90,000 square feet and with total company sales of more than $1 billion – an ordinance clearly targeted at Walmart.

    Both papers report that organized labor is gearing up for another battle to keep Walmart out of Chicago.

    KC's View:
    There is an irony to all this, of course. Walmart hopes to expand because of its “low price message,” which appeals to people with less money than ever to spend – either because they are budgeting more carefully or because they have lost their jobs completely. Organized labor says that it wants to provide better for its members, but it persists in fighting expansion that would make lower prices more accessible to more people. (Granted, it argues that Walmart is doing more damage than good by “exploiting” workers.)

    Seems to me that the stalemate doesn’t help anyone … and in fact hurts people. Which is a shame.

    Published on: February 9, 2009

    In a front page story this morning, the New York Times describes the condition at the Georgia plant operated by Peanut Corp. of America that apparently led to a salmonella outbreak that has sickened more than 19,000 people and killed eight:

    “Raw peanuts were stored next to the finished peanut butter. The roaster was not calibrated to kill deadly germs. Dispirited workers on minimum wage, supplied by temp agencies, donned their uniforms at home, potentially dragging contaminants into the plant, which also had rodents. Even the roof of the Peanut Corporation of America plant here in rural southwest Georgia was an obvious risk, given that salmonella thrives in water and the facility should have been kept bone dry.”

    And, the Times writes, an examination of the case “reveals a badly frayed food safety net. Interviews and government records show that state and federal inspectors do not require the peanut industry to inform the public — or even the government — of salmonella contamination in its plants. And industry giants like Kellogg used processed peanuts in a variety of products but relied on the factory to perform safety testing and divulge any problems. At the same time, processed peanuts have been finding their way into more and more foods as a low-cost yet tasty additive, making tainted products harder to track.”

    Furthermore, the Times reports that “inspecting the plant was the responsibility of Georgia, which like 42 other states is under contract with the Food and Drug Administration to monitor food plants. The agency’s Science Board concluded in 2007 that the agency did not have the capacity to ensure a safe food supply, with domestic businesses under its purview having risen to 65,500 from 51,000 in 2001.

    In Georgia, state agriculture inspectors said they were hampered by rising needs and falling budgets … Plant employees said they typically had advance knowledge of state inspections and that last month, when they were tipped off that federal investigators were coming, the employees were told not to answer questions. Where the state had found no major problems, the federal team found many, like the leaky roof, and swab tests showed salmonella living on the plant floors. Plant managers had not decontaminated the peanut butter processing line after detecting salmonella, the federal report shows.

    “In examining Peanut Corporation of America’s records, federal investigators discovered that company tests had found salmonella 12 times since 2007. The inspectors said they got the records by invoking a bioterrorism law.” And, making things worse, the company has been accused by the federal government of continuing to ship peanut butter that it knew was contaminated.

    KC's View:
    Clearly, a special corner of hell should be reserved for the guys who ran Peanut Corp. of America…and with every revelation, the temperature of that corner should be increased.

    This is just such an utter nightmare. Clearly the federal government needs to exercise greater oversight, but also needs to have a more efficient structure in order to be more effective. Clearly, there needs to be greater transparency and traceability, so that everybody knows what ingredients are in every product.

    It is hard to know where to start. But this crisis shows how fundamentally the US food safety infrastructure needs to be changed at virtually every level.

    Published on: February 9, 2009

    Bloomberg reports that Starbucks today will introduce “a $3.95 combination meal as the world’s largest chain of coffee shops competes with breakfast value menus at other restaurants. The Seattle-based company … will offer coffee and a choice of egg sandwiches or a caffe latte and coffee cake or oatmeal.”

    The move comes as a slew of foodservice operations – Panera, Wendy’s, Burger King, Dunkin’ Donuts – introduces new breakfast options – a strategy embraced because “sales during early hours have grown faster than other segments in the past five years, according to data from NPD Group, a consumer-research company.” At the same, Technomic is saying that “breakfast foods are about 25 percent more profitable than lunch and dinner items, based on the cost of ingredients.”

    And, it is a segment in which fast feeder McDonald’s has successfully marketed its offerings for years.

    KC's View:
    It may be cheap to sell breakfast fast food, but it astounds me in some ways that restaurant chains are able to successfully market against supermarket chains – and make no mistake, that’s exactly what they are doing – for a meal that may be easiest of all when it comes to home preparation.

    Bowl of cereal, a piece of fruit, cup of coffee, a glass of juice. Can’t imagine that it’ll get any cheaper than it was for me this morning and every morning.

    I would argue that the vast majority of supermarkets are still merchandising and marketing breakfast foods (and lunch and dinner foods, for that matter) pretty much the same way they were 10, 20, 30 years ago.

    Different climate. Different competition. Different customer base.

    Can't fight a 21st century war with 20th century weapons.

    Got to get aggressive, and create a new paradigm. Find differentiated products that will keep the customer coming back. Or let the competition nibble away at a business until it won’t really matter anymore.

    Published on: February 9, 2009

    The Business Journal of the Greater Triad Area reports that Fresh Market CEO Brett Berry and CFO Michael Barry, sons of founder Ray Barry, have left the company’s day-to-day operations, though they remain on the board and as shareholders.

    COO Craig Carlock has taken over as president and CEO, and the Journal reports that “the company said in a written statement that the full management transition will unfold over the next several months, and that the new executive team will include a yet-to-be-named CFO.”

    KC's View:
    It wasn't that long ago that Fresh Market was on the sale block, until the company said that the owning family had fallen back in love with the business … though my educated guess would be that it actually discovered that Fresh Market wasn't going to sell for as much as it hoped. Since then, the sale price has only gone down with the rest of the economy…so it seems entirely likely that somehow all these pressures added up to these executive departures.

    Published on: February 9, 2009

    Ahold-owned Peapod said that it is expanding its online grocery service to northwest Indiana, according to stories in the Munster Times.

    Peapod currently serves 22 US markets, including the Chicago metropolitan area. Most of the markets are on the east cast, where the service is marketed in conjunction with Ahold-owned brick-and-mortar chains Stop & Shop and Giant; in Chicago and Milwaukee – and now Indiana - customers are served by a central warehouse and the service is marketed as an independent entity.

    KC's View:
    It’s interesting to read the news coverage of the expansion and see the extent to which Peapod’s advantages as a money-saving service – that 1,000 of the 8,000 SKUs carried by Peapod are on sale each week. Add that to the argument – advanced elsewhere but relevant to this discussion – that buying online mans buying with greater discipline, and that buying with greater discipline means fewer impulse purchases, and that fewer impulse purchases means saving money.

    The recession might end up being a good thing for the online grocery business.

    And because I have a natural bias in favor of online shopping alternatives, I’m always glad to see companies like Peapod continue to grow. It is a slow, steady march…always focused. It’s sort of like the like from “Hoosiers,” in which Coach Norman Dale (Gene Hackman) says, “There's a tradition in tournament play – you do not talk about the next step until you've climbed the one in front of you.”

    Published on: February 9, 2009

    Advertising Age reports on a new study by Technomic saying that the law requiring chain restaurants to post calorie information seems to have changed the way people are eating…but has not hurt restaurant chain sales, which have gone up in the lower calorie segment.

    According to the story:

    • About 82% said “they were changing their consumption habits because of it, by choosing lower-calorie alternatives.”

    • Some “86% of study participants said they were surprised by the calorie information.”

    • “Only one-third of study participants said they stopped going to certain restaurants as a result of the 9-month-old calorie-posting mandate for restaurants that have 15 or more locations in the city.”

    KC's View:
    Conventional wisdom suggested that this legislation was unwanted by consumers and hurtful to business. So much for conventional wisdom.

    Transparency is the word of the day, the week, the month, the year. Ignore it at your own risk.

    Published on: February 9, 2009

    Kroger announced that it has reached a new labor agreement with United Food & Commercial Workers (UFCW) Local 711 in Las Vegas, members of which have ratified a new labor agreement with the retailer’s Smith's and Food 4 Less divisions. The agreement covers more than 2,800 Smith's associates and 900 Food 4 Less associates who work in 47 stores in and around Las Vegas.
    KC's View:

    Published on: February 9, 2009

    • The Business Journal of the Greater Triad Area reports that Harris Teeter “has joined the ranks of pharmacies offering generic medications at a discount. The Charlotte-based retailer will offer customers a 90-day supply of more than 300 generic prescription drugs for $9.99. Enrollment in the Generic Prescription Savings Club will cost customers $4.95.”

    • The Associated Press reports that Safeway spent $500,000 on lobbying the federal government on a variety of issues during the fourth quarter, while Supervalu spent $170,000 on lobbying during the same period.

    MediaWeek reports that “popular newsstand magazines like Time Inc.’s People and Bauer Publishing’s In Touch were missing from Wal-Mart stores last week after those publishers, along with American Media Inc., stopped shipping copies to Source Interlink Distribution and Anderson News Co. rather than meet their demands for a 7-cent-per copy distribution fee. Time Inc. said it was working to minimize disruptions in deliveries, but its Sports Illustrated has a lot to lose when its Swimsuit Issue goes on sale Feb. 10.”

    KC's View:

    Published on: February 9, 2009

    • PriceSmart announced that its January sales were up 17 percent to $97.4 million from the same period a year ago, on same-store sales that were up 18.1 percent.
    KC's View:

    Published on: February 9, 2009

    MNB user Filip Pascale wrote:

    In your response to the Dunkin Donuts ad about decaf, you stated that food retailers were just being efficient when making rotisserie chickens in the morning. What about the customers that want a rotisserie chicken at 10:00 in the morning? We make rotisserie chickens several times a day. We are open 8-8, we service our customers 8-8. We have fresh ground beef ready at 8 am and fresh baked bread.

    How can you make a statement like that when you are claiming to be a "retail professional"? It has nothing to do with efficiency, but everything to do with servicing a customers' needs. We do all these several times throughout the day. This is not very efficient, but it what our customer wants.

    Point taken. But my point is that in my experience, there are very few customers looking to buy such a chicken at 10 am, and that most chickens that go on the rotisserie at 8 am are being sold in the late afternoon…when they are inedible, which only reinforces the notion that supermarket fresh food ain’t always all that fresh.

    If you have customers who are buying such chickens at 10 am, good for you. Keep on cookin’.

    Regarding the possibility that if the recession creates an environment in which there are more women in the workforce than men, which will mean that more men will be doing the food shopping, which should mean that supermarkets adjust their marketing pitches, one MNB user wrote:

    It's very true right now and retailers need to better understand is that our impulse buying patterns are strong and thus, easier to appeal to. Most males are somewhat easier marks to the well-presented impulse display with just the slightest appeal to our senses and a larger market basket will prevail, i.e. BB Q's and wine, or beer and we're toast! It does not mean we will ignore value, but we are looking for the reward for doing something we weren't originally conditioned to do!!

    I noted a column last week in the Wall Street Journal saying that marriage is on the decline, and got a number of emails along the same lines as this one:

    Isn't it rather fascinating that the only people who seem to care about getting married these days are homosexuals of both "genders"?

    Certainly seems to be the case.

    I said on Friday that I sort of felt bad for Michael Phelps, which led to a number of emails.

    One MNB user responded:

    Michael Phelps signed a contract in which he pledged to hold a certain morality line. He was fully aware of the consequences. He was a role model because he chose to be a role model. Do we want the lesson for our kids to be…

    • Violate your honor and morals, but don’t get caught…or
    • If you violate your honor and morals, you must pay.

    Another MNB user wrote:

    Far be it for me to cast stones, but when you're one of the most recognizable people on the planet and have tens of millions in sponsorship dollars committed to you, hitting a bong at a college house party is definitely stupid.

    MNB user Steve Garrett wrote:

    I do not buy into him being still being young. This is not the first misstep.

    Has he learn anything?? Is he going to wiser?

    He is not alone and truthfully if that was you or I in the picture no one would care.

    The bigger problem is we need to stop putting people barely known on a pedestal.

    In most cases most people are not what you see!

    This country has so many heroes that will never get the spotlight and maybe more importantly would never want the spotlight as it is their life not their desire to impress anyone.

    MNB user Carla Baughman wrote:

    I agree with you - I also feel bad for the "kid". I am even annoyed (and somewhat suspicious) of Kellogg's dropping him. As they said, the agreement expires this month. I have my doubts that they would have renewed anyway. The London Olympics are 3 ½ years away and everyone is cutting budgets. They could have quietly let that agreement rather than make a public statement. Michael Phelps didn't ask to be placed on a (unrealistic) pedestal. He just had amazing goals and, even more amazing, he accomplished them. Through hard work. Now, he's playing a bit before gearing up for London (hopefully). Cut him some slack!

    MNB user Anne Maas wrote:

    I agree that the whole Michael Phelps incident is being blown out of proportion. Was it a stupid thing to do? Yes, given his status and his corporate sponsorships. But more importantly, as you noted, why in the world would he allow someone to take a picture?? And who is this random that sold out to the media? That's what I'm much more interested to hear about ...

    I'm guessing he/she lost a few friends as a result of this one.

    I would never argue that he shouldn't face repercussions. That was the most expensive pot he’ll ever consume, and maybe that’s the way it should be.

    But here’s where I come down.

    I have less problem with an athlete who uses a little dope in the off-season than I do with an athlete who uses performance-enhancing drugs to win a batting title and the MVP, and then expresses moral outrage on national TV about the use of steroids in sports.

    If you get my meaning.

    KC's View: