retail news in context, analysis with attitude

Published on: February 18, 2009

by Michael Sansolo

”Retailers should think about just getting rid of their magazine sections and using the space for something more 21st century. (You can keep a few at checkout if you like.)” - Kevin Coupe, MNB, 2/10/09

It’s rare that this column addresses topics Kevin Coupe takes on, but this issue is one that demands further comment. Here goes:

Kevin didn’t go far enough.

Because, in truth, retailers should be thinking about getting rid of every section in their stores and using the space for something more 21st century. Or in some cases, more 20th century.

Here’s why. There is no greater enemy to business than the status quo; no greater hurdle to be cleared than the notion that the way we did things yesterday is exactly the way we need to do them tomorrow. In fact, we should ask radical questions and we should strive to come up with the answers.

Imagine what would happen if an entire category were called into question. Suddenly, suppliers and retailer partners would be meeting with incredible urgency to determine how best to save the space. There would be discussions about product mix, marketing segmentation, improved efficiency and other issues that all too often are left untouched. We’d likely see the category reborn, better dialed into the needs of local markets and possibly refreshed and revitalized at the shelf. Or we’d see it go away.

It could happen to any category, wherever there are too many SKUs, too many incorrectly placed SKUs and too many underperforming assets. In short, it could happen to any category in the store.

We’d also see a focused analysis on the role of the category and why it matters. We’d see emphasis on its place in building sales or profits or image. In short, we’d see categories managed the way they should because one sad truth in many (if not all) categories is that there are products on the shelf that don’t belong there because they were placed for the wrong reasons.

And in that regard, Kevin’s suggestion to get rid of the magazine category might actually be a huge boon for business.

That said, let’s try to start the discussion on magazines, the topic of Kevin’s commentary. Yes, magazine sales are down, but I don’t think the category is dying. Rather, I think we are at a point of change in the world of communications and many magazines will be examining how to shift their focus, their story mix, their sales mechanisms and more to deal with the basic realities of the current age. And by the current age, I’d argue that we have to look far beyond the current economic situation, which is obviously impacting everything. We have to examine the generational shift underway, the growing environmental movement and some inherent inefficiencies in the publication distribution business.

Newspapers, magazines and books may all be facing tough times, but if the hard questions are asked, I suspect all three will survive although the industry and the products might start looking different. (The New York Times ran an interesting article Monday about the changing role of school librarians. And anyone who thinks reading itself is dead has never watched a child devour a Harry Potter book.)

I’ve also felt that media provides one great example on how an industry can re-invent itself. The example is: radio. In my parents’ day, radio was the king, providing news, music, entertainment and story telling. (Woody Allen captured the power of the medium in the movie “Radio Days.”) By the time my generation came along, radio lost much of its role to television, yet radio remained a taste maker, a source for new music and we listened even as we migrated to the world of FM.

But for a host of reasons that are beyond what I understand - possibly cassette players in every car, the iPod, or whatever - radio’s role changed again. Now we listen for targeted shows on politics, news, sports or even specific genres of music. Radio goes on. The influence of people like Rush Limbaugh or Tom Joyner should remind us of this daily. So radio changed, connecting with an audience in a new way and moved on.

Now, radio obviously has some advantages that other categories do not. There are times radio still has us as a captive audience, like in the car, but I’d argue that if radio hadn’t created a new user model none of us would be listening. (And it’s instructive that the model is still experimenting and at times struggling. Consider the current perilous condition of Sirius XM.)

It’s an object lesson for magazines and publications, but also for every category of every store. The consumer changes and we must react. We have to understand shifting needs, shifting technologies and simple changes in day to day life that put some products on the ascend and some on the descend. It how we understand and cope with these changes that makes all the difference.

So yes, consider getting rid of every category, if you must. Ask the tough, uncomfortable questions. And as you answer them, prepare to change.

Michael Sansolo can be reached via email at msansolo@morningnewsbeat.com .

Published on: February 18, 2009

The Wall Street Journal reports that Tom Vilsack, the new US Secretary of Agriculture, “is expected to ask the food industry to adhere to more stringent rules for disclosing the country of origin of products sold at grocery stores … Mr. Vilsack will ask meat producers to label meat packages with the country in which the animal was born, where it was raised and where it was slaughtered … The new rules also will require labeling on more foods that have been changed from their natural state, such as through roasting or boiling. Foods deemed to have been ‘processed’ generally are exempt from country-of-origin labeling requirements.”

Vilsack reportedly plans to outline the new rules later today.

Published on: February 18, 2009

The Boston Globe reports that while many Americans are aware of the peanut recall associated with the ongoing salmonella outbreak, they are confused about the specifics – with 25 percent mistakenly believing that the recalls include jars of national brand peanut butter. “Most of the survey respondents correctly identified peanut butter crackers as being on the recall list, but fewer than half were aware that cakes, brownies, cookies, some prepackaged meals, and pet treats were also on the list,” according to the story.

"There's a striking level of awareness of this recall, and many people have taken action. But they're not aware of the range of products involved in the recall," said Robert J. Blendon of the Harvard School of Public Health. "People should check the Food and Drug Administration recall list."

According to the Globe, “about 60 percent of people who knew about the peanut recall responded by checking ingredient lists in the grocery stores, throwing out foods at home they thought were on the recall list, and skipping food with peanuts, including at restaurants.”

Published on: February 18, 2009

Kraft Foods CEO Irene Rosenfeld yesterday introduced a new slogan for the food manufacturer – “Make today delicious” – as well as a new corporate logo has the name "kraft foods" in lower case blue letters, with the "foods" part underlined by a red smile.

Rosenfeld also introduced a series of core corporate values that she would help the company’s 100,000 employees coalesce behind a more productive and effective way of doing business. These values include such mantras as "keep it simple," "inspire trust,” "tell it like it is,” and "we act like owners” – the latter of which Rosenfeld said was the most important.

While the new logo and slogan are designed to be uplifting, Rosenfeld said yesterday that they will only go so far, and that they must be accompanied by concrete results.

Published on: February 18, 2009

In Minnesota, the Star Tribune features an interview with Robert Mariano, chairman/president/CEO of Roundy’s, in which he discusses changes taking place in the business. Excerpts:

• On shifting shopping patterns: “I think for people who still have dual incomes, time is still of the essence. They may reduce how much they will spend at a quick-service restaurant, but they may be eating out as much as they were. So I haven't seen a lot of movement there yet. I think what we've seen in the stores is people shopping for more value. I read that people are grocery shopping like they're shopping for a car. That's true. That's at all economic levels. So they're just watching what they buy.”

• On private label growth: “We've been on a very aggressive effort to grow our own brand presence. The company used to be a wholesaler, and now is a retailer, so we've been on an aggressive campaign to add things constantly. It kind of plays right into where the customer is at.” (Mariano says that Roundy’s current stocks about 4,000 own label products, and wants to grow that to about 6,000.)

• On competition: “I think you play to your strengths. And our strengths are in perishables and our ability to serve each neighborhood uniquely. Customers in the United States are fickle. They'll never believe you have the lowest price, they always think there's a better deal. That's just the American way, so in a respect you have to earn your stripes each and every week you go out there. We want to be the best supermarket. We're a supermarket. We're not a Wal-Mart.”

Published on: February 18, 2009

USA Today reports that a new survey by Ellison Research suggests that people are more loyal to the household products they purchase than they are to the churches they attend.

The story says that the survey found that “16% of Protestants say they would consider only one denomination, while 22% of them would use only one brand of toothpaste and 19% would use just one brand of bathroom tissue. Experts say the findings may be more telling about Americans' views of the plethora of Protestant groups than how they choose between Quilted Northern and, say, Cottonelle.”

The study suggested that “44% of Americans have switched from one faith, or one denomination, to another,” but that there is a pronounced difference between Protestants and Catholics, 60 percent of whom said they would not consider switching from Catholicism to a Protestant denomination.

Published on: February 18, 2009

The Wall Street Journal this morning reports that “brand-name manufacturers are trying to boost sales and defend their market shares in part by working with retailers to create special displays that allow name brands and store brands to share the promotional spotlight. Their strategy acknowledges that the rise of store brands has been a boon to retailers, whose overall sales have slumped and whose gross profit margins on store brands typically exceed those on branded items by 10% to 12%.

“General Mills, for example, is using in-store grocery displays to promote ‘full meal solutions’ that include its brands as well as store brands. At the Food Lion grocery chain, the company recently did a ‘taco night’ display featuring its Old El Paso brand taco shells, taco seasoning mix and refried beans, as well as Pace salsa and Food Lion rice and ground beef. A ‘pizza night’ display featured General Mills' Pillsbury dough with the retailer's store-brand tomato products.”

The story reflects the ongoing tension that exists as retailers become more reliant on private label products that are perceived as being more attractive to shoppers during recessionary times, and manufacturers try to work within this shifting mindset while defending their own turf.

The Journal notes that this tension may be on full display at Walmart in the near future, as it relaunches its Great Value own label program with improved quality and packaging. The Journal writes, “The plan carries some risks for Wal-Mart, which became the nation's largest food retailer largely by offering its customers lower prices on well-known brands … Although Wal-Mart's Great Value line, with 5,000 products, is the largest food brand in the country, it accounts for just 16% of the retailer's food sales. By contrast, Kroger Co.'s store brands account for 26% of that grocery chain's sales.”

Published on: February 18, 2009

The Seattle Times has a story suggesting that at least in some neighborhoods, shoppers are rallying around local merchants that are in dire straits because of the recession: “Although large, national chains dominate the headlines about the U.S. retail sector, small shops are more at risk of going under, experts say. They tend to operate on thinner profit margins, with little room for error, and cannot afford to slash prices to the extent that many cash- and credit-strapped shoppers have come to expect.

“Local shopkeepers say they hope to survive the recession by paring orders to reflect their diminished outlooks, carrying more products at the lower end of their price ranges and asking customers for their support through tough times.” And, while “most economic data suggest people are pulling back on their spending as they lose jobs or forgo pay raises and bonuses, worry about shrinking retirement funds and adjust to a new era of tightened lending standards,” there is some evidence that people “who are financially stable … want to help.”

However, the story also notes that “buy local” has an unusual resonance in the Pacific Northwest, and these same sentiments may not be evident elsewhere.

Published on: February 18, 2009

• The Arizona Republic reports that Walmart plans to “lower the fees on its prepaid, reloadable Visa debit card as the recession continues to wallop its customers … The company plans to charge a one-time $3 activation fee, a $3 charge for reloads and a $3 monthly fee on its MoneyCard.
Those costs had been $8.94, $4.64 and $4.94, respectively.”

Published on: February 18, 2009

As expected, yesterday Starbucks CEO Howard Schultz unveiled the company’s new instant coffee entry, Via, which will first be rolled out in Seattle and Chicago.

In a piece for the Huffington Post, Schultz explained his rationale:

“There are numerous logical reasons: the significant size of the instant coffee market ($17B globally); the increasing mobility of consumers (imagine a cup of Starbucks VIA Ready Brew on a mountaintop); and, regardless of our ubiquity, that customers continue to tell us they want more Starbucks, and more ways and opportunities to enjoy it.

“But beyond these market trends, there is a larger rationale. During trying economic times, the brands that endure are those that that adapt to the changing needs of their customers, without forsaking their core values. We think introducing a paradigm-changing and better-tasting instant coffee is a way to bring quality and value to the mass market, and to turn on a whole new set of coffee drinkers to the Starbucks brand. This is a considered bet for us and we know we'll learn a lot as we launch the product in leading markets over the coming weeks … I know some will question our decision, and I understand this reaction. Expectations from brands like Starbucks are high, and interaction with our brand is very personal.

“Yet in spite of those high expectations (or perhaps because of them), we are confident we can disrupt and reinvent the instant coffee category -- introducing quality coupled with value.”

Schultz continues: “I believe that today, perhaps more than ever, we need to be mindful of who we are. We are forced into making decisions without perfect information: delay a decision by even a day and the economy will have changed shape once again. Business in this climate is more art than science. At Starbucks there are no sacred cows -- except one. I believe that it is crucial, and I think our customers agree, that we remain true to our core values. To adapt is essential in order to survive, to walk away from our founding principles -- the very reason for our being -- would be reckless. Like all businesses, we're aggressively managing the short term, with an eye firmly fixed on the future. But things will never go back to normal. When the economy does stabilize, I do not believe that we are going to see behavior and attitudes automatically flip back to what they were during more prosperous periods. There's been a mental shift that will be hard to undo."

Published on: February 18, 2009

• Ahold-owned Peapod, the online grocery service, has announced a new partnership with NuRide, a commuter rewards programs.

According to the announcement, the goal is “to reward commuters who participate in the Earth Day Commuter Challenge taking place between now and Earth Day in the Connecticut and the New York metro region. The Earth Day Commuter Challenge … will track all forms of green commuting including carpooling, vanpooling, telecommuting, biking, walking and taking mass transit. Employers who participate get the opportunity to ‘Race to the Finish’ in the challenge event and participating commuters can save money on gas and earn rewards from local and national sponsors, including over two dozen weekly prizes of $100 in groceries delivered right to their door by Peapod by Stop & Shop, the division of Peapod which serves the New England and Metro New York area.”

Published on: February 18, 2009

• USA Today reports this morning “dozens of businesses, government agencies and schools nationwide are counting exit signs that contain a mildly radioactive compound and are to report any losses to federal regulators after Wal-Mart Stores said it could not find 15,000 of the signs.”

According to the story, the issues contain “tritium, a hydrogen isotope with a radioactive strength similar to that of material in many smoke alarms.” While they are not unsafe, there are federal rules for disposing of the signs in order to reduce the risk of low-level radioactive contamination.

• The Los Angeles Times reports that a coalition of environmental and health activists plans to initiate a lawsuit against Procter & Gamble, Colgate-Palmolive and two other major companies, aimed at forcing the manufacturers to “reveal the chemical ingredients of their cleaning products and their research on the products' effects.”

The Soap and Detergent Association said that it was disappointed that the coalition had decided to file a lawsuit, but the Times notes that the manufacturers had been asked to provide the information voluntarily but had not done so.

• Add Maine to the list of states considering a fee for plastic disposable shopping bags. According to the Associated Press, a previously rejected bill has been resurrected that would charge a dime per bag (down from the previously suggested 25 cents), and would apply to all retailers, not just supermarkets.

• The Chicago Tribune reports that Roundy’s has signed a lease for a new store to be opened in Chicago’s Bronzeville section, part of its effort to open a dozen stores in the Windy City by the end of next year.

• The New York Times reports that McDonald’s plans to open 500 stores in China over the next three years…an increase of roughly 25 percent over the 2,000+ it currently operates there.

Published on: February 18, 2009

• Walmart said yesterday that its fourth-quarter profit fell 7.4 percent to $3.79 billion, from $4.096 billion during the same period a year earlier. The company said its profits were affected by exchange rates and the cost of settling a series of lawsuits during the fiscal period.

Total sales rose to $109.12 billion from $107.34 billion, on same-store sales that were up 2.8 percent.

Wal-Mart's U.S. sales rose six percent during the quarter, while business at its Sam's Club warehouse division was flat. International sales fell 8.4 percent but a constant currency basis, international sales actually rose nine percent, the company said.

Published on: February 18, 2009

MNB reported yesterday that the University of Michigan’s quarterly American Customer Satisfaction Index (ACSI) is out, and says that despite the recession, “customer satisfaction with the goods and services that Americans buy improved in the fourth quarter of 2008,” climbing to 75.7 on the ACSI’s 100-point scale, up 0.9 percent from the previous quarter.”

My comment: To be honest, I find these results a little surprising. There seems to be so much public discontent out there, it is a little strange to see a study suggesting that consumers actually may be more satisfied with many retailers than they were just a few months ago. (There aren’t many other institutions about which one could say that.) That’s a good sign for retailers…and a public trust that, in many ways, retailers need to re-earn every day. It also suggests that if people actually had more money, they’d be willing to spend at least some of it with the retailers they trust. So maybe there’s a light at the end of the economic tunnel after all.

MNB user Al Kober responded:

Spoken like a true liberal. You can’t even accept good news because it might not fit into your preconceived perception that the sky is falling. The economy is shot and the government must be our savior. All businesses are failing. All people are suffering etc. In reality, 92% of all Americans are still holding jobs and working hard , and if the doom and gloomers would just get more realistic and look for the more of the positives like this piece, maybe the customer confidence would be better. Yes many are going through tough times but the constant stream of only bad news doesn’t help. And then when some good news comes along, guys like you do not want to accept it, or doubt its accuracy, or even believe it is true.

“So maybe there’s a light at the end of the economic tunnel after all.” To your credit, you did close your comments on a somewhat positive note.

It’s not you. I am just becoming totally disgusted with the new administration and all of his socialist agenda and needed to vent. Thanks for this format to do just that.

My pleasure.

For the record, I didn’t say I didn’t believe it or doubted its accuracy or didn’t want to accept it. Just that I was a little surprised.

As was MNB user Bob Livingston:

I found that report on Consumer satisfaction index to be a surprise as well. One of the early findings in reviewing the case histories of all of the retailers, who have failed this past year, is that they maintained little or no relationship with those they served and customers left in flocks, since there was no connection between both parties. Coming out of this recession I fully expect that, when companies conduct their post-mortem, service will come back to the forefront. I sure hope so...

I keep reading and re-reading this email, and cannot for the life of me figure out Bob Livingston’s political persuasion. He doesn’t sound like a socialist or a liberal … but you never know.




Yesterday, MNB reported on a Chicago Tribune report that People for the Ethical Treatment of Animals (PETA) is planning to relaunch its “McCruelty” campaign against McDonald’s as it looks to get the fast feeder to pressure its chicken suppliers to kill their chickens more humanely. According to the story, there are two ways to kill a chicken before slaughter. One is to knock it unconscious with an electric jolt before cutting its throat, and the other is to gas it – which is the more humane practice preferred by PETA. McDonald’s, for its part, maintains that its research shows that gassing isn’t necessarily more humane than electric shocks and throat cutting…and there are at least some animal experts who agree.

My comment: Readers of this site know that I take a certain perverse pleasure in tweaking PETA, mostly because we all know that its ultimate goal is to turn the world into a spinning globe of vegetarians. But I have to admit that the various descriptions of how chickens are out to death – the Tribune writes that “in most U.S. chicken slaughterhouses, birds are plucked from bins by workers and hung upside down on an assembly lines … their heads are dragged through brine and a shock is administered, which if done properly knocks the bird senseless … a whirring blade then cuts its throat” – certainly goes into the “you really don't want to know how sausages are made” file.

To which one MNB user responded:

Is compassion a negative trait in your opinion? You act as if attempting to reduce the suffering of animals is not a noble endeavor.

As I’m writing this, the guy behind me (who also just read your column) is sharing with us all that he would “love to visit a slaughterhouse” because he thinks it would “really cool.”

Do vegetarians disturb you more than people like him?

No. They don't.

Vegetarians actually don't bother me at all, as long as they don't try to convert me or make me guilty about enjoying a cheeseburger. (I feel the same way about people who knock on my front door to try to convert me to one religion or another. Or salespeople who invade my turf at any time.)

People who get off on any kind of suffering, on the other hand, bother me a lot…and I would hate to think that I encouraged that sort of attitude.

MNB user Hortencia Espinoza had some thoughts:

My note to PETA: Stop focusing on McDonald’s and KFC and put some of your efforts on what you CLAIM is your lifestyle, being a vegetarian. Where the heck were your efforts to make the “veggie” foods, i.e. PEANUTS and PEANUT BUTTER safe for us to eat? If you really do stand for better ethical treatments of animals, start with the human animal.

MNB user Robyn Lydick wrote:

I’d much rather PETA lay its pressure to better LIVES for the animals.

I personally won’t eat flesh, but family members do; and as readers of Michael Pollan learned in Omnivore’s Dilemma, animals raised in more natural conditions are actually better food.

Don’t focus on the kill floor, but the battery cage. Let these animals actually see light, and breathe fresh air.

PETA is smart in which fast food places they target. These are the biggest buyers and can remake the industry, if they choose to.

PETA is incredibly sloppy, PR-wise, when it comes to REAL animal issues.