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    Published on: March 6, 2009

    More Friday Musings by “Content Guy” Kevin Coupe

    The Boston Globe reports that after two decades of being a state of the art entertainment retailer with a high profile brand name, the last six Virgin Megastores in the US will close down this summer, victims in part of the nation’s financial troubles.

    But even more deadly to the Virgin stores was a little contraption called the iPod, which popularized the concept of downloading music, television shows and movies from the Internet rather than buying physical CDs and DVDs.

    Now, the Globe notes that there still are some 150 Virgin Megastores elsewhere in the world in the rest of the world, licensed to local ownership in Australia, Japan, and the Middle East.

    If the owners of those stores think that business-as-usual is a viable strategy in the current environment, they’re crazy. It has nothing to do with the economy, and everything to do with the technology and intellectual game-changers that have forever affected how people gather and access information and entertainment.

    Owning a CD/DVD store isn’t quite as hopeless as, say, being in the door-to-door encyclopedia sales business. But it’s close.

    Along the same lines, it was noted in this space last week that as the Rocky Mountain News closed down, there are a lot of newspapers in trouble…also victims of technological shifts and changing priorities held by young consumers.

    Which makes it interesting that Hearst Corp. – which has been threatening to close the San Francisco Chronicle if it cannot find a buyer – reportedly is considering turning the Seattle Post-Intelligencer into an Internet-only news service.

    The P-I won’t be the same paper, nor will it have the same coverage, budget or ad base. If this happens, it will at least have the opportunity to develop a 21st century business model…to figure out how to monetize its core mission.

    That’s what we all have to do in our businesses. Not ignore the future, or fight its intractable march. But embrace it.

    KC's View:

    Published on: March 6, 2009

    A new study says that US coupon redemption in the fourth quarter of 2008 was up 10 percent compared to the same period a year earlier: “While the first three quarters of the year saw redemption dip slightly, coupon redemption surged up by nearly 10% in the fourth quarter, compared to Q4 2007. That increase came in November and December which both saw double-digit redemption growth. A double-digit increase in the use of food coupons primarily drove the jump in redemption, although non-food coupon redemption also rose by nearly 10%.”

    The trend is continuing, with consumers redeeming nine percent more coupons in January ’09 than they did in January ’08.

    According to the study, from promotions transaction settlement provider Inmar, “Consumer response remained strong for the year with 2.6 billion coupons redeemed, the third year in a row at that level. The weak economy was a major factor in stopping the steady decline that coupon redemption had seen in the years prior to 2006. The peak year for coupon redemption was 1992, at the end of the last major recession, when 7.9 billion coupons were redeemed.

    The study also says that “marketers continue to believe in the power of coupons, proven by a 5% increase in the number of coupons made available to consumers last year. At 317 billion coupons, distribution is not just up over the previous year, but is back up to levels from a decade ago.”

    KC's View:
    Not exactly a surprise. I still think that, especially in this economy, coupon usage would be greater if more of them actually were relevant to the people to find them falling out of their Sunday newspapers or showing up as junk mail. I remain appalled by how much coupon distribution is not targeted…and they can say that redemption is going up, but the ratio of coupons thrown out to those used is still awful.

    Published on: March 6, 2009

    USA Today writes that Minnesota is vastly more competent at dealing with food safety problems than most other states and even the nation as a whole…and that, in fact, its prowess “exposes weaknesses in the nation's ability to quickly track and contain outbreaks, food safety specialists say.”

    It is a long, 1700+ word piece, but here’s what it seems to come down to. Minnesota has a state food safety system that values consistency, transparency and traceability, and the state has devoted adequate dollars to making it work (unlike many other states, where budgets have been cut).

    In addition, Minnesota seems to have the right mindset for investigating food safety issues – its inspectors work on the assumption that every illness report is just the first in a series that will result in the identification of an outbreak, as opposed to assuming that everything is an isolated incident until proven otherwise.

    KC's View:
    The difference, it seems to me, is one food safety apparatus is designed to protect consumers while the other has devolved into a system designed to protect industry … even though the smart business players know that a consumer-oriented food safety system is the best thing for industry.

    Only two things that I can think of that are negative about Minnesota. It has a winter that lasts about nine months, and it only has one Senator.

    Ironically, the New York Times this morning reports in a front-page story that while government food safety inspections clearly have been demonstrated to have their limitations, private inspections also are not the answer…something amply demonstrated by the fact that private inspections were conducted at plants owned by Peanut Corp. of America, which has been blamed for the salmonella outbreak that has sickened more than 600 people and contributed to deaths of as many as nine. And the Food and Drug Administration (FDA) has made increased private inspections a lynchpin of its plans for an improved food safety apparatus…which concerns people less than impressed by private audits.

    The whole thing contributes to an overwhelming feeling of hopelessness that seems too prevalent these days.

    Published on: March 6, 2009

    The Washington Post this morning reports that a half-dozen manufacturers of plastic baby bottles have decided to stop selling in the US those that are made with bisphenol A … a move happening the same week that NY’s Suffolk County moved to ban BPA usage, and the New Jersey and Connecticut Attorneys General urged the manufacturers to stop using BPA.

    BPA has been the subject of some controversy. As previously reported here on MNB, there have been a series of studies linking BPA with health problems that include diabetes and heart disease. However, the US Food and Drug Administration (FDA) has published a draft assessment saying that BPA does not pose a health hazard when people are exposed to small amounts, and that conclusion has been confirmed by European Food Safety Authority (EFSA) Authority, Health Canada, the World Health Organization, Health and Consumer Protection Directorate of the European Commission; the European Chemical Bureau of the European Union; the European Scientific Panel on Food Additives, Flavorings, Processing Aids, and Materials in Contact with Food; and the Japanese National Institute of Advanced Industrial Science and Technology, as well as the Grocery Manufacturers Association (GMA) and the American Chemistry Council.

    However, that hasn’t stopped the Canadian government, Consumers Union (CU), the Consumer Federation of America (CFA) and Walmart from disagreeing with the FDA decision; in Walmart’s case, it is not selling children’s products containing BPA.

    KC's View:

    Published on: March 6, 2009

    There is an interesting story in American Medical News about how, as there has been an increase in the number of in-store medical clinics throughout the United States, there has been a corresponding increase in legislative focus on these installations.

    There were 350 such clinics in 2006, and the number now is close to 1,200…and as they have become more popular, states have started considering various kinds of regulations that could affect how they operate. These rules and regulations are run the gamut from requiring separate entrances to limiting what kinds of treatments can be offered and the age groups that can be treated; to this point, most state efforts to regulate the clinics have failed.

    However, the suggestion from legislative experts is that every failure actually increases the likelihood that future efforts could succeed, and that the clinics eventually will find themselves working under government regulations that some will deem to be oppressive and others will say are necessary.

    KC's View:
    If such efforts are designed to make sure that patients are getting adequate and accessible health care, then there is a role for government to play a regulatory role.

    What concerns me is that there are going to be places where government is going to intercede because politicians have been persuaded (some would say “paid off”) by members of the current health care establishment who are threatened by the in-store clinic evolution.

    Especially today, that’s unacceptable.

    Published on: March 6, 2009

    In Canada, Toronto’s Globe and Mail reports that Loblaws wants to move to more of a full-time workforce, believing that such a shift would save it training costs and improve morale and loyalty.
    KC's View:
    Interesting time to consider such a shift, when a lot of companies are cutting staff and laying off personnel. If the numbers work, a full-time staff can only help Loblaw be more competitive when it comes to the in-store experience.

    Published on: March 6, 2009

    MSNBC reports that Walmart is once again eyeing Manhattan as a place to locate a new store…something that has been elusive for the world’s largest retailer. The address being considered is in Chelsea, on Sixth Avenue. …. and it is believed that the current economic downturn could open a window for Walmart, which will bring both jobs and low-cost products.

    Opposition is practically guaranteed from organized labor and local retailers.

    KC's View:

    Published on: March 6, 2009

    • Albertsons LLC, the privately owned supermarket chain that operates Albertsons stores not owned by Supervalu, said yesterday that it has come to an agreement that will Supervalu continuing to provide back office infrastructure and services until the end of 2014. The original agreement, signed when the two companies bought and split up the Albertsons chain in 2006, was scheduled to expire.

    • The Food Marketing Institute (FMI) said yesterday that its Safe Quality Food Institute (SQFI) has launched a new website — www.sqfi.com — organizing the content according to the needs of the diverse community of users, including food suppliers, retail buyers, auditors and certification bodies, and training centers and consultants.

    According to the statement, “Representatives of each group can find the information and services they require grouped together on separate web pages. A list of more than 40 guidance documents, codes, applications and registration forms are also grouped by user. Retailers can perform highly targeted searches for SQF-certified suppliers, specifying, for example, the product category, company type (primary producer or manufacturer), level of certification (1, 2 or 3) and country.”

    KC's View:

    Published on: March 6, 2009

    • Walmart said that its total company February sales were $30.018 billion, up 2.8 percent from the $29.188 billion reported during the same period a year ago. Walmart’s US sales were up 8.1 percent, and its Sam’s Club division was up 3.1 percent, while international sales were down 10.8 percent. Same-store sales in the US were up 5.1 percent without fuel being factored in, and up 4.5 percent with fuel included.

    • Village Super Market Inc. said that its second quarter net income was $8 million, up from $6.4 million during the same period a year earlier. Revenue was up seven percent to $312.7 million, on same-store sales that were up 5.9 percent.

    • Target Corp. reports that its February sales were stagnant at $4.37 billion, compared to the same period a year ago. Same-store sales were off 4.1 percent.

    • Rite Aid reported that its February revenue was down 2.4 percent to $2.549 billion, on same-store sales that were down 0.9 percent.

    • Anheuser-Busch InBev, the Belgian brewing giant, said that its fourth quarter profits were the equivalent of $61 million (US), down 95 percent from the same period a year earlier. Q4 sales were up 35 percent to $6.5 billion.

    The company blamed acquisition and restructuring costs for the profit decline, and said it would endeavor to sell off $7 billion worth of assets – including its amusement parks – to help pay down debt from the company’s $52 billion acquisition of Anheuser-Busch.

    For all of 2008, AB InBev profit was down 41 percent to $1.6 billion (US), on annual revenues that were up 12 percent to $20.4 billion (US).

    KC's View:

    Published on: March 6, 2009

    I wrote yesterday that everybody needs to be in the market share business, that the down economy should be a time to worry less about sales and profits and focus on building share of market and stomach that will hold when things eventually rebound.

    To which MNB fave Glen Terbeek wrote:

    This is particularly true if the market share is defined/measured locally. National market share definitions/measurements only allows performance to average, not potential!

    Agreed. Market share should be measured in terms of single stores, because that’s how shoppers think about them. They don't care if a store is a single unit operation or one of a thousand stores in a chain…they care whether a store suits their needs and desires.



    MNB user Ken Wagar had some thoughts about another story:

    I found Kraft’s comments regarding line extensions to be déjà vu all over again.

    In my opinion Kraft has been the King of line extensions for virtually all of my 40 years in the industry. While they make some great products and have some very successful brands they have always been aggressive in stretching those brands sometimes to the point of the extreme. There is no question that they have been a leader in item proliferation over the years so for the most part this announcement is just more of the same.

    What is a bit curious to me is that the two really innovative products they created, Snackwells and Lunchables each became categories unto themselves and these are the types of innovative items they seem to be saying they won’t develop in the near term. Even in the current economic climate I would think they would be better off innovating than continuing on the long path of line extensions, item proliferation and diluted sales of existing key items.





    I keep insisting that retailers need to develop an Internet strategy…especially in view of a new study about how “green” such strategies are…and continue to be surprised by the number of retailers that do not have web projects front-and-center on their agendas. One MNB user contributes:

    Agreed. In addition to an Internet sales strategy for grocery stores, they should also consider adopting other electronic-based tools and market them as "green". Examples include online training programs for their employees (reduce travel and materials saving resources) and in-store digital signage delivering customer-centric education (vs. marketing messaging) to save on pamphlets and POP materials. As customers continue to mature in their desire and demand to receive information where and when they need it, the industry has to begin thinking about content needed and how & when to deliver it to match the customers' point-of-need.




    I’ve spent a lot of time recommending the Kindle (and will get to it yet again in “OffBeat,” below).

    One MNB user wrote:

    I just got a Kindle this week, and I think the ideas suggested by your readers for use in Government, Business, & Schools is a great money and tree saving idea. New technology can create new jobs, improve efficiency, reduce waste and improve our way of life. What a novel idea, Kindle! While we are utilizing technology, let’s just have all the Congressmen and Senators stay in their home states and meet via Webinars and conference calls. They might have a better chance of meeting their constituents from their home states as well.

    When you think about it, having everybody get together in one room in order to vote is sort of a 19th century concept…

    MNB user Kevin McKamey chimed in:

    Just thought you might like to know, I purchased a Kindle 2 last week partially based on the recommendation from your column. My wife and I had only purchased one Kindle book so far, but after downloading the “free” iPhone Kindle APP last night, we purchased 4 more Kindle books. The flexibility enabled by reading books on multiple Kindles (a Kindle and two iPhones) allowed us to feel that we would both be able to enjoy books at the same time and even when we did not have the original Kindle unit with us. At first I questioned the business move to allow iPhone users to read Kindle books on their iPhones. The sale of Kindle units would certainly not be as high with the iPhone capability available. If every person needed a Kindle unit in order to use this new service, Amazon would sell more Kindle units. After realizing that I and my wife could read the same or different book at the very same time with the iPhone APP, I realized that Amazon had decided to seek long term sales instead of just initial short term purchases of Kindle units. During this time of economic hardship, companies should try to emulate this long term philosophy of building loyalty with their customers. When spending is increased in the future the customers will be loyal and purchase from those same companies. Amazon certainly made deposits in our loyalty banks and expanded the possibility for future sales.

    More on this below…

    KC's View:

    Published on: March 6, 2009

    This week, Amazon.com announced that it had created a new application that would allow Kindle owners to synch up their electronic books with their iPods…essentially giving them access to literature in two different places and formats for the same price. Remarkably, within a couple of hours of this announcement being made, I had more than a dozen emails from MNB users advising me of this new development and suggesting that – since I own both an iPhone and a Kindle, and am enthusiastic, to say the least, about both technological tools – I might want to test this new service.

    You know me well.

    As soon as I could, I downloaded the application to my iPod and it wirelessly gave me access to the 20 or so books that I have on my Kindle. The screen is small, but the font is adjustable…it might not be the best way to read a long book for an extended period of time, but it struck me as perfect for when I have unexpected time on my hands and have neither my Kindle or even my iPod to rely upon.

    The night after I downloaded the application, I found myself in Burlington, Vermont, having dinner by myself…and it was wonderful to have access to my books even though I’d left the Kindle in my hotel room. That’s when technology is great, I think … when it has a purpose, when it awakens needs or desires you didn’t even know you had, and when you start to wonder how you ever survived without it.

    Bingo.

    Speaking of that dinner…

    I was eating at Leunig’s, a wonderful French bistro in downtown Burlington, where I enjoyed the most amazing jalapeno glazed scallops served with slices of blood orange and a crispy saffron, black bean and sweet corn risotto cake and sautéed baby spinach. It was melt in your mouth good, and I washed it down with a couple of glasses of 2006 Marchesi di Barolo Barbera d’Alba “Ruvei” from Italy…which was somehow both delicate and intense and perfectly complimented the scallops.

    So there I was in a French bistro, eating scallops and drinking good wine, a listening to a couple of musicians play standards from the forties while I read chapters in Ernest Hemingway’s “A Farewell to Arms” that actually take place in Paris. It was sort of a surreal evening that could have been happening in another place and at another time…except that I was reading the book on my iPhone.

    It’s a good life.




    We all hear about the politicians and elected officials who seem to be tone-deaf to what is going on around them, except when they are able to manipulate it to their own advantage.

    So it was nice to read in the Irish papers this week that there actually are five members of the Irish Senate who have volunteered to take pay cuts as a way of saving the government money and demonstrating solidarity with the population at large at a time of real financial difficulties in that nation.

    There also, according to reports, is one Senator who has declined his salary completely, saying the funds could be better used to serve the public interest.

    That Senator, as it happens, is Feargal Quinn, founder of Ireland’s legendary Superquinn supermarket chain … and a man who has made a career not only out of not being tone deaf, but of being carefully tuned into what the customers (and now, the citizens) are saying and thinking.

    Good for him.




    MSNBC reported the other day about a new study saying that “caffeine helps kill off human cells damaged by ultraviolet light, one of the key triggers of several types of skin cancer.”

    According to the story, “Several studies have shown that people who regularly drink coffee or tea seem to have lower incidences of nonmelanoma skin cancers,” an some people are suggesting that topical, caffeine-based skin creams could be the next rage.

    Which sounds like a potential line extension idea for Starbucks.

    Or maybe for White Could Coffee, which makes the excellent “Attitude Blend,” which we’ve christened the “official coffee of MorningNewsBeat.”

    Though I’m not sure I could get anyone to rub MorningNewsBeat coffee cream all over their bodies. Not even Mrs. Content Guy.




    A new study from the National Sleep Foundation says that 27 percent of Americans are losing sleep because of financial worries, and that the number of people getting lousy sleep has almost doubled in just eight years.

    It’s almost certainly true that current economic worries are contributing to the sleepless nights. But I suspect there is another culprit – blogging.

    It really has been the last eight or nine years that blogging has become popular, which coincides with the decline in quality sleep in the US.

    Coincidence? I think not.

    I’d be more sure about this, but I only got four and a half hours of sleep last night and five the night before, and it is hard to be sure of anything at this point.

    Except, of course, that mainlining “Attitude Blend” is my first, best option.




    “Night and Day,” the new Jesse Stone novel by Robert B. Parker, is typical of the author’s work…it is a fast and enjoyable read, with language that has a somewhat musical quality and punchy, character-driven dialogue filled with irony. I liked it a lot, as I usually do his books.

    And it was nice to read it the same weekend that “Jesse Stone: Thin Ice,” appeared on CBS…the fifth TV movie featuring Tom Selleck as Stone, the chief of police in mythical Paradise, Massachusetts.

    The only problem is that we’ll have to wait months or maybe a year for the next installments. (At least there will be another western and a Spenser novel published by Parker this year.)




    That’s it for this week. Have a great weekend, and I’ll see you Monday.

    Sláinte!!
    KC's View:

    Published on: March 6, 2009

    Whole Foods and the US Federal Trade Commission (FTC) announced this morning that they have reached a settlement in the long antitrust battle that began with the retailer’s $565 million acquisition of Wild Oats.

    The deal will have Whole Foods selling “leases and related assets for 19 non-operating former Wild Oats stores, 10 of which were closed by Wild Oats prior to the merger and nine of which were closed by Whole Foods Market,” as well as “leases and related fixed assets (excluding inventory) for 12 operating acquired Wild Oats stores and one operating Whole Foods Market store.” In addition, according to the announcement, “Wild Oats trademarks and other intellectual property associated with the Wild Oats stores” will be put up for sale.

    Whole Foods CEO John Mackey called the agreement “mutually satisfactory.” In a prepared statement, FTC chairman Jon Leibowitz said that “as a result of this settlement, American consumers will see more choices and lower prices for organic foods … It allows the FTC to shift resources to other important matters and Whole Foods to move on with its business."

    The FTC, stymied in its initial efforts to block the deal, has been trying to unravel the merger since it closed more than a year ago both through administrative hearings and court filings. The FTC’s case is based on its antitrust argument that the deal created a dominant entity in the natural/organic segment that would result in higher prices and less choice for consumers. Whole Foods, on the other hand, has argued that there is plenty of competition in the segment, and that prices actually have gone down since the merger.

    KC's View:
    While I continue to believe that the FTC was wrong and Javert-like in its pursuit of Whole Foods and desire to unravel the deal, it probably makes sense to simply come to an agreement and stop wasting everybody’s time and money.

    I do, however, have a question. In this economic environment, it seems like it is by no means a sure thing that these locations will be easily sold. And I’m not sure anybody is going to pony up a lot of cash to buy the Wild Oats brand, either. It’ll be interesting to see in nine to 12 months how many of the stores have been sold and for how much, and whether someone has decided to claim the Wild Oats mantle.

    My suspicion is that a pure-play organic retailer is not what most customers are looking for right now…that they like having organic options, but are willing to buy them from more mainstream retailers that have a broader array of items. Not everyone will feel this way, but a lot.

    Bottom line: Has all this tumult improved the competitive nature of the grocery business and the organic/natural subset? I don't think so. I think it just wasted a lot of money at a time when there is too little of it to spare.