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    Published on: March 13, 2009

    Forbes reports that Walmart executive vice president of finance Charles Holley Jr. told a Bank of America consumer conference that the company has “widened the competitive moat” that stands between it and other retailers both inside and outside the US.

    Holley said at the conference that the recession has put Walmart in a strong competitive position, that it will remain the low-price leader, and expects to take advantage of unspecified new business opportunities over the next few months.

    According to the story, “Wal-Mart plans to keep pushing low-price products, Holley said, adding that it has 40 percent more discounts than a year ago. The company is also relaunching this month a store-brand food line called Great Value, which will have better packaging and products.

    “Internationally, Holley said that while Japan's economy is struggling, Wal-Mart's customer count is up and same-store sales are positive. He added that the price gap between Wal-Mart and its competitors is increasing.”

    One of the alligators in the moat, according to a separate story in the Financial Times, could be Supermercado de Walmart, a new format being opened by the company in Arizona and Texas this summer. The new format consists of remodeled Neighborhood Market stores of about 39,000 square feet that will contain Hispanic products, will be located in Hispanic neighborhoods, will hire bilingual staffers, and aggressively target the fastest growing demographic in the US.

    KC's View:
    Here at MNB, we’ve been saying for months that Walmart is in market share warp drive these days, looking to use the recession as a tool to create as many unassailable advantages for itself as it can…so that when the recession ends, as it inevitably will, it will be that much harder for the competition to catch up.

    The good news for competitors, of course, is that there is no such thing as an unassailable advantage. If Walmart sees the current economic crisis as an opportunity generator, other retailers must think the same way.

    One quick note about Supermercado de Walmart. When Michael Sansolo and I were in Phoenix last year, we visited a Fresh & Easy Neighborhood Market that clearly was in a Hispanic area, but that seemed to reflect very little effort to customize the approach and selection to local folks. Tesco may have fixed this problem, but it also may be that the lack of smart targeting illustrated to Walmart that there was a big opportunity there. (Not that Walmart usually need other companies to demonstrate what the opportunities are…)

    Published on: March 13, 2009

    The Wall Street Journal this morning reports that “the Commerce Department said Thursday that sales at retail and food-service outlets dipped 0.1% in February to $346.8 billion, following an upwardly revised 1.8% gain in January. Sales of motor vehicles and parts continue to languish. Excluding them, sales rose 0.7% in February, the second gain in a row after five straight monthly drops at the end of last year.

    “The report showed gains at establishments ranging from clothing to electronics to furniture stores, as well as a 3.4% increase in gasoline-station sales.”

    And, the Journal writes, “the Labor Department said there were 5.3 million Americans filing for unemployment benefits the week ended Feb. 28, a new high since the department began keeping track in 1967. New claims for benefits for the week ended March 7 rose to 654,000.”

    KC's View:
    Some people are saying that these numbers – combined with a rebound in the stock market over the past few days – could indicate a recovery is in the making, or at least that the recession could be winding down.

    That strikes me as wishful thinking. The worst thing we could do is think that this was just a temporary blip on the radar screen, and that things are going back to “normal.”

    The message here remains consistent. We’re in a “new normal.” We forget that at our own risk.

    Published on: March 13, 2009

    Advertising Age reports that the omnibus appropriations bill passed by the US Congress and signed by President Obama includes language that requires the creation of a working group that will look at whether the government should set standards for foods that can be marketed to children, as a way of grappling with the nation’s obesity crisis.

    There is some debate over whether “children” should mean 17 and under, or 12 and under. But the bill says that the working group “is directed to conduct a study and develop recommendations for standards for the marketing of food when such marketing targets children who are 17 years old or younger or when such food represents a significant component of the diets of children,” and “determine the scope of the media to which such standards should apply.”

    The group is required to report back to Congress by July 15, 2010.

    "This proposal is completely unnecessary," Scott W. Openshaw, director of communications for the Grocer Manufacturers Association (GMA), tells Ad Age, noting that there are industry initiatives already addressing the issue. "Taxpayer dollars and agency time could be made much better use of. Besides, the proposal -- the way it is written -- not only reinvents the wheel, it does so poorly with broad, misdirected language that goes far beyond marketing to children. Too far."

    KC's View:
    Memo to GMA and other business organizations…I suspect the general public doesn’t have a lot of faith these days in industry initiatives, simply because from peanut butter to the banking crisis, industries don't have a terrific reputation these days.

    This isn’t to say that government initiatives always are to be trusted. Far from it.

    But I think that the business community needs to come to grips with the fact that at least for the time being, their world isn’t viewed as a panacea.

    Published on: March 13, 2009

    The Boston Globe reports that Massachusetts officials and supermarket owners in the Bay State have agreed to a “statewide effort to control the billions of bags that end up as litter everywhere from tree branches to beach fronts.

    “The five-year plan, devised as state lawmakers and municipalities have proposed bans or charges for the disposable bags, aims to cut the number of bags provided at supermarkets and grocery stores from the estimated 1.5 billion a year today to 1 billion a year in 2013. The reductions will come from a combination of incentives for customers to recycle old bags and from closer state scrutiny of bag purchases by supermarkets.”

    According to the story, the agreement “calls for stores to reduce their use of disposable bags by offering customers incentives to bring in used bags, setting up stations near checkout counters where customers can recycle old bags, and requiring supermarkets to provide data to state officials about the number of bags they buy and distribute every year. State officials said the agreement would allow supermarkets to provide creative incentives, such as coupons to customers who bring in old bags or paying them up to a five cents for each bag they reuse. The state also plans to help train checkout clerks in the art of packaging and the sale of inexpensive nylon or canvas reusable bags.”

    The agreement is viewed as an alternative to the fees, taxes and outright bans that have been implemented or considered by other states and municipalities.

    Predictably, the business community views this approach as preferable, while environmentalists see it is inadequate to the task of getting rid of disposable bags.

    KC's View:

    Published on: March 13, 2009

    • The Food Marketing Institute (FMI) and the Global Marketing Development Center (GMDC) announced that they will co-locate the FMI Supermarket Pharmacy Conference and the GMDC Health Beauty Wellness Marketing Conference, September 11-14, 2009, at the Marriott Grand Lakes in Orlando, Florida.

    According to the announcement, “the combined format provides for collaborative strategic planning” at conferences designed “to bring health, beauty, pharmacy, wellness and food executives from GMDC and FMI together for strategic discussions.”

    • The Minneapolis / St. Paul Business Journal reports that General Mills is getting out of the frozen dinner roll business by selling four manufacturing plans to Illinois-based Pennant Foods. Terms of the deal were not disclosed.

    General Mills reportedly will continue to produce its frozen biscuits and sweet rolls.

    KC's View:

    Published on: March 13, 2009

    • Nash Finch Co. said that its 2008 annual sales were $4.704 billion, up 3.8 percent from $4.533 billion a year earlier. Net earnings for fiscal 2008 were $36.2 million, down from $38.8 million.

    • Smithfield Foods reports that its third quarter loss was $103.1 million, compared to a $54.5 million profit record during the same period a year ago. Q3 sales were up seven percent to $3.35 billion.

    KC's View:

    Published on: March 13, 2009

    • The New York Times this morning reports that Steve Bernard, described as the “restless adventurer and uncommitted entrepreneur” who started Cape Cod Potato Chips in 1980 and brought the kettle-cooked potato chip back to prominence, died this week of pancreatic cancer. He was 61.
    KC's View:

    Published on: March 13, 2009

    There was a story a couple of days ago about Walmart getting into the medical data storage business through its Sam’s Club division, which led one MNB user to write:

    A quick review on the Internet tells us that Walmart has been studying this technology with potential corporate partners for a few years. Their introduction of clinics in stores has provided a test-bed for implementation of digital systems as a means to reduce costs for employers and to improve efficiencies (and hopefully outcomes) for patients. Targeted patients are the employees of the above-mentioned corporate partners (Dell, Intel, etc.). Walmart appears to be frustrated with the slow digital conversion in physician offices (adding to Walmart expenses when providing health insurance to their employees) and also sees a business opportunity in an IT market not satisfactorily addressed by conventional IT providers.

    Eliminating analog records is a different issue. Each state has their own laws regarding how long records must be maintained (for example: 5 years, 7 years, until age 21 for minors, for the life of the patient for mammography records). In most cases it is the responsibility of the health care provider to keep that data safe, accessible, and private. Since much of this data was created in a pre-digital world, the reality is that most facilities (especially small offices) will be operating in a dual mode environment: analog for historical data and digital moving forward. Some of these analog records may need to be kept for as long as two decades (or longer for mammography). Converting the old analog data to digital data is not cost effective because of the human resources required. So you will continue to see folders in hospitals and offices.

    Another MNB user wrote:

    I can remember a GREAT Walmart leader who said many times that the company need to stay in the business it knew best, and that was retail. The company should not get into manufacturing, and all the other business that would take away from the focus of the company and the needs of the customer.

    While health care and recorded keeping are things we all agree we need. Walmart doesn't need to be working on this. Target as an example has come out lately with many new enhancement to the sales receipt and store operations that Walmart does not have. This is where I think they need to be looking at.

    The story noted that part of the new economic stimulus package is supposed to go to online medical data storage, which prompted MNB user Clayton R. Hoerauf to write:

    Excuse me? Money for the stimulus package going towards the one company whose bottom line is “above water”? I’m not sure that was the President’s intention.

    Responding to yesterday’s MNB Radio piece about the common qualities shared companies that have survived the Depression and four wars, one MNB user

    I am surprised that Anheuser-Busch was not brought up during this conversation. There were not many brewers that made it through these periods, more to the effect of prohibition than anything, but to talk of innovation and change was huge for this brewer. They made a complete change in their strategy of brewing beer during prohibition to making corn products, commercial refrigeration units, bakers yeast, ice cream, and non-alcoholic drinks such as the famous Bevo malt beverage or "near beer". Many of these signs of change during the period can still be seen at the Anheuser Busch brewery in St. Louis including two small elephants atop the main posts at the gate of the brew house symbolizing the mark of the Anheuser Busch bakers yeast and "Renard the Fox" sitting on the corner of the packaging plant that was a symbol for the Bevo beverage. I believe they are constant reminders of what the company had to endure through change, and not to forget that we cannot become complacent in any business. These were just changes and innovations that the corporation made during bad times. Think of the innovations of pasteurization and refrigerated rail cars that Adolphus Busch embraced and developed in the good times to help the transportation of Budweiser throughout the US. I just hope this company can continue this long standing tradition under a new and very different ownership...

    MNB user Laura Foley Ramsden chimed in:

    I would add Foley Fish to your list. Founded in 1906, we’ve seen it all and continue to thrive in our 4th generation. We believe strongly that by providing the very best fish, the very best service and the very best pricing, we will continue to win despite this economy. Our employees take pride in the fish they are producing and the company they represent. Our customers stay loyal to product rather than price because they know we deliver value. We, as owners, communicate exactly your message – head down, work hard, stay focused and we will succeed.

    Good for you.

    Just to be clear, the list of companies – originally compiled by Jim Donald – was not meant to be all-inclusive. But it should be a way to measure one’s own priorities, achievements and weaknesses.

    KC's View:

    Published on: March 13, 2009

    One of the advantages – or disadvantages – of reading as many newspapers as I do each day (more than two dozen, all online) is that I tend to see the commonality of a lot of the coverage.

    Many of the papers have carried in recent weeks stories that talk about the psychological impact of the current recession on college students and recent college graduates, many of whom have been living in a bubble of prosperity and entitlement, but are now finding that things may not come as easy for them as expected.

    A lot of these young people are having trouble finding jobs, or, in plenty of cases, lost their jobs soon after starting them. I’ve heard these stories plenty in the town where I live, as I stop to chat with people at the bank, in the coffee shop, at the drug store, wherever. At the local schools, even some of the youngest children are aware that mommy and daddy are worried about their jobs.

    In some ways, this is a shame. Youth is a time when you aren’t supposed to be concerned about this stuff.

    On the other hand, I can’t help but think that this is a good thing, that maybe people will think more about working and creating than investing and just reaping the benefits. While the nation’s problems are complicated and require some fundamental resets on priorities and perspectives, I also think that there is nothing wrong with the US that a better work ethic – and maybe a little humility - wouldn’t fix.

    Don't know about you, but I believe that when Jon Stewart had his Howard Beale moment this week in talking about CNBC and James Cramer, he expressed as smartly and passionately as anyone the kind of frustration that so many Americans have during the current crisis.

    It isn’t just the misguided choices and priorities that so many in the financial services business seemed to have, but the way that the culture – as reflected by many in the mass media – seemed to worship at that altar.

    Last night’s interview of Cramer by Stewart on “The Daily Show” didn’t even seem like a fair fight. Stewart had all the right questions, and Cramer seemed to have almost no answers.

    There’s a reason that “The Daily Show” is a primary source of information for so many Americans. It’s because the host and the show’s sensibility are better at boiling down issues and opinions than almost anyone else.

    That said, I have to say that I get more addicted all the time to “Morning Joe” on MSNBC, which actually regularly features intelligent conversations about important issues by smart people. There is passionate partisanship here from all over the political spectrum, and I almost always learn something.

    This morning, for example, there have been contributions from the likes of Pete Hamill, Peggy Noonan, Gene Robinson and Pat Buchanan…all of whom have been weighing in on the direction of the country, the politics of the moment, various foreign policy issues, and the efforts of the Obama administration.

    It’s like a great dinner party from six to nine each morning.

    Speaking of Pete Hamill, he had a great line in the New York Times this week.

    Hamill was recalling the fact that a couple of decades ago, he and Jack Newfield – both Brooklyn-born writers – were separately compiling a list of the most evil people of the 20th century…and discovered that they each had the same people in the top three positions – Hitler, Stalin, and Walter O’Malley.

    (O’Malley, for the uninitiated, is the much-reviled baseball owner who moved the Dodgers from Brooklyn to Los Angeles.)

    A new roster of evil, Hamill said this week, would have to include Bernard Madoff, who began running his $50 billion Ponzi scheme during the 20th century. In fact, Hamill said, Madoff might have to go into the top three…but that it would be important to expand the list to four: “O’Malley would still bat cleanup,” he said.

    Damn right.

    There was a story the other day from HealthDay News saying that 98 percent of people training to be dietitians have negative biases against people who are obese and overweight … with some concerned that this could actually impact the quality of care that they offer the people who need their help the most.

    Isn’t this sort of like Mother Theresa having a bias against poor people?

    One of my favorite reads each day is “The Onion,” the satirical website that offers headlines and stories that almost always make me smile.

    This week, the satire hit home with a headline that read, “FDA Approves Salmonella.” The story read, in part:

    Calling it "perfectly safe for the most part," and "not nearly as destructive or fatal as previously thought," the Food and Drug Administration approved the enterobacteria salmonella for human consumption this week.

    The federal agency, which has struggled in recent years to contain the food-borne pathogen, and repeatedly failed to prevent tainted products from reaching store shelves, announced Monday that salmonella was now completely okay for all Americans to enjoy … According to FDA officials, the intracellular bacterium will be commercially available in a variety of forms. Plans are already in the works to offer salmonella as a flavorful topping, food spread, powdered drink mix, dessert gelatin, and as a "no frills" yellow liquid guaranteed to enhance one's overall eating experience.

    Very funny. But on some days, it also seems like an approach that the FDA might actually embrace, since approving things is a lot easier than actually practicing oversight.

    My wine of the week: the 2006 Cantele Primitivo, a Zinfandel-like Italian wine that is just wonderful with Italian food. Excellent!

    That’s it for this week…


    KC's View: