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    Published on: March 23, 2009

    As unions and management prepare to face off over the Employee Free Choice Act, pro-labor legislation that has been introduced in the US Senate and House of Representatives, three of the nation’s more prominent retailers reportedly are supporting a compromise that could help resolve differences over the proposal.

    According to some reports, Costco, Starbucks and Whole Foods are proposing that a compromise bill would allow unions to organize in a workplace if 70 percent of employees sign union-authorization cards; the current bill, as written, only requires 50 percent of the employees to sign authorization cards.

    Bloomberg News reports that “under the alternative being sought by the three companies, management could demand a secret-ballot election, and a provision of the original bill requiring binding arbitration for union contracts would be dropped. Penalties would be increased for companies that take action against workers before union elections and refuse to participate in collective bargaining. The alternative would also set a fixed period in which a union election must be held, and would provide unions with the same access to meet with workers as employers get before an organizing vote.”

    The Wall Street Journal notes that the Obama administration, while supporting the existing bill in concept, has said that it is open to a compromise measure. It is not known whether the White House was involved in crafting the proposal made by the three retailers.

    The Bloomberg story suggests that neither labor nor management seems terribly enthusiastic about the compromise proposal.

    KC's View:
    It sounds like a reasonable compromise to me. But reasonable compromise is probably not what is being sought by the negotiators on both sides of aisle.

    I’ll repeat what I’ve said before. A mandated secret ballot election needs to be part of whatever labor reforms are instituted by Congress and the Obama administration.

    Published on: March 23, 2009

    The New York Times over the weekend featured a long – 2,600-word – piece about the “food revolution,” essentially arguing that “after being largely ignored for years by Washington, advocates of organic and locally grown food have found a receptive ear in the White House, which has vowed to encourage a more nutritious and sustainable food supply.”

    According to the story, people like chef Alice Waters and author Michael (“The Omnivore’s Dilemma”) Pollan are beginning to be seen as thought leaders in the nation’s capitol, with legislators and Congressional staffers seen carrying Pollan’s book around with them. Vegetable gardens have been begun at both the White House and even the US Department of Agriculture (USDA). Calls for a major shift in priorities and infrastructure in the nation’s food safety apparatus are being taken seriously and may get some traction this year.

    “At the heart of the sustainable-food movement,” the Times writes, “is a belief that America has become efficient at producing cheap, abundant food that profits corporations and agribusiness, but is unhealthy and bad for the environment.

    “The federal government is culpable, the activists say, because it pays farmers billions in subsidies each year for growing grains and soybeans. A result is an abundance of corn and soybeans that provide cheap feed for livestock and inexpensive food ingredients like high-fructose corn syrup.

    “They argue that farm policy — and federal dollars — should instead encourage farmers to grow more diverse crops, reward conservation practices and promote local food networks that rely less on fossil fuels for such things as fertilizer and transportation.”

    The only real concerns – that political lobbying by agribusinesses with a stake in the status quo could derail their efforts, and that current economic realities could slow their momentum.

    KC's View:
    “Sustainability” is a word not used much before four or five years ago, and now it seems to have so much currency, relative to so many issues at play in our political, cultural, social and economic lives. Certainly the priorities urged by Waters, Pollan and their brethren seem like intelligent strategies to take that will be good for the nation’s long-term health…though I’m old enough and cynical enough to think that reality and politics could get in the way.

    Published on: March 23, 2009

    The Wall Street Journal reported over the weekend about how CPG manufacturers, facing pressure from retailers to lower their prices so as to be in synch with the recession’s impact on consumers, are instead “offering more coupons, promotions and other price reductions,” which allows them “to boost sales without permanently cutting prices.”

    According to the story, “In a BMO Capital Markets study of 75 food retailers – including Kroger Co., Wal-Mart Stores Inc. and Safeway Inc. (SWY) - nearly three quarters of the retailers surveyed indicated that promotional levels have increased and were heavily weighted to staples like dairy, cereal and soup.”

    A number of manufacturers spent a food part of 2008 raising prices to compensate for increased commodity costs, and have been trying to hold firm about now lowering prices despite significant pressure from some of the nation’s largest food retailers, including Supervalu and Safeway. Adding to the tensions between retailers and manufacturers has been the willingness of chains to use private label brands – which generally are both less expensive and carry higher margins – as a cudgel in their dealings with suppliers.

    And, the Journal writes, “For grocers, the promotions are also a way of better competing with Wal-Mart's low prices. After factoring in promotions, traditional grocers have cut their price gap with Wal-Mart to about 14%, down from up to 30% last summer…”

    KC's View:
    I just don't see how this is healthy for the food business in the long run. It is illusory rather than real…and it still leaves Walmart 14 percent cheaper than traditional grocers. This is considered a sufficient response?

    Published on: March 23, 2009

    Reuters reports that Costco CEO Jim Sinegal has said that he plans to take advantage of the depressed real estate market of the moment to make deals for locations that he previously might not have been able to get.

    "We're getting better deals on real estate," he reportedly said at a media event in Portland, Oregon. "People who didn't want to talk with us about shopping center sites now want to talk with us."

    Sinegal also said that despite some softening of Costco’s business, the company plans to continue opening 25-30 stores per year. And, he said, the membership warehouse club chain is tweaking its selection to put an even greater emphasis on value.

    KC's View:
    Some companies respond to tough times by hunkering down…but the smart ones know that this is a good time to get aggressive…to open new stores, to find better people, to use every marketing tool at their disposal to build market share and put some distance between them and the competition (which would be the guys who are hunkering down hoping to simply survive the bad times).

    Published on: March 23, 2009

    The Chicago Tribune reports that “while Wal-Mart has been in the spotlight for trying, mostly unsuccessfully, to plant its flag in the city of Chicago, the behemoth has been quietly building its supermarket presence in the suburbs in recent years.

    “Wal-Mart's market share is still small compared to Chicagoland's grocery leaders, Jewel and Dominick's. But with several new stores, Wal-Mart gained share last year, seemingly at the expense of Jewel and Dominick's, data from market researcher Nielsen Co. indicate. And more Wal-Mart Supercenters are coming to the area: six this year, including one that opened this past week in Orland Park, which gives it 19 now open. Six more are planned for 2010. ”

    At the same time, the Tribune writes, “Wal-Mart is preparing a push for as many as five new city stores, betting the economic crisis will make its proposition more appealing.”

    While Walmart executives seem to think that they can achieve the same kind of market share figures that they have in other areas of the country, capturing up to 35 or 40 percent of the grocery business, the paper notes that strong competition from Supervalu-owned Jewel and Safeway-owned Dominick’s, plus resistance from powerful labor unions to Walmart’s expansion plans, could make this difficult.

    KC's View:
    Jewel and Dominick’s have to be vigilant about their businesses right now, being careful to stay aggressive and never get complacent or cautious. Walmart, especially at the moment, is not to be underestimated.

    Published on: March 23, 2009

    The Fort Worth Star-Telegram reports that a jury has ordered former Minyard’s CEO Ronald E. Johnson to pay $2.3 million to his former employer, saying that Johnson has accepted a million dollars in kickbacks from suppliers.

    Johnson has said he will appeal. He had charged that Minyard’s ownership had not paid him $600,000 worth of bonuses that he was owed. And, Johnson has said he is essentially unable to pay the settlement since his real estate business has failed.

    Johnson had been hired to run Minyard’s in 2004 after the company was bought by an investment firm.

    KC's View:
    When Johnson was first hired to run Minyard’s in 2004, one MNB user wrote:

    You can kiss this chain good bye. Ron Johnson has had notable success in running Jitney Jungle and Del Champs into the ground and almost did the same to Farm Fresh in Norfolk. What a shame.

    Another member of the MNB community wrote:

    Just hope he doesn't bring the same great ideas to Minyard's that he did to Jitney Jungle.

    You got it right.

    Published on: March 23, 2009

    In the UK, the Guardian reports that Walmart-owned Asda Group is engaged in “tough negotiations” with all of its major suppliers as it looks for better prices and terms on as many as 30,000 SKUs. The company, which has been growing market share as chief rival Tesco sees some slippage, says it is focused on driving down prices and isn’t interested in building up its own margins.

    KC's View:
    Essentially, it seems that Asda is doing what we’ve been saying that Walmart is doing here in the US…playing a market share game. That is a smart thing to do during a downturn, because it ideally positions a retailer for when the times get better.

    Published on: March 23, 2009

    MSNBC reports that the annual CoreBrand 2008 Corporate Branding Index is out, and as they have ever since 2004, Coca-Cola and Johnson & Johnson occupy to number one and two spots.

    According to the story, “Harley-Davidson moved up one place to 3rd replacing Hershey Foods, which is now in 4th. Campbell Soup moved up one spot to 5th place replacing Hallmark, which is now 6th. UPS remained unchanged in 7th. Colgate-Palmolive moved up one spot to 8th, replacing FedEx which is now in 9th place … Of the top ten, only Kellogg Company (10th place) has shown significant growth rising from 15th in 2007 and from 21st place in 2005.”

    James Gregory, CEO, CoreBrand, noted that the listing is not a popularity contest, but rather an evaluation of all the aspects that go into brand strength, including financials.

    Other findings, according to the story:

    • “Visa and MasterCard have both moved up steadily since 2005. Visa is now 23rd up from 36th in 2007 and 44th in 2005. MasterCard is 31st up from 44th in 2007 and 57th in 2005.”

    • “Starbucks had a notable loss as it dropped from 10th place in 2007 to 14th place in 2008. This isn't a major surprise since its latest publicity has focused on store closings and competitive pressures.”

    • “PepsiCo has also been dropping at an alarming rate from 4th place in 2005 to 11th place in 2007 to 18th place in 2008 (and) Procter & Gamble…dropped steadily from 31st place in 2005 to 39th place in 2008.”

    KC's View:
    Perhaps my biases are showing, but…

    I have a lot of trouble with a list that says Microsoft ranks 54th and Apple ranks 91st; that just seems a little divorced from reality.

    In addition, it surprises me that the credit card companies have gaining in brand strength, especially since “credit” has become a dirty word in the current economic environment.

    And finally, it was curious to see that Harley-Davidson listed so high and growing, since the New York Times had a big story Sunday on how its sales are sputtering and the company could be in real trouble as a result of the economic crisis.

    Published on: March 23, 2009

    • The Sacramento Bee reports that Tesco-owned Fresh & Easy is “dragging” in implementing plans to expand in the Sacramento region, with some locations showing little visible progress while others are being built or remodeled. The paper notes that “while the company is keeping quiet about when any Sacramento-area locations might open, it continues to close deals for sites and is making its rent payments, real estate brokers and property managers say.”
    KC's View:

    Published on: March 23, 2009

    • Good analysis from the Washington Post, noting that CEO Howard Schultz seemed both chastened and resolved at last week’s annual meeting of Starbucks Corp.

    “For Schultz, the next year, at least, will be a balancing act,” the Post writes. “He'll need to recast Starbucks as affordable without harming its brand of ‘specialness.’ He'll need to cut costs while still investing in growth. He'll need to fend off gigantic competitors like McDonald's and Dunkin' Donuts without directly competing on price. And, perhaps most challenging of all, he'll need to persuade people to drink instant coffee.”

    KC's View:

    Published on: March 23, 2009

    Funny story out of the UK, where numerous newspapers took note of events that took place in a Tesco store.

    Apparently, people browsing in the TV section got something of a surprise when more than 20 flat screen televisions starting showing what would be called an “adult film,” with a man and woman engaged in enthusiastic and innovative conjugal relations. (Someone apparently changed the channel on the master system that controlled all the sets.)

    No complaints were filed. And one story noted that the movie ran for five minutes before anyone changed the channel, and that employees only noticed that there was a problem when they noticed a crowd of people gathering in the TV department.

    KC's View:
    I guess we put this into the “Tails of Tesco” file…

    Published on: March 23, 2009

    MNB reported last week that Costco opened a new Costco Business Center in Hawthorne, California, described as stocking more business products than the average membership warehouse store that the company operates, and also offers delivery services to area businesses.

    One MNB user was there, and offered this appraisal:

    I was there for the VIP party last night at the new Hawthorne location.

    The building was really nice, lots of skylights, walk in refrigerators to keep everything cold, and jackets available for the customers to keep warm (as long as they stay clean no one walks out of the store with them on anyway). Definitely catering towards restaurants with the equipment and accoutrements to back it up and there were also many great grand opening deals on basic business needs that I will take advantage of.

    It has a good mix but there were a few items that my business needs that are not carried there and when I asked if we can request special purchases the representative told me no. But also the prices and variety are not totally in line with Restaurant Depots on some staple items like sugar and flour and paper goods like bakery and pizza boxes. Oh, I could not find unbleached flour, which we use in many of our standard recipes so maybe they should also over the next few months speak with their business customers to see what they are missing.

    Also, many of their produce items were of similar packs to what is sold in their general Costco stores. Example, 3# bags of bananas. Our bakery goes thru anywhere between 2 to 3 cases per week. Sell the product by the case.

    I think that the hope for business owners will be that the business center will cater to the businesses and general public traffic continues to use the Costco location at the 405/Hindry/Rosecrans intersection.

    All in all it looked great and so was the product. But for us, we’ll need to continue to shop elsewhere because of pricing and missing staple items.

    There was a report last Friday that Nestlé was either more vigilant or just luckier when it inspected the Peanut Corp. of America (PCA) plant that since has been found to have sold tainted product that caused a salmonella outbreak – it found “grossly unsanitary conditions” during two different visits, and decided not to do business with the company.

    Which led me to ask:

    Would it be too much to ask of a system that would allow, encourage or require a company like Nestlé to sound a very public alarm – telling the government, which would then spread the word among other manufacturers – if it found “grossly unsanitary conditions” at a supplier?

    Sure, it might be helping the competition. But the damage that has been done to the entire food industry by the PCA scandal may not be fixed for years…and hurts everyone.

    One MNB user responded:

    I can’t think of anyone who would disagree that maybe Nestle should have sounded the alarm and perhaps could have saved the entire food industry of another crisis…but… there was an insider at PCA that sounded the alarm (both internally and to the FDA) and after months of on the job harassment and being ignored by the FDA he was fired by PCA. And, I’m sure Nestle would have been sued by PCA. Nestle found a way to compete in a broken and flawed system…why didn’t everybody?

    And another MNB user wrote:

    Without a law degree I am only guessing, but I would say it isn’t so much giving the competition a head’s up that prevents sharing, but defamation of character and false accusations fears that prevent the sharing. When you have to be careful how to answer questions about former employees I don’t think sharing inspection findings would be very easy either.

    It ain't defamation if it is true.

    I keep calling for the Obama administration to find a role for former Walmart CEO Lee Scott, which led one MNB user to write:

    Lee Scott, along with a sizable cadre of other credible, hard-working, no-nonsense other former middle and senior executives willing to work for $1 a year and would honestly put the good of the country ahead all else, are not likely to volunteer. After seeing the new CEO of AIG, asked by the government to do it, pilloried by all the posturing Representatives, playing to populist sentiment---when in their haste they didn’t read or understand what they were voting for. Sounds like people didn’t read or understand how mortgages work.

    A few minutes of watching Liddy confirmed that he had a firm grasp of the facts, a credible objective and plan, and was well on the road to executing it. Then to have the inane questions and undeserved scorn dumped on you by incompetents---well it’s more than any smart person would want to be within the same zip code of.

    Funny line, BTW, from Jon Stewart the other night, when he noted that AIB is going to have to change its name because its reputation and image have become so toxic.

    The new, less controversial name, he said, would be “Herpes.”

    Finally, in “OffBeat” on Friday I lamented the reported return of lard as an ingredient, which prompted one of MNB’s Parisian readers to respond:

    Don’t want to call it lard? How about saindoux? (sane-doo) -- that’s what it’s called here in France…sounds almost pretty, doesn’t it? But oh, those pie crusts…

    In Paris, they can get away with a lot of things…

    I think about Paris
    When I’m high of red wine
    I wish I could jump on a plane…

    KC's View: