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    Published on: March 25, 2009

    LAS VEGAS -- Random notes and comments from “Content Guy” Kevin Coupe from the annual summit sponsored by Information Resources Inc., currently taking place at the Wynn Las Vegas…

    • One would think that in these economic times, when so many budgets are being scrutinized and even eviscerated, it might be hard to get retailers and CPG companies to send folks to an event like this. Looking around the room, though, there seems to be a palpable energy…maybe it is desperation, maybe it is sensing opportunity…maybe it doesn’t matter.

    • During the two-day summit, Americans will go to the store 66 million times and spend $1.8 billion, said Thom Blishock, president of consulting and innovation at IRI, in welcoming the audience. “That means 66 million chances to touch the shopper, to make a sale, to increase the relevance of your brand.” He went on, “There are 270 million shoppers in America, and the question is, how well do you know them? More important, how well should you know them?”

    “It’s tough out there,” Blishock said. “And things are only going to get tougher…it is time to reinvent, rethink, redesign and rewire” organizations so that they are more responsive to shoppers with changing habits and priorities.

    • Dr. Romesh Wadhwani, chairman of IRI, expanded on this notion of consumer change, saying that the shopper cannot help be confused by the messages being sent by the government. “Six months ago, we were being told that we're spending too much and should be saving more. Now, we’re being told that we are saving too much and should be spending more.”

    • Wadhwani made an excellent point about the competitive pressures out there these days, noting that in an environment where revenues at major chains like Kroger are up and industry revenues are down because of the economic pressures on customers, it is no wonder that smaller, more vulnerable companies are being driven to the edge. The story this week that Bi-Lo has filed for bankruptcy seemed to drive the point home.

    • Wadhwani also addressed the five big trends that he said were affecting fundamental market change:

    1) the first “moment of truth” is now in the home rather than in the store, because 65 percent of all shoppers are creating lists and making decisions before they ever leave the house…”if you are not on the last, you’re toast,” he said;

    2) “shopper loyalty is rapidly becoming an oxymoron,” he said, as the economy encourages ever more fragmented behavior…he also hit the nail on the head when he said that most loyalty programs weren’t really loyalty programs, anyway;

    3) “manufacturers are rapidly losing pricing power,” Wadhwani said, referring to current tensions between retailers and manufacturers in which ‘retailers are turning the screws on manufacturers and promoting private label”;

    4) Wadhwani suggested that private label penetration in the US is likely to get to European levels, where it currently tends to be 30 percent or more at retail, with some retailers pushing to get it to 50 percent…in the US, he said, retailers are pushing it up to 20-25 percent in certain categories with “the right products with the right attributes at he right prices”; and

    5) channel dislocation is rampant, with “attention to detail and insights down to the store level” being the key to survival.

    • Big idea from Wadhwani, who just said that part of the problem with traditional insights is that they tend to be slow and not transformational. “All insights are not born equal,” he said. Wadhwani pushed for faster, actionable more accessible insights … if it takes a 90-day study to reach an insight, he said, that insight will be useless. “We live in a real time world,” he said, pointing out how many people get real information via various Internet services…and said that anything less that “real time insights” are irrelevant and useless.

    • Following up on this was Jaya Kumar, chief marketing officer at Frito Lay, who said that over the past year the most important lesson learned by his organization was the critical nature of speed. “Speed is a strategic competitive advantage,” he said. “You can copy the strategies of any company, but what you can’t copy is speed. Speed is so cultural and so dynamically connected to how an organization responds,” he said, that it becomes an enormous differentiator.

    On the simplicity front, Kumar noted that most analysis is too complicated and therefore too slow. “Simplicity is becoming paramount for success,” he said, and we need tools that allow us to iterate in simple fashion.” He pointed to the company’s latest campaign for Lay’s potato chips, which emphasizes simple ingredients “potatoes, natural oil and a dash of salt” as an example of simplifying the message in a way that makes it easy for shoppers to understand.

    • Kumar also said pointed to the importance of establishing trust with trading partners and consumers, especially in a difficult economic environment. “Competence and character intersect to create trust,” he said, noting that “you can react at remarkable speed when you trust your partner.” When trust declines, on the other hand, speed goes down and costs go up.

    • Much of what was described by Wadhwani and Kumar was brought together in a presentation by author and management consultant Ram Charan, who urged attendees to demonstrate transformative leadership in their organizations…to listen to anxious employees, to protect the talent, and to nurture the credibility that allows people and companies to prosper.

    Charan also made his own argument for simplicity, noting that when Steve Jobs returned to Apple Computer as CEO, at the first board meeting he looked at the 26 projects being worked on by the company and instantly whittled the list down to four. “In tough times, there is no luxury to do peripheral things,” Charan said.

    • There were also a couple of interesting presentations by retailers from the convenience store and drug store channels, looking at how they are repositioning themselves to grapple with tough times.

    Joe DePinto, president/CEO of 7-Eleven, noted that his c-store chain has found a strong niche with a newly developed private label line of 180 SKUs, with own label water and chips being embraced by shoppers. DePinto also said that his company is reorganizing its supply chain, where high costs – compared with the grocery, drug and mass merchandiser channels – have put c-stores at a competitive disadvantage. 7-Eleven, he said, is moving into a consolidated delivery model, which it already was doing in fresh foods, for heavy liquids and frozen foods.

    Kim Feil, VP/chief marketing officer at Walgreen Co., said that her company was working to differentiate itself in a crowded marketplace; for a lot of people, “we’re a convenience store with a pharmacy in it.”

    One of the things that Walgreen is doing, Feil said, is reorganizing its stores around customer purchasing needs, bringing together, for example, items that people might need if they have a cold, rather than having them scattered around the store. In addition, she said. Walgreen is looking to break down the barriers between the various ways that people can buy – online, phone, mail and in the store. And, Feil said, the company is looking to examine and justify every SKU: “It was a revelation to find out that we had nine SKUs of flashlights,” she said by way of example. “If you’re in Walgreen’s and you need a flashlight, you’ll buy the one we have. You want a choice, you’ll go to Lowe’s.”

    • On day one, the Summit’s theme is about active leadership, active innovation, active interaction with shoppers, and an active approach to sustainable growth. Retailers and manufacturers have a choice…hunker down, which only leaves them vulnerable to attack and irrelevance, or embracing the moment as an opportunity.

    Doesn’t seem like a hard choice to me.

    More tomorrow…

    KC's View:

    Published on: March 25, 2009

    NBC News reports that the movement to pass the Employee Free Choice Act, also known as “card check legislation,” hit a roadblock yesterday when Sen. Arlen Specter (R-Pennsylvania) announced that he would oppose the legislation – making it virtually impossible for the Democrats to get 60 votes to overcome a Republican filibuster, which would prevent the bill coming to a vote.

    "The problems of the recession make this a particularly bad time to enact Employees Free Choice legislation,” Specter said in making his announcement on the floor of the Senate. “Employers understandably complain that adding a burden would result in further job losses. If efforts are unsuccessful to give Labor sufficient bargaining power through amendments to the [National Labor Relations Act], then I would be willing to reconsider Employees' Free Choice legislation when the economy returns to normalcy."

    The NBC story notes that Specter, a liberal Republican, likely made a political calculation in his decision-making. He is up for re-election in 2010, and could have faced a primary challenge had he supported the card check legislation, would have ended the requirement that a secret ballot be held before union certification of a workplace. Specter will face a Democratic challenger, but his move at least lessens the likelihood of a primary opponent.

    Democrats were hoping that support from Specter, plus the seating of Al Franken as senator from Minnesota (which is still being challenged by incumbent GOP Sen. Norm Coleman because of questions about votes counted and uncounted), would have pushed the card check legislation over the top.

    KC's View:
    Nothing wrong with a good political calculation…especially when it means that the vote ends up in line with my opinion on the issue.

    Published on: March 25, 2009

    The Seattle Post-Intelligencer reports that Starbucks, in partnership with Unilever, is out with a new ice cream line that “comes in flavors inspired by Starbucks's most popular beverages.,” including caramel macchiato, mocha frappuccino, and java chip frappuccino. A pint sells for $3.99. Java chip frappuccino comes in a single-serve cup for $1.29.

    The Unilever partnership replaces a previous deal with Dreyer’s that expired last year.

    KC's View:
    I wasn't really paying any attention to this story until I got a note from MNB user Paul Arbuthnot who pointed out that “Starbucks, is at it again: introducing a super-premium (i.e. high fat) ice cream @ $3.99/pint. Good timing, given concerns about obesity and the dismal ‘cut back’ economic climate.”

    Legitimate point.

    On the other hand, people still are buying small indulgences that they can enjoy at home, to replace the bigger indulgences that they used to enjoy during more prosperous times. So maybe this isn’t such bad timing…it will be interesting to see how this plays out.

    And sometimes, it just makes sense to generate buzz with new products…as indicated in our next story…

    Published on: March 25, 2009

    The New York Times advertising column this morning points out that “in tough times, it would seem the flow of new products would be slowed by companies fearing that shoppers have too much on their minds to consider still another cereal, soap or soup. But as the recession grinds on, Madison Avenue is serving up a steady stream of new packaged foods, cars, drugs (prescription and otherwise), menu items (for both sit down and fast-food restaurants) and beverages ( alcoholic and otherwise) … One reason to stay the course on new products is that they can offer marketers new reasons to reach out to consumers when the impulse may be to pull back.”

    And the story cites a study from SheSpeaks suggesting that more than 80 percent of respondents said that they are more likely or just as likely to try new products, regardless of the tough economic times.

    KC's View:

    Published on: March 25, 2009

    MSNBC.com has an interesting story about how “grocery auctions are gaining in popularity as an easy way to cut costs. The sales operate like regular auctions, but with bidders vying for dry goods and frozen foods instead of antiques and collectibles. Some auctioneers even accept food stamps.”
    KC's View:
    This would be a curiosity except for one thing. The story also notes that people are ignoring expired “sell by” dates if the deal is good enough … which is absurd, especially given everything we know about food safety.

    Next thing you know people will be buying products containing peanut butter from Peanut Corp. of America (PCA) if the deal is good enough, because what’s a little risk if you can save a buck.

    Published on: March 25, 2009

    • The San Francisco Chronicle reports that a federal appeals court there yesterday heard arguments in the decade-old gender discrimination case against Walmart that charges the company with denying as many as two million women with equal pay and promotions since 1998.

    At issue is whether the case should be a class action suit; Walmart wants each case to be tried separately, while the plaintiffs maintain that the offenses were systemic and deserve to be tried as a unit.

    According to the Chronicle story, “The judges gave no clear indication of whether they would allow the suit to proceed as a class action, although each lawyer encountered skeptical questioning.”

    KC's View:

    Published on: March 25, 2009

    The Washington Post reports on a new study from the National Cancer Institute, saying that eating red meat dramatically increases the likelihood that one will die prematurely.

    According to the story, “The study of more than 500,000 middle-aged and elderly Americans found that those who consumed about four ounces of red meat a day (the equivalent of about a small hamburger) were more than 30 percent more likely to die during the 10 years they were followed, mostly from heart disease and cancer. Sausage, cold cuts and other processed meats also increased the risk.

    “Previous research had found a link between red meat and an increased risk of heart disease and cancer, particularly colorectal cancer, but the new study is the first large examination of the relationship between eating meat and overall risk of death, and is by far the most detailed.”

    "The take-home message is pretty clear," Walter Willett, a nutrition expert at the Harvard School of Public Health, tells the Post. "It would be better to shift from red meat to white meat such as chicken and fish, which if anything is associated with lower mortality."

    The Post reports that the American Meat Institute (AMI) “dismissed the findings, however, saying they were based on unreliable self-reporting by the study participants.”

    KC's View:
    I’m not sure that the AMI can win this argument. The best it can hope for is that the study recedes from memory as barbecue season beckons.

    Published on: March 25, 2009

    • The Wall Street Journal this morning reports that PepsiCo is reducing the amount of plastic used in its water bottles by 20 percent, “the latest step by a beverage company to portray itself as environmentally conscious as sales of bottled water slip.”

    The slippage isn’t small. After years of double-digit growth, bottled water sales were down 0.4 percent last year, the Journal notes, and there are some projections that it will remain stagnant – at the very least – for the next five years.

    USA Today this morning reports that milk prices are down about 50 percent from last summer, and dairy producers are “taking an enormous hit,” with “the number of dairy cows being sent to slaughter has risen by about 20% from last year, as desperate farmers cull their herds and sell at fire-sale prices. Adding to the problem, banks are less willing or able to extend farmers' loan payments amid the financial turmoil.”

    KC's View:

    Published on: March 25, 2009

    • The Kansas City Business Journal reports that Associated Wholesale Grocers CEO Gary Phillips has retired, and is being succeeded by the company’s executive vice president of merchandising Jerry Garland. AWG also named Mike Rand, executive vice president of wholesale operations, as the company’s new COO.
    KC's View:

    Published on: March 25, 2009

    We had a story yesterday about how the recession may have a long-term and pervasive impact on consumer behavior, which led MNB user Brian Anderson to write:

    I think it depends on how long the recession lasts. My parents grew up during the depression. They have always been extremely frugal and some of their friends who made their fortunes during their lifetime are the same. They reuse envelopes from cards that were given in person instead of mailed… they use them to send the letters that they write instead of making the expensive phone call! It truly is not because they can’t afford to buy envelopes or make phone calls; it’s just engrained in them. Nothing was wasted and frivolous spending was taboo. So, I think the long-term impact may be directly related to the duration of the forced frugal behavior. Obviously it won’t be letters vs. phone calls with younger generations, but it will be something that they have had to learn to live without due to the economy…

    Another MNB user wrote:

    You know my feelings about taking the consumer’s behavioral pulse along the way…that it is still too early to tell what the other side of this cultural phenomenon will look like…but the recent thoughts of Jeff Immelt (GE CEO) were very compelling…This is not a business cycle…this is a reset…economically…politically…and culturally…(paraphrased) and this thought should be at least discussed in every strategic planning session.

    Agreed. That’s a point we’ve been making here on MNB for years.

    But MNB user Ronald Berry thinks differently:

    This (story) makes me put on record my feelings on WalMart’s ‘Great Value’ campaign. I do not believe this will be successful long term. I believe as you do that right now people are looking for values and this goes for everyone from high to low income. Being frugal is in right now. But when the economy picks up, consumers will want to ‘get back’ to the way it was. Which does not bode well for having a pantry loaded with ‘Great Value’ products. Private label has evolved way past the plain blue and white packaging touting value. My opinion is that they will have some initial success but it will not be sustainable and they will be re-designing in the not too distant future.




    On the subject of Bi-Lo’s bankruptcy filing, one MNB user wrote:

    Perhaps Bi-Lo is viable in their home market but maybe not so much outside of that as they encounter competitors with better models. Chapter 11 should offer the opportunity to retrench; future growth prospects are another matter.

    Another MNB user wrote:

    Interesting that Bi-Lo and Bruno’s are both portfolio companies of Lone Star. Both now in bankruptcy. Bi-Lo used to run Bruno’s before they were decoupled in June 2007. Bruno’s fate was sealed years ago by the likes of KKR and Ahold. Maybe we should leave operations in the hands of the grocers and not the equity fund managers?

    MNB user David J. Livingston wrote:

    Bi-Lo is just another sterile Winn Dixie-esque grocer stuck in no-man's land between Wal-Mart/Aldi and Harris Teeter/Publix. Just like Winn Dixie, they've been around for a zillion years, supported all the local sports teams, fell asleep at the wheel, and have driven off a cliff. When was the last time we saw a retailer actually improve being owned by a private equity group? Sure they will send out a lot of positive press releases and nominate themselves for some phony industry awards, but they still end up being the same low sales per square foot grocer.

    Unless, of course, management uses the moment as an opportunity to actually get innovative. Which I hope they do.

    Another MNB user wrote:

    I was just speaking to a colleague about this situation and what Mike Byars and Randall Onstead might bring to this company. One of my thoughts was that the biggest impediment to the turn around of this company has been the C&S relationship with contracts that are more favorable to C&S and have been a big hindrance to this company. I also know that this was the big roadblock to the sale of the company a year or two ago. It’s my understanding that filing for bankruptcy protection would allow them to break the contracts. One thing is certain, creativity, innovation and pulse of the customer is not a C&S strong suit. Mike developed a great partnership with Associated Grocers when he was with Minyards… it will be interesting to see what changes here.

    No matter how it happens, Bi-Lo has to have a strategy for the future even as it deals with financial reorganization. And it has to be focused.

    This is a company that would have meetings of senior and middle managers in which they would discuss dozens of strategic imperatives for the coming year…not realizing, I think, that the most any organization can handle at one time is one or two strategies. Everything else has to be tactics supporting the strategies.

    This isn’t just semantics. This is serious stuff, and it matters to success and failure.




    On the acceptability of lard as an ingredient in 2009, MNB user Beatrice Orlandini wrote from Italy:

    I often go to Sicily (my husband lives there) and have learned a few local recipes.
    One required the use of lard instead of butter. I was shocked thinking that it would be almost poisonous and would give the cake a horrible taste.

    No way, it is much lighter, non greasy and now I use it regularly (for pies only). Actually, it is still widely used for frying in several Italian regions.

    Still I felt uneasy about it. I discussed this issue with my homoeopathist, who is also an expert in nutrition. He reassured me 100%. Though lard is an animal fat, is has a burning point that is much higher than even extra virgin olive oil. Thus it is less toxic for frying and cooking.

    I don't have any proof, but it sounds good to me.


    You actually made it sound appetizing to me, too.

    Then again, I find that when Italians write and talk about food and wine, they can make pretty much anything sound delicious.




    Finally, yesterday MNB had a story about how a new study out of Tufts University says that people who have a glass or two of wine or beer each day could be increasing their on bone mineral density (BMD), and that beer and wine actually could be better for bone strength than calcium. The study comes on the heels of one that just a few weeks ago said that women who drank a glass or two of wine each day may increase breast cancer risk even while reducing the risk of heart disease. Which only serves to confuse consumer.

    Two important notes. One is that hard liquor does not seem to have the same positive impact as beer and wine, according to the study. The other is that there seem to be fewer downsides for men than for women.

    And I joked that my first reaction to this story was to shout, “Yippee!”

    Which prompted one of my favorite people in the food industry – actually, one of my favorite people, period – Joanie Taylor to write:

    Triple Yippee!!! I already survived breast cancer, I'm now working to rebuild my bones, and I'll have a great explanation for my chronic confusion. There just isn't any side but "up" for me!!! Thanks for sharing the good - hiccup! - news, Kevin!

    My pleasure.

    KC's View: