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    Published on: April 6, 2009

    Balducci’s, one of the most famous names in New York City specialty food retailing, plans to close its two New York City locations, in Chelsea and Lincoln Square, as well as one store in Ridgefield, Connecticut, and another unit in Washington, DC.

    Sources tell MNB that the owner of at least one of the Balducci’s locations is searching about for other food retailers to take the space, and has approached Fairway Markets, which turned down the opportunity because the building wasn’t appropriate for its format.

    The closures will leave Balducci’s with stores in Westport and Greenwich, Connecticut.

    No specific reasons have been given for the closures except that the company is undergoing a reorganization that made it necessary to close underperforming units. Balducci’s was acquired several years ago by Bear Stearns Merchant Banking from Sutton Place Gourmet, which has bought the company from the founding family in 1999.

    The original Balducci’s, in Greenwich Village, closed in 2003.

    KC's View:
    There will be plenty of obituaries written for Balducci’s, I expect; the one I’m most looking forward to will probably come from Nora Ephron, who has spent a good part of her professional life chronicling the comings and goings of the Upper West Side. (The New Yorker piece probably will be pretty good, too.)

    Sentiment aside, it may just be that Balducci’s time had come…that sometimes a store can actually outlive its usefulness.

    Published on: April 6, 2009

    The Minneapolis Star Tribune has a story saying that Kraft Foods was aware that there may have been problems with salmonella contamination of its trail mix as far back as late 2007, but that it was only two weeks ago that pistachios from a California plant were determined to be the likely source of the problem.

    There reportedly were two positive samples – one in December 2007 and another in September 2008 – out of thousands of tests, according to the story, eventually leading it to Setton Pistachio in California, which sells its nuts to Kraft and numerous other companies.

    The Star Tribune writes that Kraft “recalled or destroyed all suspect foods, and notified its suppliers and the Food and Drug Administration, which on Monday issued a sweeping national warning against eating the nuts.”

    The pistachio salmonella warnings come after months of warnings about peanut butter contamination, which has led to hundreds of sickened consumers and nine related deaths.

    KC's View:
    I hope retailers are doing a better job of informing their customers about the food safety issues surrounding pistachios than they did when it came to peanut butter. Sure, they pulled offending products off the shelves, but many retailers seemed to want to pretend that it never happened, hoping that this approach would best keep consumers from worrying.

    It was US Supreme Court Justice Louis Brandeis who once said that “sunlight is the best disinfectant.” Keeping people in the dark, especially in these days of Internet transparency, is never, ever the best policy.

    Published on: April 6, 2009

    The Greenville News reports that bankrupt Bi-Lo has received permission from the court overseeing its restructuring to use some of the $125 million debtor-in-possession financing commitment obtained from GE Capital.

    "We are pleased to have reached this agreement and to have received interim court approval to access this DIP financing," Michael Byars, Bi-Lo’s president and chief executive officer, said in a statement. "Over the course of the past week, we have evaluated several DIP financing proposals from multiple lenders. The revised agreement we have reached with GE Capital provides us with more liquidity on better overall terms than originally proposed."

    One of those alternative financing proposals, as it happened, came from Ahold, the company that used to own Bi-Lo; the story suggests that this forced GE Capital to come up with a better package for Bi-Lo.

    Byars said in his statement that while the chain “intends to fund operations primarily through its cash on hand and cash generated from operations, this interim DIP financing further strengthens the company’s financial position.”

    KC's View:
    Obviously, these financial moves are necessary, but stories about bankruptcies rarely focus on the issues that I think are most important, like how the company plans to address the operational issues that forced the bankruptcy to begin with. Or, how the company plans to redefine the marketplace and its approach to customers.

    Fundamental changes seem to be called for if you are in bankruptcy court. I want to know what they are…because if the goal is be a traditional grocery chain in untraditional times, then I’m not sure what the point is.

    Published on: April 6, 2009

    Interesting column by Al Ries in Advertising Age in which he makes observations about brand equity enjoyed by two major retailing names – Walmart and Starbucks.

    “The most valuable thing a company owns is its position in the consumer's mind,” he writes, and the most important thing a company can do is protect that position. Regarding Walmart, he suggests that Walmart's move into fashion, “was a total failure” because it was at odds with the retailer’s essential value offering. However, he also writes that “Walmart was lucky its fashion foray didn't work. That would have hurt its low-cost reputation,” which has helped it rebound and take advantage of the ongoing recession.

    Ries argues that Starbucks is making a similar mistake with its Via instant coffee product, which he says waters down the company’s brand reputation. Starbucks would be better off, he says, by lowering prices a bit – perhaps 10 percent – so that it is more affordable without diluting the differences between it and more mainstream players like McDonald’s and Dunkin’ Donuts.

    “In the long run, the only thing that counts is the perception of the brand in the consumer's mind,” Ries writes. “That's what marketing people should focus on. Not current sales which for luxury brands are certain to be hurt by the economy. Save the brand and when the economy improves, so will the brand's sales.”

    KC's View:
    I tend to agree with Ries on this one, though I have been surprised by the quality of the Via product; I tend to keep a few of them in my bag when I’m on the road because it sure beats the crappy coffee often stocked in hotel rooms, and hot water is pretty much always available.

    As far as Starbucks keeping its image, I actually think it should be marketing the in-store experience more aggressively. One MNB user suggested that it could have “happy hours” in its stores, perhaps in the late afternoon or early evening, when it could use lowered prices and maybe some entertainment as a lure to shoppers.

    Or, they could be creating special book club deals to get those folks to use the store as a meeting place…always good for coffee sales.

    Or, since CEO Howard Schultz currently is working for a buck a year, they could have “chairman’s specials” – every day, during a specific hour, he could pick out one item and it would be available for a dollar during that period of time. The item would always be different, but it would generate a kind of enthusiasm and traffic. (And probably sell a bunch of coffee that cost a lot more than a buck.)

    Just some ideas … probably worth exactly what you paid for them.

    Published on: April 6, 2009

    Reuters reports on the appearance last week before the US House of Representatives Agriculture Committee of John Hanlin, vice president of food safety for Supervalu, in which he urged the government to take a risk-based approach to expanding oversight.

    "We must look beyond the meat and poultry divide and focus on food safety systems across all categories of commodities using a risk-based approach," said Hanlin, suggesting that the US Department of Agriculture (USDA) be allowed to inspect “high-risk products such as spinach, other leafy greens, tomatoes, nuts, grains and other raw agricultural commodities” that currently get minimal attention because of budgetary restraints.

    Hanlin said, “"We must remove products from our shelves and our (distribution centers) almost daily due to food safety issues reported to us by USDA, FDA and food manufacturers … Consumers are losing confidence in our food supply."

    KC's View:

    Published on: April 6, 2009

    In the UK, the Competition Commission plans to try yet again to create a test that would prevent any single supermarket chain from getting too big a market share in any local market.

    A report in the Guardian notes that this decision is in spite of the fact that market leader Tesco – which objected to the imposition of such a test – won its appeal to the Competition Appeal Tribunal (CAT), arguing that the commission had not defined that financial impact of such a test.

    While Tesco may have won the battle, it is at least conceivable that it could lose the war…since the CAT has given the Competition Commission to come up with a better test with more clearly defined parameters. One thing is unlikely to change: the Competition Commission’s continued argument that when any one chain has too big a market share, it is bad for consumers.

    KC's View:
    Ironically, over the past several quarters, Tesco’s national market share has been slipping, with both Asda and William Morrison Supermarkets seeing some pretty good gains. It suggests that you don't need this sort of government interference, that the marketplace will take care of itself; after all, if something isn’t good for consumers, they generally will shop somewhere else.

    Published on: April 6, 2009

    A report from the Instore Marketing Institute suggests that Toys R Us is getting into the grocery business, at least on a limited and/or test basis.

    According to the report, “At least three stores in the Chicago area this month began setting up aisles resembling a mini-grocery store with beverages, snacks, cereals, confectionery and household products. Signage labels the department as ‘R' Market."

    And, “Shorter gondolas in the center of the department merchandise bottled water, boxed juice and other beverages, as well as pita chips, breakfast bars, cookies and cereal. One aisle is dedicated to baby food. Endcaps merchandise food and non-food products.”

    KC's View:
    Competition can come from anywhere. It is an important lesson, once again reinforced.

    Toys R Us is unlikely to do fresh foods, so that will continue to be a major competitive strength for supermarket retailers. But it would be foolish to underestimate the Toys R Us test … if only because it is so illustrative of larger truths.

    Published on: April 6, 2009

    • While the target audience may not exactly be aging baby boomers (yet), published reports in the UK say that Walmart-owned Asda Group plans to begin selling a line of collapsible wheelchairs, raised toilet seats and even urine bottles that will be of use and interesting to older shoppers and that previously have only been available through specialty stores and websites. (Asda notes that younger people facing illness or physical challenges will also find the line useful.)

    The initial rollout will be 75 stores, with the goal to expand the line and have the offering in every one of Asda’s stores.

    Noting that the rollout can be considered pioneering for a supermarket chain, Asda said that “we are confident that it will more than likely be popular and relevant to customers’ needs now and in the future.”

    KC's View:

    Published on: April 6, 2009

    Fast Company reports on Tesco’s efforts to find out what packaging its UK customers can do without – by creating a system that allows them to throw out useless packaging while they are still in the store. The six-week trial is being run at a select number of stores, and the retailer believes that the initiative will both give it a better handle on shopper priorities as well as providing a better, more immediate way to recycle.
    KC's View:

    Published on: April 6, 2009

    • The Produce for Better Health Foundation has begun discussions within the produce industry that could lead to the creation of a national fruit and vegetable research and promotion board that would be charged with a “comprehensive health marketing, communications, and education effort” that would seek to “increase consumption in the United States of all forms of fruits and vegetables.” If such a board were created, it would be funded by “first handlers,” and the foundation is looking for $30 million worth of funding.

    • The National Association of Chain Drug Stores (NACDS) and the Food Marketing Institute (FMI) announced that they have filed a motion seeking a stay in federal district court in Massachusetts following the release of the final judgment in the First DataBank and Medi-Span lawsuit. The motion asks the district court to halt implementation of the approved average wholesale price (AWP) reductions that would dramatically cut pharmacy reimbursement.

    According to the announcement, “Last month, Judge Patti B. Saris of the United States District Court for the District of Massachusetts ruled to reduce the AWPs used to set pharmacy reimbursement rates to 120 percent of wholesale acquisition cost (WAC) for 1,442 designated drug products. As a result of the court’s approval of the settlement, First DataBank and Medi-Span issued statements announcing that AWPs will be reduced to 120 percent of WAC for all remaining drug products effective September 26, 2009. First DataBank and Medi-Span also plan to stop publishing AWPs, which are used as a prescription drug pricing benchmark. NACDS and FMI previously filed a legal brief, including an economic analysis, to counter the proposed settlements.”

    KC's View:

    Published on: April 6, 2009

    CBS News reports that an organic cereal manufacturer called Golden Temple of Oregon had to have new packaging made after it discovered that the toll-free number listed on the old boxes had a typo in it.

    Unfortunately, the incorrect phone number sent consumers to a phone sex line.

    While the new boxes have begun shipping, apparently there are plenty of the old boxes still on store shelves.

    KC's View:

    Published on: April 6, 2009

    We continue to get email regarding our story about a Dunkin’ Donuts franchisee who was forced to give up the business he’d owned since 1979. The reason? Walid Elkhatib is a Muslim, and is forbidden by his faith from handling any pork products. When he invested in a Dunkin’ Donuts franchise in 1979, it did not sell breakfast sandwiches. When the company did introduce them in 1984, it allowed him to not carry them, and to post signs that said “no meat products available.” But it changed its mind, and Elkhatib lost the franchise…and I commented that “You’d think that there would be a better way to handle this. I would argue that Dunkin’ Donuts would look a lot better if it could find a way to accommodate this man’s religious beliefs, even if it meant deviating from the strict franchising agreement. Sure, there would be complications … but isn’t it better to actually be a little tolerant, especially these days?”

    One MNB user responded:

    Who's the one who got to decide that religious beliefs are more important than anything else . . . let alone everything else? Seems to me this guy has an easy decision: Either execute his franchisor's strategy to his best ability or find another line of work that conforms to his idiosyncrasies.

    Fascinating. I wonder how most Christians would respond if I described their tenets as “idiosyncrasies.”

    MNB user Clay Dockery wrote:

    Franchisees are the face of a company and that company has the right to ensure that their brand is protected in a multitude of ways. Otherwise, you, the consumer, may just shop elsewhere.

    I don't pretend to understand the Muslim requirements with respect to handling pork, but would hope that the owner could ensure the employment of a non-Muslim individual that would handle the meat products rather than banning them outright. Sadly, this whole story seems to be about a franchisee and a corporation both digging in their heels rather than looking for a constructive solution.

    Listen, Dunkin’ Donuts clearly seems to be within its legal rights. But I wonder if it is missing an opportunity here, since Muslims do happen to be the fastest growing ethnic group in the US.

    Regarding Nash Finch’s decision to move away from its controversial “cost plus 10 percent” pricing policy in its Avanza stores in Denver, one MNB user wrote:

    I live in Denver and this +10% program at Avanza is embarrassing to the grocery community at large. You’re asking the consumer to project what the final cost will be of their groceries instead of giving them the final price. The person(s) who created this program (or approved it) are incredibly unsophisticated grocery marketers.

    It was reported last week that on Long Island, Suffolk County Executive Steve Levy has signed legislation banning the use of bisphenol A (BPA) in empty beverage containers for children under the age of three. The measure, which actually contradicts the federal government’s position that BPA is safe, carries a $500 fine.

    BPA has been the subject of some controversy, with people lining up both for and against it. The US Food and Drug Administration (FDA) has approved its use, a position supported by a wide range of trade organizations. However, Consumers Union (CU), the Consumer Federation of America (CFA) and Walmart all disagree with the FDA decision; in Walmart’s case, it is not selling children’s products containing BPA. In addition, an independent panel of scientific advisors has told the FDA that its reasoning was flawed when it issued a provisional ruling that BPA is safe.

    I commented last week that “this ends up looking, by the way, like the FDA is on the side of the manufacturers making bottles with BPA, and that Walmart is on the side of the consumer. Which may be great positioning for Walmart, but it doesn’t appear to say much for the judgment of the FDA.”

    Leading one MNB user to write:

    Come on! Are you really saying that the FDA's judgment should be governed by consumer ignorance rather than objective scientific evidence? Would you really prefer that its "judgment" reflects a popularity contest among the great unwashed?

    No, I am saying that there seems to be a lot of room for disagreement here…in addition to which, the FDA isn’t exactly the voice of credibility these days.

    KC's View:

    Published on: April 6, 2009

    Over the weekend in the NCAA Final Four battles, North Carolina defeated Villanova 83-69, and Michigan State upset the University of Connecticut 82-73, setting up tonight’s NCAA Division I Championship game.

    In the women’s NCAA Final Four tournament, Louisville defeated Oklahoma 61-59, and the University of Connecticut beat Stanford 83-64. The championship game is on Tuesday.

    The Major League Baseball season began last night, as the Atlanta Braves defeated the Philadelphia Phillies 4-1.

    KC's View:
    Call me old-fashioned, but I keep thinking that MLB lost something when they scheduled Sunday night games to begin the season. I always thought that the traditional first game, played every year in Cincinnati, was something you could count on.

    Ah, well…