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    Published on: April 27, 2009

    The US government has declared a public health emergency as 20 cases of swine flu have been confirmed in the United States, following the revelation that there may have been as many as 103 related deaths in Mexico, raising fears that this could be what the New York Times calls a “leading edge of a global pandemic.”

    Swine flu cases have been identified in New York, California, Texas, Kansas and Ohio, though there have been no reported fatalities in the US.

    Many questions remain. The Times writes, “Top global flu experts struggled to predict how dangerous the new A (H1N1) swine flu strain would be as it became clear that they had too little information about Mexico’s outbreak — in particular how many cases had occurred in what is thought to be a month before the outbreak was detected, and whether the virus was mutating to be more lethal, or less.”

    Meanwhile, in response to the crisis, the National Pork Board has issued a statement reassuring the public that pork products are safe to eat and that consumers cannot contract swine flu from eating pork that has been properly cooked. To this point, it is believed that swine flu is spread from person to person, and has nothing to do with contact or proximity to pigs.

    However, it is believed that the crisis will have an impact on pork exports from the US, which is a $5 billion annual business.

    FYI…ABC News reports that the World Health Organization defines a pandemic as meeting three criteria: “First, it must be an infection that has newly emerged. Secondly, it has to be able to cause serious illness in humans. And thirdly, it must be able to spread easily from person to person. Infections in this category can often spread beyond their continents of origin -- and potentially around the world.”

    Health experts say that the best way to avoid swine flu is to wash your hands often and well. It also is recommended that people stay away from people who are coughing and sneezing…and postponing planned trips to Mexico also is recommended.

    KC's View:
    All the evidence to this point suggests that this is not a food borne illness…but it will contribute to the overall feeling of consumer disquiet nonetheless.

    BTW … it is a little early to get an official response on this one, but I wonder what it would take for the Food Marketing Institute (FMI) to cancel its Dallas-based Future Connect conference next week. For one thing, Texas is one of the states where swine flu has been detected…though in San Antonio, not Dallas. (Though as we post MNB this morning, there is a late report that there may be three cases of swine flu in Dallas, though the report is unconfirmed.)

    Beyond that, though, there is a notion that we’ll all be sitting in a series of big rooms next week…and if there is an outbreak of coughing, it’s at least going to get some people wondering. (Maybe FMI could find a corporate sponsor – Smithfield Foods, perhaps? - to hand out branded surgical masks when people show up at the door…)

    Obviously, I’m joking (a bit) here… but the serious point is that a week from now, this situation could look very different. It could have receded into the background, but it may look a lot worse…and the industry needs to consider the implications from every possible angle.

    And when that guy next to you coughs, hold your breath.

    Published on: April 27, 2009

    Costco Wholesale reportedly has settled a lawsuit over the sale of “hot gasoline” – fuel that expands when it goes over 60 degrees, but that is not accounted for inside fuel pumps.

    According to Consumer Watchdog, “For every 15-degree rise in temperature, 1% of the fuel is lost to expansion … A 2% expansion of gasoline at 90 degrees, at even $3.00 a gallon, is a $1.20 loss on a 20-gallon fill-up. At $4 a gallon, the loss is $1.60. The loss to all drivers nationally adds up to $3 billion or more.”

    The settlement would have Costco installing special pumps with sensors that will compensate for any increased temperature at all affected locations where it is legal within five years. The states where Costco is impacted include Arizona, California, Florida, Georgia, Kentucky, Nevada, New Mexico, North Carolina, Tennessee, Texas, Utah and Virginia.

    The Kansas City Star notes, by the way, that “the American Petroleum Institute and the Petroleum Marketers Association of America have strongly opposed attempts to require temperature-adjusted pumps at U.S. filling stations.”

    KC's View:
    I was curious about this story, because it concerns a phenomenon that, to be honest, I never had heard about. So I went over to the website of the National Association of Convenience Stores (NACS) to see what they had to say about it, since it is an organization with a stake in how this issue is decided.

    Now, my science skills would be described as rusty if I’d ever had any science skills to begin with…but since I never did, consider that a caveat as I work my way through the explanation.

    If I understand the industry position correctly, it is that 1) the science actually isn’t be disputed, but the impact is; 2) retail prices already reflect the expansion differential; 3) there is no “conspiracy” on the part of the petroleum industry to defraud consumers; and 4) if sensors were installed at the nation’s gas pumps, it would actually cost consumers more money because those costs would have to be factored into retail prices.

    The official industry position also suggests that Costco is reaping a public relations bonanza by agreeing to a settlement that it may not actually to act on, since it will not have to install new heat-sensing pumps in any states that have not made them legal.

    My considered opinion, having read all this stuff, is that I have no idea who is right and who is wrong. I’m confused and I expect that shoppers are confused as well. From a consumer perspective, I suspect that the Costco decision plays best…and I’m just not confident enough with the industry position to say that it’ll overcome the clear advantage that Costco has at this point.

    Published on: April 27, 2009

    The Arizona Republic reports that Bashas’ plans to close about nine underperforming stores in addition to the five that were shuttered in February, though it was not specific about the exact number or which ones they might be. Bashas’ currently operates 150 stores under a variety of banners.

    The paper notes that Bashas’ is the victim of both the recession and heightened competition from the likes of Walmart, Safeway and even Tesco’s Fresh & Easy Neighborhood Markets.

    And, the Republic suggests that there could be more closures since the Phoenix-Scottsdale area is one of the most over-stored markets in the country.

    KC's View:
    Tough to hear this news, but the clear message is that companies are hunkering down…and this isn’t the end of it. It isn’t hard to imagine that a year from now, Bashas’ could be down to about 125-130 stores…and that other chains will be making similar decisions. Sometimes, you have to clear away the dead wood.

    Published on: April 27, 2009

    Supervalu-owned Jewel-Osco plans a “Big Relief Price Cut” promotion that will cut prices by up to 20 percent on thousands of everyday items, according to a story in the Chicago Sun Times.

    "Consumers have become increasingly budget conscious, and their spending and savings habits have shifted dramatically due to concerns about the economy," the grocer said in a press release announcing the promotion.

    KC's View:
    It was just a few months ago that some commentators were saying that consumer prices would not come down, that high manufacturer and commodity costs would prevent such a thing from happening. But it always seemed to us here at MNB that the pressure of the recession would force prices down, one way or the other.

    Published on: April 27, 2009

    The New York Times reports that the recession has been good for at least one business over-the-counter sleeping aids, which during March experienced double digit sales increases over the same period a year earlier.

    The reason: people worried about their economic situation tend not to sleep as well as in more prosperous times, and turn to various medications to help get shut-eye. Making things worse is that some of the people most worried about their jobs and prospects – people between the ages of 55 and 65 – also tend to be the people most plagued by insomnia.

    “Not only does this age group have to deal with the pains of getting old, but they are also most affected by the financial crisis, a huge headache in and of itself,” says a related report released by Packaged Facts, the market research firm.

    KC's View:
    When the Coca-Cola Retailing Research Council did its report on connecting food to health, one of the things that it came up with was an “artifact of the future” that might be given to people picking up a prescription for sleeping pills. This tag would suggest that people having trouble sleeping, in addition to medication, might want to try eating turkey, bananas and wheat bread – all of which contain compounds that encourage sleep.

    I thought about this when I read this story, since a national case of insomnia might be the perfect scenario in which retailers could suggest the consumption of such products. It’s just an idea…but retailers looking for an edge have to find and use them whenever possible.

    FYI…ABC News reports that the World Health Organization defines a pandemic as meeting three criteria: “First, it must be an infection that has newly emerged. Secondly, it has to be able to cause serious illness in humans. And thirdly, it must be able to spread easily from person to person. Infections in this category can often spread beyond their continents of origin -- and potentially around the world.”

    Health experts say that the best way to avoid swine flu is to wash your hands often and well. It also is recommended that people stay away from people who are coughing and sneezing…and postponing planned trips to Mexico also is recommended.

    Published on: April 27, 2009

    There is a long piece in USA Today this morning about the criminal investigation into the activities of Peanut Corp. of America (PCA), which has been implicated in the salmonella outbreak that appears to have contributed to some 700 illnesses and nine deaths.

    According to the story, “Federal authorities have begun a criminal investigation of PCA, and the company is bankrupt. Records produced in the FDA's investigation of PCA and in congressional hearings on the outbreak portray a company that not only failed to heed warnings about its deficiencies, but allegedly shipped products that had tested positive for salmonella after retests were negative.

    “More important, the case reveals a food-safety system in which every key link in the chain of protection failed, food-safety officials and lawmakers say.”

    And, the paper writes, “The U.S. food-safety net relies heavily on companies to be good operators. Yet PCA repeatedly failed to fix problems that were brought to its attention, according to regulatory records and documents made public in congressional hearings. Nestlé, for example, twice inspected PCA plants and chose not to take on PCA as a supplier because it didn't meet Nestlé's food-safety standards, according to Nestlé's audit reports in 2002 and 2006.

    “Regulators never found anything major wrong with PCA's Blakely plant until after the outbreak. Then, the FDA found major problems in sanitation, manufacturing and even plant design.

    “Unlike Nestlé, other PCA customers, including Kellogg, never audited the Blakely plant themselves. Instead, they selected PCA as a supplier based in part on an inspection by an auditing firm that was paid by PCA and that rates almost every client ‘excellent’ or ‘superior’.”
    KC's View:

    Published on: April 27, 2009

    The Denver Business Journal reports that Kroger-owned King Soopers and Safeway have come to a tentative agreement with the United Food and Commercial Workers (UFCW) on health care provisions of a new labor agreement currently being negotiated to replace the current five-year contract that expires on May 7.

    According to the Journal, the provisions will give “some 19,000 workers in the Denver area … access to preventive-care measures for the first time, and the increased health of workers should save money for both them and the companies … The preventive-care services also include Web and phone nurse support, a chronic disease management program and screenings such as mammograms and prostate tests. The services will come at no extra cost to the employees.:”

    The agreement reportedly will be presented to the third retailer with which the UFCW is negotiating, Albertsons, this week.

    However, both sides caution that the health care agreement is just one component of the broader labor negotiations that continue, and that are said to be far from being concluded. Among the subjects on the table and still to be decided are wages and the future of the existing two-tier benefits system.

    KC's View:

    Published on: April 27, 2009

    • The Arkansas Democrat-Gazette reports that the United Food and Commercial Workers (UFCW) “is actively recruiting potential members at more than 100 Wal-Mart stores in 17 states.”
    KC's View:

    Published on: April 27, 2009

    The Wall Street Journal this morning reports that Anheuser-Busch InBev is betting that the next big game trend will be ping-pong – and has actually ended some high profile sponsorship deals in order to become lead sponsor of the Bud Light Hard Bat Ping Pong Tournament.

    There are a number of companies betting that ping pong will be the next Texas Hold ‘Em, the poker game that swept the nation just a few years ago, with a presence that extended from people’s family rooms to Las Vegas and a range of televised tournaments.

    KC's View:
    Seems to me that the advantage that ping-pong has over poker is that it is perfectly legal – retailers could have weekend ping-pong tournaments in their parking lots as a way of creating excitement, which is something they couldn’t really do with poker.

    The other advantage is that ping-pong is cross-generational…the table in our backyard gets constant use during the summer, and Mrs. Content Guy takes great pleasure in the fact that she’s able to regularly defeat our kids. (Everybody is able to beat me, so I generally just make dinner while they’re playing.)

    There are plenty of marketing ideas implicit in this trend…and retailers should get aggressive about it.

    Published on: April 27, 2009

    Responding to last week’s story about how Bruno’s employees who are members of the United Food and Commercial Workers (UFCW) reportedly have taken steps to authorize a strike that could take place if the bankrupt retailer is sold, one MNB user wrote:

    It never ceases to amaze me how unions continue to use the same tactics and ultimately cause their employer to go under. The net result is that they lose jobs. Seems counter productive.

    Isn’t that the definition of insanity? Doing the same thing over and over, and expecting a different result?

    We had a number of emails regarding the story last week saying that five chains operating pharmacies in New York State have agreed – under pressure from NY Attorney General; Andrew Cuomo – to provide prescription instructions in five languages other than English: Spanish, Chinese, Italian, Russian and French.

    One MNB user responded:

    The main reason for this is to save lives. The main issue is more than the standard drug information, which the drug companies provide, it is the directions for taking the medication. The directions must be printed in both the person’s selected language and in English so the pharmacist knows that the code they entered for the instructions is correct; they put in a shorthand code that is expanded to something readable.

    The retailers implementing this valuable feature will not be limiting this to NY. Once you do the work to support this feature you might as well roll it out across the country and market it as a service.

    You may also want to note that CVS already supports 150 languages via 800 number support.

    But another MNB user disagreed:

    From a moral sense, yes, it does seem like the right thing to do, but to add these additional languages there is a cost. Those cost get passed on to all consumers. So then I have to ask while we are talking about what is fair, let’s look at the other side of the coin and ask if is it right for everyone else to have to pick up the tab? I think not. After all, isn’t English still official language of the US. Should I expect the French to require bi lingual labels and packaging because I want to shop in a Carrefour when I’m over there and need to get a bottle of aspirin, but don’t speak the language? We’re a country that loves entitlements, or call them what you will, but we forget that there is a cost associated with them that we all pay. Hopefully if anything good comes from the current economic conditions it just might be that realization. Cynically I doubt it.

    I get your point. But New York is not France.

    (What was it Gene Hackman, as Detective Popeye Doyle, said in “French Connection II?” Oh yeah…”I’d rather be a lamppost in New York than the president of France.”)

    Another MNB user wrote:

    I have mixed feelings about forcing pharmacies to be able to communicate in so many languages in New York State. Part of me says, that if you live hear you should learn English. The part of me that once volunteered as a teacher at an ESL program at my church realizes that no matter how well an immigrant learns English, it will always be their second language. Just think, if you or I migrated to say Russia, even if we learned to speak Russian fluently, we would always be most comfortable in English as that is what we grew up with, it is what we are most nuanced in. That being said, I would think in a place like New York State, businesses would make an effort to communicate in several languages, it would make good business sense.

    And still another MNB user wrote:

    Why can't "the market" drive this? Or if Mr. Cuomo thinks it's so important, why doesn't the state pay for this service? And what about access to the same languages when you talk to your doctor about your treatment? What about when you buy a house; can you get all the documents in Russian? And a car? And your extended warranty? Can you file your New York state taxes in Russian, and are all the tax codes available in these five languages? How about basic services like transportation? Are there subway maps in Russian? (are there any maps available!?) Will the state provide a Russian interpreter for your court hearing should you get arrested? Where does it stop? The Pharmacy business is important and this service critical. But why doesn't Mr. Cuomo call it what it is, a tax on the Drug store companies?

    Then again, I forget it's politics, not government service....

    We’ve had lots of stories about the growth of private brands lately, which led MNB user Bob Anderson to write:

    For all the great suppliers and Retailers who have work so hard for many years to improve the quality of most Store Brands this news is well earned. I hope that not too much is made to the point that the recession is why Store Brand continue to grow, as this TREND had been taking place for years. I would hope that credit is being given to the customer for being better educated on value, quality and the "why pay more " philosophy. In addition manufactures have done a much better job of improving quality, packaging and yes understand " their" store brand. I would also like to point out that the PLMA, their management team and members have done an outstanding job of helping all better understand the role and needs of Store Brands. I sure that this TREND will continue to build much into the future.

    Another MNB user wrote:

    I have been involved in the private label business for over 15 years working with manufacturers and retailers developing new items, improving quality and packaging while maintain a value proposition to the brands. The recession certainly gave the private label industry a boost but is not solely responsible for the current state of the business. The retailers and the manufacturers need to be given the majority of the credit for investing the time and money in developing their products and label to the point it is today. The recession is enhancing the state of the private label industry which will only help us grow for years to come.

    And another MNB user chimed in:

    We are a national company that manufactures both our brands and private label. Our research shows that where retailers stock only private label in a category (in this case perishable prepared foods) that category sales decline. It’s fair to say that overworked buyer/merchandisers at big retail chains do not have the opportunity to romance and connect the consumer emotionally with their store brands, therefore store-brand-only simply fulfills pre-existing demand. Retailers also don’t have mechanisms for product or package innovations that help drive category interest. The best scenario is at least 2 brands: PL and national. I agree if you are brand #3, 4 or 5 you are in danger.
    KC's View: