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    Published on: June 2, 2009

    by Michael Sansolo

    While I like to believe that ideas for our discussions at MorningNewsBeat can come from anywhere, I have to admit that this week’s was a surprise. And that only proved once again the challenges of diversity in our society.

    My daughter, Sarah, usually amazes me with her intellect and her knowledge of far-flung topics. So I was somewhat stunned when she handed me the Sunday comics and asked to explain what could possibly be funny about one particular strip. I should explain that Sarah is no slouch, having just graduated from college with enough honors to make me wonder how exactly I helped produce her. But this time, she was stumped.

    It quickly became clear why. The cartoon, while not especially clever, required knowledge she couldn’t possibly have: the last names of the original Three Stooges. Sarah may be Phi Beta Kappa, but I know Moe, Larry and Curly way better.

    It brought me back to thinking about last week’s column in MNB on “The Big Sort” and how Americans are separating into like-minded communities. Our problem isn’t just living around people who agree with us, it’s learning to understand those who don’t.

    For instance, this Sunday’s Washington Post magazine featured an article about Brandon Hardesty, who became incredibly famous by acting out movie scenes in his parents’ basement and posting those short videos on YouTube.com. In case you are wondering how that fame pays off, his videos were getting viewed in such stunning numbers that YouTube itself even noticed and struck a deal with the young man to build advertising revenue off of him. Now Hardesty is off to make real movies.

    I never heard of Brandon Hardesty; Sarah didn’t know the Stooges’ last names were Howard, Fine and Howard. What a world.

    Only here’s where it gets interesting. I doubt there is a single company out there who can boast a level of success with employees watching training videos that equals what Hardesty produced in his basement. Wouldn’t it have been amazing if Weis Supermarkets, Hardesty’s employer (until recently), could have used his video talents in a productive way. I’m betting most of his managers at Weis were as clueless as I was about Hardesty’s talents.

    So the problem isn’t that we are sorting. Birds of a feather in some ways have always flocked together. The difference is today we can do it so much more easily. And today, more than ever, we need to keep an eye on those different from us to find out what they know, how they live and why different doesn’t mean wrong.

    In complex times and in a complex society, we have no choice. We have to understand these divides and find ways to breach them time and again…or we lose.

    We should also remember that at times we aren’t different at all. Sarah and I capped off our weekend by visiting Arlington National Cemetery, something we have long neglected to do despite living so near to Washington, DC. We never should have waited as it’s a trip everyone should make at some point, simply to be awed by the human cost of war that we should never easily forget.

    I was moved by the changing of the guard at the Tomb of the Unknown. I was stirred by personal memories at the memorials to the crews of both space shuttle disasters and the failed 1980 rescue mission in Iran. But what struck me most were the rows of seemingly endless markers for soldier after soldier and war after war.

    There is shockingly little sorting at Arlington. I’m not sure that matters much to us in business, but sometimes it isn’t all about business.

    Michael Sansolo can be reached via email at msansolo@morningnewsbeat.com .
    KC's View:

    Published on: June 2, 2009

    There is a piece in Forbes by Art Carden, a professor of economics and business at Memphis-based Rhodes College, in which he writes of a study he is conducting in conjunction with researchers at the University of North Carolina, that seems to indicate – contrary to conventional wisdom – that access to big box stores and warehouse clubs may actually help people maintain a lower body mass index and avoid obesity.

    According to the story, the first round of statistic analysis suggests that Walmart access is “associated with lower body-mass indexes and a lower probability of being obese. As we gathered more data on Wal-Mart discount stores, Wal-Mart Supercenters, warehouse clubs like Sam's Club, Costco and BJ's Wholesale Club, and other outlets, we found that the correlation holds up under a variety of different circumstances, with a clear relationship between warehouse clubs and better eating habits emerging over time. Further, we found that Wal-Mart's effect on weight is largest for women, the poor, African-Americans and people who live in urban areas.”

    The research indicates that since big box stores tend to reduce prices, they also tend to create an environment in which people are more willing and able to afford healthier foods…and that people actually use warehouse clubs to stock up on healthy foods.

    Carden writes that the study results suggest that “relative prices and purchasing power affect people's decisions, and this research suggests that people do make the right decisions when the prices of healthy foods fall and purchasing power rises.

    “Do you want to make poor people healthier? Then restricting the growth of discount chains is the last thing you should do. Instead, repeal programs that distort incentives- like agricultural subsidies that make junk food made from corn and soybean derivatives artificially cheap. Next, cut payroll taxes. With more take-home pay in their pockets, lower-income workers can afford to buy foods that are better for their health.”

    KC's View:
    Interesting piece, though I think I’d like to know who or what entity funded the study. That isn’t clearly indicated in any place I can find…and I suspect that a lot of people will share my skepticism.

    Published on: June 2, 2009

    FloridaTrend.com reports that there is speculation around that Winn-Dixie could be a prime acquisition target for the likes of Kroger, Safeway or Supervalu – especially now that CEO Peter Lynch seems to have the company moving in the right direction, unprofitable stores have been shuttered, and sales are increasing. Despite Winn-Dixie’s advances, the sense seems to be that the chain is caught between a rock and a hard place – Publix and Walmart – and that it is almost impossible to survive in such a position without being part of a greater entity.

    Lynch, for his part, isn’t talking on the record about the rumbling. "My focus here at Winn-Dixie is making a better company,” he says.

    KC's View:
    Not to accuse Lynch of being anything other than forthright, but when I read this quote I thought of the bus scene from “Bull Durham,” when Crash davis (Kevin Costner) says to “Nuke” LaLoosh (Tim Robbins), “You're gonna have to learn your clichés. You're gonna have to study them, you're gonna have to know them. They're your friends. Write this down: ‘We gotta play it one day at a time’.”

    “My focus is to make XXX a better company” sort of sounds like the CEO equivalent.

    You could look it up.

    Published on: June 2, 2009

    Yet another story – this one from Advertising Age about the so-called “new frugality, with the magazine writing that “the heavy betting” in corporate America is that the nation “will eventually shake off recession but keep saving and spending more responsibly. We'll borrow only when we must. We'll pay bills and debts immediately. We'll save up before we buy big things.

    “New England Consulting Group reported last week that people buying more store brands now don't have any plans to trade back up, and that recession-induced shopping habits are likely to persist ‘long after it's gone.’ All that has left many marketers trying to adapt with strategies such as lowering some prices, offering multiple product lines at varying price points and giving reluctant consumers reasons to buy by tying into causes such as environmentalism.”

    Still, there remain two schools of thought about how Americans will react as recession slowly - very slowly, according to conventional wisdom – gives way to recovery. One says that the scars of this recession will be deeper and more akin to those of the Great Depression, causing a long-term re-evaluation by most people of what they need and what they want. But the other school suggests that these scars will vanish.

    "Some of it will persist, no doubt," Eldar Shafir, professor of psychology and public affairs at the Massachusetts Institute of Technology, tells Ad Age. "But people adjust to context very, very quickly. If the thing they went through is at the level of true trauma, then it will take awhile. But my suspicion is that for the majority of people you're talking about, this has not been traumatic, just worrisome and troublesome."

    KC's View:
    As I think I’ve made pretty clear on a variety of occasions here on MNB, I tend to side with Professor Shafir on this one…not because of any great level of optimism, but rather out of abiding cynicism about what sometimes appears to be America’s chronic ADD.

    I think I like the way it is expressed by a number of experts in the Ad Age piece – that what may actually evolve over time will be a new equilibrium…a new balancing act between value and aspirations that actually results in clear and definable consumer values into which canny marketers will be able to tap. Of course, they’ll have to remember that the consumer is not homogeneous…that there is a lot of diversity out there…and that it is important not to think that every shopper is like us. (As Michael Sansolo has been pointing out in his columns about “The Big Sort.”)

    And, we have to keep in mind that the next generation of consumers is in many ways completely different from past generations – raised with different rules of acquisition (with apologies to the Ferrengi) and different assumptions about buying what they want, when they want it, where they want it, how they want it.

    Published on: June 2, 2009

    Reuters reports that one of the effects of the recession could be an expansion by US retail giants into new global markets.

    According to the story, Anthony Buono, executive managing director of real estate giant CB Richard Ellis, told a conference sponsored by the International Council of Shopping Centers that “there are a lot of retailers who are in defensive mode right now, but a lot of retailers still have ambition to go abroad.”

    The conventional wisdom seems to be that the recession will bottom out in the third quarter of this year and begin a slow – some say extremely slow - recovery, but that the United States is likely to be ahead of the curve, compared to most other countries. This, the reasoning goes, will put US companies in an advantageous position if they want to extend their portfolios through acquisition, franchising, joint ventures, or simple expansion.

    KC's View:

    Published on: June 2, 2009

    Bloomberg reports that former Kmart CEO Charles Conaway has been found guilty in a civil lawsuit brought by the federal Securities and Exchange Commission (SEC) that charged him with deceiving the company’s board of directors, analysts and shareholders about the company’s “woeful” finances in 2001-2002.

    The jury verdict came after a single day of deliberations.

    Conaway’s attorney said he plans to appeal.

    The SEC wants to bar Conaway from ever again serving as an office of a public company.

    KC's View:
    Man, it is like Kmart is some sort of corporate typhoid Mary. Touch it, and you’re infected with the poison forever.

    Published on: June 2, 2009

    Fascinating piece in Internet Retailer about expectations that the Obama administration could have an enormous impact on online retailing. Three major areas that could be affected by legislation and/or regulation:

    • Privacy concerns. There is a belief that the White House will push for laws that will restrict the ability of online marketers to use databases to target and differentiate consumers with advertising and promotional offers.

    • Broadband. Part of the Obama administration’s stimulus package includes money designated to expand broadband access to parts of the nation where it is not currently available.

    • Sales taxes. With state and federal governments pretty much all facing budget crises because of diminished tax revenues, there seems to be a feeling that the time is ripe for some sort of Internet sales tax that would level the playing field between online retailers and their brick-and-mortar brethren and generate significant dollars for a variety of government entities.

    KC's View:

    Published on: June 2, 2009

    Unilever-owned Ben & Jerry’s has launched a new Facebook application that it says provides some 900,000 fans “with enhanced lines of communication from manufacturer to consumer and consumer to manufacturer.”

    According to the company, the global Facebook application enables Ben & Jerry’s “to collect valuable global email addresses of their Facebook Fan base and provide consumer insights for individual countries. These email addresses opened the line of communication allowing Ben & Jerry’s to send news, product updates, specials and other relevant communications to their consumers. It also gave Ben & Jerry’s insight on how to geo-target their advertisements within different markets, and give insight for future product development based on country specific trends.”

    KC's View:
    Full disclosure: The Ben & Jerry’s Facebook application was designed and implemented by MyWebGrocer, which is a longtime MorningNewsBeat sponsor and supporter.

    However, I didn’t think I should ignore the story because of the MWG connection…because I would have run it even if the company wasn't on the site as a sponsor.

    Y’see, this is an example of what retailers must do in a new environment – create new connections to shoppers, forging different levels of loyalty, and turning shoppers into advocates by speaking to them – and listening to them – in fundamentally different ways.

    Published on: June 2, 2009

    • The Cincinnati Enquirer reports on a new Kroger program that will give its frequent shoppers free cell phone minutes as a reward for money spent in the retailer’s food stores.

    Kroger and its partner, i-Wireless, will allow shoppers using KrogerPlus cards “to earn free cell phone minutes on i-wireless phones sold at Kroger stores. Shoppers will get 20 free minutes for every $100 spent a month while using their loyalty card, with a cap of $1,500 a month. Those using Kroger's branded MasterCard will earn 30 minutes per $100 spent.”

    The program is expected to be nationwide in Kroger stores by the end of the month.

    • The Seattle Times reports that “Starbucks signed a settlement with the National Labor Relations Board last week agreeing to let Minneapolis-area employees post union materials in their break areas and discuss union issues while on the job, as long as it doesn't interfere with their performance … It's Starbucks' sixth labor settlement in three years and its second in Minneapolis.”

    While the union is proclaiming victory in the case, Starbucks says that it is the target of a “small group of individuals” seeking to unionize the company, and that it only settled the case because pursuing it through the courts would have taken more time and money than it was worth.

    • From Orlando, Florida, as its U Connect Conference is about to get underway, GS1 US notes that this month marks the 35 anniversary of the first use of the Universal Product Code (UPC) bar code, which has turned into one of the world’s best-known symbols.
    KC's View:

    Published on: June 2, 2009

    Regarding the ongoing “coffee wars” between Starbucks and McDonald’s, one MNB user writes:

    The very business model that McDonald’s operates under obviously leaves no doubt as to their desire to cause as much disease and discord among families as possible. Their practices have furthermore been linked to a major cause of global warming, the production of methane gas. The surprising statistic reveals that the major source isn’t from the thousands of cattle eating and dying to supply quarter-pounders, but from consumers who insist on eating them along with carbonated beverages laced with HFCS. The impact on the environment, especially the one in a vehicle with closed widows, is staggering. All the while Starbucks has been working to resolve world hunger by supplying $5 coffee to as many countries as it can reach and still maintain its quality, unless you want decaf.

    Me – I grow my own beans in a controlled bubble environment and pay myself a sustainable wage to nurture, harvest, roast, and grind my own. I use water filtered 7 times through a ceramic/carbon screening device that filters at the molecular level, thereby providing me with no way to strengthen my immune system.

    I could go on, but it seems that you have plenty of readers with even more extreme views than mine, so I will defer…


    Oh, I wouldn’t count on that…

    Another MNB user writes:

    I almost wrote to you a couple of weeks back when you talked about never going in to a Starbucks store that was empty. I was shocked when I was just outside of Jacksonville Florida in early May and walked in to a store at 3:30 in the afternoon. Not only were there no customers in the entire store, there were no partners in sight!

    Thankfully pretty quickly someone appeared from the back. I commented about the lack of business and she pointed across the way to where a Jamba Juice had recently closed and said that this Starbuck’s was closing later in May as well. I asked her if she was transferring to another store. She told me that a couple of the partners were, but that she and many others had had enough of Starbuck’s and would find another job.

    Having previously worked for Starbuck’s at a higher level, I think that perhaps the issues that have at times made it difficult to get things done, especially at the managers level and above finally trickled down to the Barista level. So your “guess” about top management being efficient and managing to the stock market’s demands over the past few years and taking its eyes off the ball when it comes to connecting with the employees is pretty much on the mark.

    I have personally seen some really good and very loyal people leave the company due to poorly evaluating who should move up to the next level. This at times put unqualified and unpopular people in higher decision making positions, which adversely affects almost everyone. I think it comes down to having District and sometimes Regional managers who are better at the “people” part of the job, who can and will truly connect with those in the trenches rather than being concerned about their “status” within the company. All the manuals in the world and all the paperwork that gets pushed around (although somewhat necessary) won’t help with bringing about a more positive work environment. Having seen these issues myself and feeling that there was nowhere to go within the company to talk with someone I could trust and who would listen, the downward spiral isn’t surprising, just the speed in which it has come crashing down.

    Keep doing what you are doing. I find you have a pretty good idea of what’s going on, not just with Starbuck’s but with most of the topics you write about.


    Thanks. As Dizzy Dean once said, I’d rather be lucky than good.




    Yesterday, MNB took note of a NYT piece looking at the travails of Archway cookies, where it seemed like financial considerations got in the way of quality concerns. I blamed, in part, a culture where accountants may have been more important than bakers, which led on MNB user to write:

    It is not just the accountants that sacrifice quality for cost of goods - every merchandising team in the country has - either by choice or through ignorance - done this purposefully (at least all of the ones I have come in contact with have and my gut tells me the others have as well) at some point in their history. The brands that survive are the ones who stay firmly focused on the consumer and figure out how to make quality work.

    Think about the New Coke debacle - that was a move to use a cheaper ingredient (high fructose corn syrup) that everyone knew changed the flavor of the product but the costs needed to be saved!! Procurement, product development, merchandising and manufacturing are all culpable once the race to lowest cost starts. From pet food to pancake and waffle syrup (did you know that up until about four years ago most brands of pancake syrup actually had maple syrup in them - albeit a small percentage - and none do today??) everyone is trying to find cheaper ingredients to deliver the same experience so they can be more competitive - too often it goes the way of Archway where that "savings" leads to consumer dissatisfaction which leads to brand erosion and finally the death of the brand.

    Clearly Archway had other issues - but they did on the ingredient side what
    too many companies are trying to do today.


    On the same subject, MNB user Vic Hansen wrote:

    Accounting should be a service function, full stop. Financials are about maximizing control and minimizing risk. The minute that gets to be the aim of a company it is as good as dead. The only time an accountant should be running the whole show is when she (or he) isn’t behaving like one.

    It’s no coincidence that ‘creative accounting’ is something you don’t want.


    And MNB user Jeff Foster chimed in:

    Looks like the bean counters won this one.




    Finally, we had a piece noting that Price Chopper/Golub Corp. hired Paul White to be “Director of Talent Acquisition,” which prompted MNB user Geoff Harper to write:

    Fascinating job title. Sounds like the Golubs are tackling the industry-wide future talent conundrum head-on.

    Indeed it does.

    KC's View:

    Published on: June 2, 2009

    Bloomberg reports that Walmart has gotten “preliminary court approval to pay as much as $85 million to settle 30 lawsuits claiming the company didn’t pay employees for all hours worked. The settlement covers cases filed in federal courts in 29 states and Puerto Rico, according to court filings. The accord is part of a global $640 million resolution of wage-and-hour claims reached between Wal-Mart and workers in December.”
    KC's View: