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    Published on: June 4, 2009

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    Hi, I’m Kevin Coupe and this is MorningNewsBeat Radio, available on iTunes and brought to you this week by Webstop, experts in the art of retail website design.

    I’m filing this report as I travel from Orlando, Florida, to Bentonville, Arkansas…going from moderating the general session at the GS1 US U Connect conference to covering Walmart’s annual shareholder meetings and media days. As they say in “The Godfather,” this is the life I have chosen…and I’m actually having more fun than anyone has a right to. As I often say, don't tell my wife, she thinks I’m working…

    I’ll be filing reports from the Walmart meetings later in the week, so let me take this opportunity to give you some reflections on the panel discussion at U Connect.

    Compliments to the folks at GS1 US for pulling together a terrific group of retailers to talk about supply chain issues and the role of standards in a fast changing business environment. These guys represented four very different kinds of companies – Walmart, CVS, Lowe’s, and Macy’s; we put our heads together trying to figure out what products or product lines they might have in common, and the only one we could think of was small appliances.

    And yet, they had a lot in common. One of the recurring themes in the panel discussion, as it turned out, was how the use of industry standards actually freed them to be able to be more innovative and flexible in dealing with situations that did not fit into the neat little boxes that make up the vast majority of their business transactions. A number of you, when I asked recently what questions you thought should be posed to the panel, asked about how current shifts toward private label and local buying had affected their supply chain efficiencies and standards, and pretty much to a man they said that while these trends pose challenges, disruptions to business were at a minimum because a strong foundation has been created.

    And at the same time, the general agreement seemed to be that the standards and supply chain efficiencies that have been put into place over the past decade actually are making these companies more or less resilient in dealing with the current economic downturn; they aren’t immune to the recession’s impact, and Macy’s would certainly testify to that, but it could be a lot worse.

    Another thing they all agreed on, more or less, was that a constant challenge was aligning the sales and supply chain organizations within their companies – they all said that this continues to be a high priority, but that progress is being made.

    The bottom line: Peter Longo of Macy’s said that “there is no finish line,” and that seems to be a pretty succinct summing up of the supply chain situation at hand, as these four companies – and virtually every other company in the room – seek both efficiency and effectiveness. These guys are far more knowledgeable than I when it comes to supply chain issues – which is why I was asking the questions, not providing the answers – but I found the session to be largely reassuring. These are smart, extraordinarily competent people who, while their primary jobs require them to focus on supply chain issues, never seemed to forget that the in-store experience and a high degree of customer-centricity is required to be successful in retailing. Nobody was thinking in a vacuum … and I believe the industry is better for it.

    For MorningNewsBeat Radio, I’m Kevin Coupe.

    KC's View:

    Published on: June 4, 2009

    Excellent piece in Business Week by G. Michael Maddock and Raphael Louis Vitón, about four trends that “are shaping innovation in the near term” and how “companies that take advantage of these trends give themselves an almost unfair advantage over the slow-footed or unaware.”

    1. “What some companies call departments and partners are too often emblems of inefficiency … small, cross-functional teams are the key to driving industry-changing products, services, and new business models to market whether you work in a big company or a small one. To ensure that silos are not an issue, some companies are even putting these teams in another building and saying, ‘you have one year to change our world—go!’”

    2. “Open innovation” is key to corporate success – because it acknowledges that sometimes the best ideas come from outside an organization. One example – Procter & Gamble CEO AG Lafley, who realized that “50% of their innovation must come through R&D, not from R&D. By doing this, he was helping create a culture of learners instead of knowers. He was pointing out that his people were often too close to a challenge to see opportunity. He was giving them permission to find expertise outside the company. This declaration resulted in an increased success rate, lower costs, and greater speed to market.”

    3. Social media can stimulate innovation: “Innovation is about insights, ideas, and communication. Online communities are often a perfect place to find and test insights. Online influencers are redefining the focus group … Here's the kicker: The emergence of social-media tracking tools give researchers and marketers alike a bevy of instant information to optimize targeting, messaging, and new product ideas.”

    4. “What would happen if you paid a team of really smart people who knew virtually nothing about your industry to take an objective crack at building a product, service, or business model that would rock your world? What if these people used a rigorous innovation process and had access to all research and direct contact with every department head?” The result, in all probability, would be a kind of “war game” that could create revolutionary change within an organization, rather than by a competitor that could put a company out of business.

    KC's View:
    The common ingredients in each of these trends seems to be that 1) it is almost impossible for innovation to come from within an organization (unless the culture is highly unique), and 2) in order to have long-term viability, organizations have to be working to put themselves out of business every day. There are no more important mandates if one is to survive in a 21st century business environment.

    Published on: June 4, 2009

    The Washington Post reports that lawmakers for Washington, DC, have voted unanimously to assess a five-cent tax on all disposable paper and plastic shopping bags. While the bill faces a council vote one more time before it becomes law, in accordance with local statutes, the Post notes that the legislation puts DC “at the forefront of efforts nationwide to promote reusable shopping bags.”

    The tax will be assessed on bags handed out by supermarkets, drug stores and other foodservice providers.

    According to the Post, “Under the plastic bag legislation, called the Anacostia River Cleanup and Protection Act, businesses would keep a penny for each bag sold, and the other four cents would go into a fund to clean up the Anacostia. If businesses offer a discount to consumers who bring reusable bags, they would get to keep two cents for each bag sold.

    The Post reports that similar kinds of bills are being considered in the cities of Seattle and New York, while San Francisco has outright banned disposable plastic shopping bags.

    KC's View:
    I know that there continues to be some debate about this, but I simply don't get why people resist the move to non-disposable shopping bags. It just seems so sensible – less stuff gets thrown out, which is good for the environment. Retailers spend substantially less for the disposable bags, which is good for their bottom line.

    Win-win.

    Published on: June 4, 2009

    • Walmart announced yesterday that as it opens 150 new stores this year, it will also generate some 22,000 new jobs – a notable statement with political implications that comes at a time of economic tumult when so many businesses and industries are retrenching and eliminating jobs.

    • Walmart reportedly has decided to stop reporting its monthly sales figures, joining a number of other retailers – including CVS and Home Depot – that want Wall Street to be more focused on long-term sales and profits.

    One report notes that according to Retail Forward, five years ago there were 87 companies that reported monthly sales … and today there are just 34.

    KC's View:

    Published on: June 4, 2009

    The US House of Representatives Energy and Commerce Committee held a hearing yesterday about the proposed Food Safety Enhancement Act of 2009, which is designed to improve the federal government’s oversight capabilities, and a number of interested parties appeared to address the legislation.

    United Fresh Produce Association President/CEO Tom Stenzel urged committee members to clearly and unequivocally support science-based, commodity-specific standards. “Over the past two years, we have been able to build the consensus in Congress that recognizes that fresh produce demands a commodity-specific approach – one size does not fit all,” Stenzel said. “Every major piece of food safety legislation introduced by the many players in Congress incorporates these principles that we’ve fought for, and now we must ensure that the final bill that comes out of the Energy and Commerce Committee is clear in its support for this approach … It is time to end the fears of food safety that have no place in the fresh produce department,” Stenzel said, adding, “Because science tells us there is no such thing as zero risk, government must also be able to assure the public that even if something does go horribly wrong in an isolated case, consumers can continue to have confidence in fresh produce.”

    Jean Halloran, Director of Food Policy for Consumers Union, endorsed the legislation, and made a suggestion. “This is a much needed step to protect the safety of our nation’s food supply. As Congress moves forward on this legislation, we urge members to add a provision to require testing and reporting for contaminants, the critical need for which was highlighted by the recent case of Peanut Corporation of America, which, in 12 different instances, found salmonella in its peanut butter and continued to ship deadly peanut products without being required to report known contamination.”

    And the Food Marketing Institute (FMI) issued the following statement after the hearing: “FMI supports many policy initiatives in the draft Food Safety Enhancement Act legislation because they are clearly intended to prevent problems in the food supply before they ever occur. Preventing food safety problems from occurring by mitigating risk must be the guiding principle for changes … Food retailers and wholesalers believe that given today’s global marketplace it is critical to provide the FDA with the necessary authority, credibility and resources to assure the safety of America’s food supply.”

    KC's View:

    Published on: June 4, 2009

    The Wall Street Journal this morning reports that Margaret Hamburg, the new head of the US Food and Drug Administration (FDA), supports the imposition of fees on food manufacturing companies, which would be used to fund food inspections.

    According to the story, “House Democrats have proposed legislation that would, among other things, charge all food facilities an annual registration fee of $1,000 to fund the FDA's food-safety activities. The draft legislation would, among other things, require the agency to conduct more frequent inspections at high-risk facilities and give it authority to require food facilities to take specific steps to prevent contamination.”

    It is unclear precisely how many new inspections the fees would finance; Hamburg says that some projections are overly ambitious.

    The Grocery Manufacturers Association (GMA), which traditionally has opposed such fees, now says that they can have a place.

    Pamela Bailey, GMA’s president/CEO, says, “We are concerned that a broadly applied fee to finance basic FDA functions, including inspections and enforcement, creates an inherent conflict of interest that will erode, rather than improve, consumer confidence in our food supplies."
    KC's View:
    Gotta pay for increased oversight somehow. I’m sympathetic to GMA’s concerns, but the food safety infrastructure has to be strengthened … I’m not entirely sure how else to do for it.

    Published on: June 4, 2009

    Starbucks said yesterday that as of June 30, it will offer a revamped bakery menu that will feature items free of high fructose corn syrup (HFCS), artificial flavors and dyes. The new menu will be touted as “real food, simply delicious.”

    Skeptics suggest that Starbucks is being a tad disingenuous, since it will still sell things like apple fritters…and that even an apple fritter without HFCS, artificial dyes and flavors cannot under any circumstances be defined as “healthy.”

    KC's View:
    On the other hand, Starbucks just said the food was real and delicious…not necessarily healthy.

    Published on: June 4, 2009

    • The Wall Street Journal reports that during the current economic downturn, “grocery-anchored shopping centers hold up well compared with other property types,” at least when it comes to real estate values. The reason: people may stop or curtain their shopping at upper end department stores that traditionally have anchored shopping centers, but they still have to eat…which means that centers featuring supermarkets are getting more traffic than those without.

    • Niemann Foods announced yesterday that it is acquiring 16 Pick-A-Dilly convenience stores from Big River Oil. Terms of the deal were not disclosed.

    USA Today reports this morning that ChemNutra, the Las Vegas pet food company accused of importing and distributing pet food tainted with melamine that was implicated in the deaths of thousands of dogs and cats, has pleaded guilty to the charges. The implications of the guilty plea will not become clear until after a judge has approved the agreement between the plaintiffs and the US Attorney’s office.

    • In Barcelona, at the World Retail Congress, Apple has been named the “retailer of the year,” cited as “a world class performer across every aspect of its business … The company has won many admirers for the way it has taken a fresh approach to retailing and customer service with teams of highly knowledgeable staff in all its stores and features such as the Genius Bar.”

    The runners up included Walmart and Aldi.

    KC's View:

    Published on: June 4, 2009

    • Village Super Market said that its third quarter net income was $6.252 million, up 27 percent from the same period a year ago. Q3 sales were $293 million, up 7.3 percent, on same-store sales that also were up 7.3 percent.

    • Costco Wholesale reports that its May sales were down five percent to $52.15 billion, on same-store sales that were down seven percent (including fuel sales).

    • Walmart de Mexico said that its May sales were up 10.5 percent to the equivalent of $1.65 billion, on same-store sales that were up 3.2 percent.

    KC's View:
    Is this the last time we’ll be getting monthly sales reports from Walmart de Mexico?

    Published on: June 4, 2009

    Yesterday, MNB reported that for the next three months Brookshire Grocery Co. will randomly select an employee and visit his or her home to see how many of the company’s private label Food Club brands are on hand. For every store brand item found the employee will receive $25 (up to $750). The winner will also receive $25 for displaying their Thank You Card, the company’s frequent shopper card.

    This program, called “Partner Food Club Frenzy,” launched in May and we noted that it is similar to an internal promotion developed by Daymon Associates, the private label brokerage company. (Brookshire’s primary private label provider is Topco.)

    The good folks at Daymon wrote in to note that Brookshire has been working with Topco/Daymon since July 2007, and Daymon helped BGC develop this promotion, and has used this program successfully at a number of retailer/clients over the past decade.

    Thanks for clarifying the program…which I continue to think is a smart one.

    (Not everyone agrees, though…see Your Views, below.)

    KC's View:

    Published on: June 4, 2009

    A couple of days ago, I mentioned that I am in Bentonville, Arkansas, this week for Walmart’s annual shareholders meeting and media days.

    Since then, I’ve received a number of emails from MNB users who live and work in the Bentonville area who asked if there would be an opportunity to get together during my visit.

    And so…tonight, from 7-8 pm, I’ll be hanging out at the Bonefish Grill, 3201 Market Street, Rogers, Arkansas. Come by, say hello, chat for a bit. It’ll be fun to put faces and voices to the names and words that appear on MorningNewsBeat.

    See you then.
    KC's View:

    Published on: June 4, 2009

    To be honest, I was a little surprised by the intensity of the objections contained in a couple of emails regarding the programs being used by Daymon Associates and Brookshire’s to encourage and reward employees who use private label products.

    One MNB user wrote:

    Are you kidding? You are supporting a program that has an employer entering and employee’s home and inspecting their kitchen to see what has been purchased in that company’s own PL Brand. So you don’t think that employees might feel COMPELLED to buy private label whether they want to or not so that they will be VIEWED as loyal employees. Perhaps employees should also pick up the laundry for their store manager as well and vote for candidates as selected by management. I have no problem with a company seeing everything an employee does during working hours at work but I find it hard to believe that you gave your position on this any thought at all.

    Well, maybe you read something in the story that I missed…but it was my distinct impression that employees had to sign up to participate and that they did so because they were offered the carrot of a financial prize.

    It isn’t like storm troopers are invading the homes of unwitting and unwilling employees…though that’s sort of what MNB user Dale Tillotson thought:

    I beg to differ with you on the merits of Brookshire's in home private label auditing program.

    While I do not know as well who came up with this idea, I would not be surprised if their last name was, Castro, Hitler, or Obama.

    This seems like another program designed for someone to tell you what to do and when to do it and where to buy it.

    While I would imagine that the employees effected are totally on board with the program, I have to wonder if all employees are in favor of this type infringement. Where does this stop? Audit results released will probably be analyzed by the company etc. and released.

    This just does not sound right to me.

    It would be nice what know what other readers of MNB think of this.

    Maybe I am overanalyzing this but I don't think so.


    We’re now equating Hitler, Castro and Obama…and Daymon and Brookshire’s? That doesn’t seem like calm, reasoned and credible political/business analysis to me. (Those probably are five names that few people ever expected to see in the same sentence.)

    Again, maybe I’m missing something…but when I read the story, it just seemed to me that these companies wanted to create a little excitement about private label – an investment that has lots of financial implications for them – and did so with a clever game that workers could participate in … if they so chose.

    Maybe there are privacy issues that I didn’t consider…but I simply don't see this as being nearly as malevolent as some do.

    KC's View: