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    Published on: June 18, 2009

    Notes & comment by Kevin Coupe

    NEW YORK – It has to be viewed with a certain degree of irony that at a time when so many food retailers and manufacturers are struggling to read the economic tea leaves and understand what the future holds for them and their companies – consumer needs, desires and priorities are changing, after all, and the degree to which these changes are permanent is a matter of constant debate – the 53rd annual CIES World Food Business Summit convened at the Waldorf Astoria here, one of the most expensive hotels in one of the most expensive cities in the world.

    Of course, when the Waldorf Astoria was chosen there was no recession, just as there was no swine flu pandemic. These things happen, and an industry is best served when its thought leaders soldier on while dealing with reality, as opposed to either ignoring or collapsing under the weight of circumstances.

    That doesn’t make the sense of unreality that an almost anachronistically opulent place like the Waldorf creates any more real. One US retailer, with a rueful shake of his head, told me how he’d had a breakfast in the hotel restaurant that consisted of Raisin Bran, fruit, orange juice and a Diet coke, and had dropped $40 in the process. But thought leaders like – and need – to go to cities that can challenge their business, political and thinking, and this is something that CIES has excelled at over the years, with the Summit having been hosted in cities such as Stockholm, Dublin, Prague, Barcelona, Rome, Budapest, Paris, Shanghai, and Munich in just the last decade.

    This is a different CIES World Food Business Summit, however, in that this year the organization is announcing a change in its governance, shifting from being a retailer-driven organization to one in which retailers and manufacturers share the driving. While the official announcement and details are not scheduled to come until Thursday morning, Pierre Olivier Beckers, president/CEO of Delhaize Group and the current chairman of CIES, hinted at the extent of the makeover when he referred to CIES as “an international network of food and consumer goods retailers and manufacturers.” Beckers said that once the requisite votes are taken in the early morning hours on Thursday, CIES will become an organization called the Consumer Goods Forum, ‘built on the foundation of CIES” and designed to bring retailers and manufacturers together “to think and develop common approaches and objectives.”

    These are institutional realities, what in the United States we would call “inside baseball.” The more important realities – the ones that attendees were there to learn about – have to do with global consumers, and the changed circumstances in which they find themselves.

    Gareth Ackerman, chairman of Pick n Pay Holdings as well as chairman of the CIES Summit Committee, said as much when he noted that the original theme of the conference was “Ingredients for Success,” but that “when the world was falling apart,” it quickly became evident that the theme needed to be amended to “Ingredients for Success in Turbulent Times.” Ackerman, who is well known for both a personal and corporate dedication to the concept of social responsibility, drew a direct line between this priority and finding ways to “look after the consumer” and helping them cope with the “disquiet” of changes taking place all around them.

    Indeed, the sense seems to be that one of the reasons for the conversion of CIES into an organization run by both retailers and manufacturers is that this is almost too much for one sector to do by itself, that broader and more granular cooperation is needed – in much the same way that CIES has led the way in terms of developing global food safety standards that are both effective and efficient.

    “Our mission is as relevant today as it was a half century ago,” Beckers said. “We cannot be satisfied with good intentions alone. We have to be right.”

    Other notes…

    The first day’s sessions took a broad look at the economy and the world’s food supply, beginning with Dr. Michael Mandelbaum, an author and professor at the John Hopkins School of Advanced International Studies, who offered a primer on the “macroeconomic context” in which the world finds itself.

    It was, he said, a “triple whammy” of events that took place almost simultaneously – a bursting of the economic bubble, the credit crisis, and a recession. The burst bubble, he said, was like drinking too much for far too long and waking up with a hangover; the credit crisis was like having a heart attack; and the recession was like a serious case of the flu. Any one of the three would be a challenge, but having all three at the same time would certainly remind a person of his or her own mortality.

    Among the risks still facing the global economy, Mandelbaum said, are:

    • The possibility that the various cures employed by governments will be inadequate, making the recession last longer than necessary; he suggested that because the US and China have spent more in their attempts to fight recession, they would come out of it faster than Europe and Japan…which is good news unless you happen to be European or Japanese.

    • The possibility that enormous debt created by US government actions, coming on top of eight years of deficit spending, with create crippling inflation…which is a problem for everyone, he noted, since this recession has proven the global centrality of the US economy.

    • The possibility that turbulent times will create economic nationalism and protectionism, with “would be disastrous” for the global economy.

    There was, however, good news. “The worst has not happened,” Mandelbaum said, referring to a total collapse of the global financial system. “And it is not going to happen. This recession, like all recessions, will end, and growth will begin again.”

    In the second plenary session, Professor Robert Watson, chief scientific advisor to the UK’s Department for Environment, Food and Rural Affairs, addressed the fact that despite a doubling of global food production since 1960, 15 percent of the world’s population still goes to bed hungry every night. Watson noted that demand for food will double in the next 25-50 years, and said that the globe needs “sustained growth in the agricultural sector” if it is to meet this challenge.

    However, Watson also said “that there is plenty of food today,” and the real problem is one of distribution and the fact that the poor cannot afford to buy it. In other words, the system is both functional and dysfunctional at the same time.

    Watson elaborated by pointing out that the US government subsidizes the growth of certain crops, and then “dumps” the crops that cannot be sold on the open market in places like sub-Saharan Africa, where local farmers cannot possibly compete on price. This leads to less than optimal use of land in such places, and a lack of self-sufficiency on the part of those farmers. “It is in our best interests to make sub-Saharan Africa more self-sufficient,” he said.

    And, Steve Burd, president/chairman/CEO of Safeway Inc., brought to this global audience his company’s approach to health care issues, reiterating a familiar position: that if individuals were obliged to pay the full cost of "unhealthy behavior," they would be motivated to a) change their behavior and b) be more responsible about health care costs.

    Final thoughts about Day One…

    It seems to me that in some ways, the story of this CIES World Food Business Summit may be told by events that bookend the event.

    One of them doesn’t happen until Friday – the annual closing black tie reception sponsored by L’Oreal, which people already are talking about because it will be considerably less lavish than receptions past. This appears to be a bow to the new reality, and delegates to whom I have spoken actually seem to think this is both sensible and timely – a way of dealing with reality as opposed to ignoring reality or collapsing under its weight.

    The other event was far smaller, but perhaps more telling. On Tuesday, there were a series of store tours, with four busloads of delegates shuttled around nearby Westchester and Fairfield Counties to see the local retailing scene. I had the opportunity to serve as a kind of informal host to the delegates at Stew Leonard’s, and it was great fun to see them gape at an innovative form of food retailing that I’ve gotten used to having shopped there for 25 years.

    I was struck that, as the retailer and manufacturer executives milled about the store, there was another tour taking place: a group of school kids, maybe eight or nine years old, walking happily through the store, wearing Stew Leonard’s hats, tasting and learning and generally connecting to a unique retail experience and the various foods it offered.

    That’s the future colliding, I thought to myself. Today’s executives and tomorrow’s customers, equally delighted by superior food, marketing and merchandising.

    Which is as it should be...

    Tomorrow: Michael Sansolo reports from the CIES World Food Business Summit, Day Two.
    KC's View:

    Published on: June 18, 2009

    Business Week reports that while the viability of the in-store medical clinic business seems to have been proven in the US, Walmart has not been as immediately successful in this segment as expected. Two years ago, it said it would have 400 of them by 2010 and that eventually it could have as many as 4,000 – but today it only has 31 open.

    “Wal-Mart has more than 1 million potential clients among its employees alone, and it is betting that the combination of rising health-care costs and consistent traffic from budget-minded shoppers will prove successful,” Business Week writes. “However, the enterprise has been marked by early stumbles and is taking longer than expected to develop. Industry experts and clinic operators cite brand confusion, advertising problems, broken partnerships, and the recession as factors in Wal-Mart's halting foray in the field.”

    Four hundred clinics remains a short-term goal, Walmart says; the magazine says the retailer “plans to increase collaboration with established medical providers,” and that hundreds of hospitals and health systems are seeking collaborative partnerships with the retailer.
    KC's View:
    Walmart will get this right. No doubt in my mind. And I still think that eventually the retailer will simply buy an in-store medical clinic provider as a way of exercising more control over costs, operations and services.

    Published on: June 18, 2009

    The Richmond Times Dispatch reports on new market share data suggesting that Delhaize-owned Food Lion has moved into first place in that marketing area with a 19.34 percent market share, passing Ukrop’s, which has a 17.58 percent share. Walmart is in third with 12.14 percent, a Kroger in fourth with 11.38 percent.

    It is the first time since 1986 that Ukrop’s has fallen out of first place, and company CEO Robert S. Ukrop professes not to be worried.

    "Market share is not our thing," he tells the paper. "We think there is enough business for us to continue to do what we do. We just have to be better at it. The fact that we have as much of a market share as we have as the little guy is amazing."
    KC's View:
    In this economy, the ascension of Food Lion hardly is surprising.

    That said, two things are going to happen here. Ukrop’s is going to continue its innovative ways, believing that when the recession ends its customers will return. And Food Lion, which is more than the bare-bones price-driven format that it used to be, will work to keep those customers.

    Published on: June 18, 2009

    The Wall Street Journal reports that the US House of Representatives has passed a bill designed to give the federal Food and Drug Administration (FDA) more power in dealing with food safety issues. According to the story, “The legislation would give the FDA authority to order food recalls, impose new civil penalties and require companies to follow food-safety standards. It also would require the agency to inspect so-called high-risk food facilities at least once a year and make companies keep detailed records to help the FDA more quickly trace the distribution of tainted foods and track the course of the contamination.

    “To help fund the work, the bill would require some 378,000 food facilities, including 223,000 overseas, to pay an annual registration fee of $500. The legislation exempts farms that raise meat and poultry and other facilities regulated by the U.S. Department of Agriculture.”

    A food safety bill with similar components has been introduced in the US Senate, but has not yet been the subject of debate.

    Both pieces of legislation come in response to a string of food safety scandals that have left consumers with some level of concern about the products they eat, and to calls from the Obama administration to strengthen the nation’s food safety infrastructure.
    KC's View:

    Published on: June 18, 2009

    The Boston Globe reports that it isn’t just Starbucks that is feeling the heat from McDonald’s aggressive entry into the premium coffee business. “Free trials and slashed prices at both McDonald’s and Starbucks in recent months also have put increased pressure on … Dunkin’ Donuts, marking one of the fiercest stretches in the java war … And although Starbucks has shuttered shops across the country, the Seattle-based giant still managed to unseat Dunkin’ Donuts, which is in the midst of a nationwide expansion, as the best coffee in Zagat’s 2009 Fast Food Survey of more than 6,000 people … Starbucks is ramping up its efforts to woo back customers by grinding beans each time a new pot of coffee is brewed, instead of grinding coffee only in the morning. Last month, the company also launched a marketing campaign promoting the quality of its coffee and values behind the brand. Additionally, Starbucks teamed up with MSNBC to sponsor its morning news program.”

    But Nigel Travis, CEO of Dunkin’ Brands, seems more focused on the McDonald’s threat.

    “The real question is whether McDonald’s can sustain the kind of focus they’ve had for the last two months, putting nearly $100 million behind the coffee push,’’ he tells the Globe. “They can’t promote coffee forever because they’ve got lots of other products to focus on.’’

    Travis also tells the Globe in an interview that Dunkin’ is seeing some customer habits change as a result of the recession. “There’s a sign some people are cutting back one or two visits a week,” he says. “And people are obviously trading for cheaper products, and that’s why we just launched a breakfast wrap at 99 cents.”
    KC's View:
    This is one of those business battles that is going to make everyone better…and the consumer will be the ultimate winner.

    Published on: June 18, 2009

    California grocery chain Stater Bros. has announced a price-cutting campaign, saying that it is reducing prices on more than 10,000 basic items, including private brands.

    "We know our customers are having a hard time making ends meet," stated Jack H. Brown, Chairman and CEO of Stater Bros. Markets. "That is why we're offering even lower prices to help the families we are privileged to serve make their food dollars go even further."
    KC's View:

    Published on: June 18, 2009

    In Maryland, the Gazette reports that both Giant Food and Safeway are teaming with United Networks of America “to offer a discount drug card program to all Maryland residents. Both grocers were named the program's preferred pharmacies. The card is accepted at more than 50,000 pharmacies throughout the country… (and) provides savings ranging from 30 percent to 75 percent on all pharmacy prescriptions, branded or generic.”
    KC's View:

    Published on: June 18, 2009

    • In New Hampshire, the Eagle Tribune reports that there has been a 50 percent increase in the number of shoppers who have stopped using paper or plastic bags and instead are adopted reusable bags – that’s better than the national average, which has shown a 44 percent increase.

    • UK retailer Sainsbury said that it plans to raise the equivalent of more than $700 million (US) that will allow it to fund its expansion plans. The company currently operates more than 500 supermarkets and 300 convenience stores, but CEO Justin King notes that in more than half the country, Sainsbury’s market share is 10 percent or less. That’s a “huge geographic opportunity,” King says.

    • There is a report out of the UK that Ocado, the online grocery service there, may be planning an IPO in 2010, which could give it more capital for expansion.
    KC's View:

    Published on: June 18, 2009

    Now available on iTunes…

    To hear Kevin Coupe’s weekly radio commentary, click on the “MNB Radio” icon on the left hand side of the home page, or just go to:

    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’d rather be lucky than good,” Dizzy Dean once said. And while I’ve always sort of embraced that phrase as emblematic of my entire career, in the larger sense, being lucky isn’t good enough. Not when the technological advances of the world in which we live makes us all pretty much transparent to practically everyone. You might as well be good, because if you’re bad, people are going to know about it.

    There was a piece in the New York Times the other day about a new application developed for both the Internet and iPhones called Good Guide, which “lets consumers dig past the package’s marketing spiel by entering a product’s name and discovering its health, environmental and social impacts.”

    In other words, you can't get away with being bad anymore. You have to be good. And the very existence of Good Guide, according to the Times piece, has prompted some manufacturers to be more transparent about what goes into their products. Speaking as a consumer, I think that’s good.

    Now, I realize that knowing that you might get caught isn’t the best reason for doing the right thing or the good thing. But if that’s best reason you can come up with in the conduct of business, I think it ought to be enough.

    If you look at some of the recent food safety crises that have centered on products ranging from pet food to peanuts, it isn’t hard to see that they can be traced back directly to people who tried to cut corners, who didn’t worry about doing the right or good thing, and who thought they could get away with it.

    Again, I say this as a consumer: Not anymore.

    I also think there is plenty of evidence out there that doing good is good for business. Think about Wegmans’ long-term commitment to its Work-Scholarship Connection, or how Walmart has turned around its fortunes since getting on the right side of the sustainability issue. Think about products ranging from Newman’s Own to Stonyfield Farms to Ben & Jerry’s have basically captured market share by representing some level of goodness beyond the importance of the bottom line.

    Now, I’m not arguing that, like Newman’s Own, we should all donate all our after-tax profits to charity. Far from it. But I do believe that while goodness ca be its own reward, many customers want to patronize companies and people that perceive as being good, or being right on the issues that they care about.

    This is, by the way, an area to which CIES – which currently is holding its World Food Business Summit in New York – has long been committed. It was years ago that CIES commissioned a study to see if it could quantify and qualify exactly what benefits, both tangible and intangible, supermarkets bring to local communities all over the world, and the results were illuminating. And, through programming that goes beyond the simple “here’s how to be more efficient” messages that so many meetings stress, CIES seems to have an unusual sense of the broader world in which we all operate.

    The Times also had a fascinating piece the other day about how a number of highly accomplished and well educated chefs “are applying their creativity and commitment to serving the lost and needy. They are working at food banks and shelters,” the Times writes, and about 40 trained chefs – twice the number of a decade ago - now work at 28 food banks affiliated with Feeding America, a Chicago nonprofit.

    I think that’s good.

    Now, a cynical person might suggest that at least some of these chefs have nothing else to do, that the recession has not treated them kindly and that they needed an outlet for their expertise and skills. That may be true…but the article suggested that this is more than just a passing fancy, but rather is an abiding and deep commitment to a humanitarian cause.

    However deep this commitment may be, we know this. It will be transparent, and one way or the other, people are going to know about it.

    Which may not be the best reason to do the right thing or a good thing. But it is a good start.

    For MorningNewsBeat Radio, I’m Kevin Coupe.
    KC's View:

    Published on: June 18, 2009

    …will return.
    KC's View: