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    Published on: June 19, 2009

    by Michael Sansolo

    NEW YORK - There’s no clearer sign of how the world has changed than the sudden confluence of the Prince of Wales and the kings of sales. That is, Prince Charles delivered a video message to the CIES World Food Business Summit here on the importance of sustainable fishing. In the course of his short talk, Prince Charles cited efforts from Walmart – a reference that probably doesn’t get made in the palace every day.

    Then again, maybe things aren’t changing. There was no clearer sign of that than when Supervalu CEO Jeff Noddle talked about the importance of understanding today’s younger generation. It was a stunning irony that on the same day Twitter was powering countless protests in Iran, only a handful of CIES delegates could claim they actually use Twitter.

    Although the themes of CIES moved from simplicity to agility and optimism, the real theme was change in a number of issues impacting the supermarket industry worldwide on issues from sustainability to the economic climate, obesity and food safety. And in the midst of all that, CIES announced its governance changes and migration to a new name: the Consumer Goods Forum.

    Two of the most griping presentations came from opposite ends of the globe - clearly the most compelling attraction of the CIES meeting.

    In the midst of the global economic crisis, Antonio Coto Gutierrez, CEO of Latin America’s Dia supermarkets, showed how much worse things could actually get by sharing his company’s experiences during the financial meltdown in Argentina a decade ago. In the course of that financial mess, prices declined then soared, leading to stunning economic chaos and, at its worst, wide scale looting.

    Yet, Dia found a way to survive and thrive by examining and building relationships with suppliers, associates and shoppers. Dia built market share during the crisis by focusing on what was most important to each group and managed to address the issues as best as possible. For instance, employee salaries were raised to keep staff committed and focused.

    Mark Price, managing director of Waitrose in the UK, delivered an equally sobering talk on an equally challenging topic - the sustainability of the global fishing industry. (Price’s speech included the specially taped message from Prince Charles.) As Price explained, the industry’s role in combating this problem is vital and he detailed steps Waitrose is taking to ensure its seafood offerings meet the standards of sustainability.

    Environmental concerns were also critical to Bill Hickey’s speech on the impact of food waste. Hickey, the CEO of Sealed Air Corp. offered shocking statistics such as 25 percent of food in the US being discarded uneaten; or how the majority of food grown in developing countries is trashed unsold or eaten. (This was an extension of the same message offered during Wednesday’s speech by Professor Robert Watson, chief scientific advisor to the UK’s Department for Environment, Food and Rural Affairs, as reported here on MNB.)

    As Hickey explained, the tragedy of this situation is hunger for individuals, waste for economies and an environmental disaster from the energy used to consume the wasted food down to the methane gas released by rotting food products in landfills. Hickey talked about the relative benefits of minimal packaging in combating this problem - an interesting message that must be balanced against Hickey’s position as CEO of the company that makes Bubble Wrap. But the message was compelling all the same.

    One interesting and somewhat offbeat speech came from David Rockwell, an architect whose projects have included the staging for the Academy Awards. Rockwell talked about creating theater, treating shoppers as guests to be entertained and how to use lighting for dramatic eye appeal in stores.

    On top of the program, change was definitely in the air for CIES itself as the association opened the day by announcing its demise - at least in current form and name. The global association is recasting itself as the Consumer Goods Forum, with equal support and guidance from retailers and suppliers. As co-chair A.G. Lafley, CEO/president/chairman of Procter & Gamble said, the association will not lose its DNA as a global forum.

    If anything, proponents of the change say, it will grow in that direction. The new Forum will focus on a few key issues that fit the criteria of global, industry-wide issues where cooperation is key to success. Such issues include supply chain (building on the existing success of global tracking numbers and global commerce initiative) food safety and security, and environmental concerns. Co-chair Pierre-Olivier Beckers, president/CEO of Delhaize Group, emphasized the point on the growing concern about climate change and the need for coordinated and non-duplicative action.

    The new forum will be overseen by a 50-member board, split equally between retailers and suppliers. Daily operations will be overseen by managing director Alan McClay, the current head of CIES. Sabine Ritter of the Global Commerce Initiative will serve as integration manager of the new Forum.

    Beckers and Lafley said the new group will not usurp the power or issues of various national associations such as the Food Marketing Institute (FMI) or the Grocery Manufacturers Association (GMA) in the US, since only those associations can deal with lobbying, national or regional issues. (FMI and GMA will also have links to the global board.) And on issues of conflict between retailers and suppliers, those groups might work on separately to set up specific education or discussions.

    Of course, the devil is always in the details. The integration of national associations will be critical, especially with the goal of eliminating duplicative efforts. It will be interesting to see how FMI, which has a strong reputation in food safety, blends with the Forum’s global food safety efforts or how FMI and GMA coordinate on supply chain efforts. It will also be interesting to see how issues migrate between the associations, especially at a time of financial pressure on all.

    And then it remains to be seen how CEOs will split their time between board commitments at FMI and GMA with the new Forum. One supplier told me more North American presidents and fewer global CEOs will largely fill the GMA board. And the role of smaller companies, a large part of the leadership at FMI and NGA, will need significant consideration.

    One retailer called the new structure a “big company” club and pointed out that Lars Olofsson of Carrefour, who is vice-chair of the new Forum, never attended a single board meeting prior to his election. “They just wanted a big guy in there,” this retailer said.

    Monday: Kevin Coupe files a final report from the CIES World Food Business Summit, Day Two.
    KC's View:
    First of all, thanks to Michael Sansolo for covering the second day of the World Food Business Summit for me. I had a commitment to be in Chicago to speak and moderate a panel at the All Things Organic conference, and flew back in time to attend the Thursday reception following the business sessions. (This was the first time I’d missed a CIES Summit session in 11 years…but duty called, and as they say in “The Godfather,” this is the life I have chosen…)

    In talking to retailers, manufacturers and service providers who are attending CIES, I found that there is something of a sense that this could be the beginning of the end for an institution that has enjoyed a high level of thought leadership over the past half-century. It isn’t seen as inevitable, by any means, but there seems to be a feeling that the new structure creates a far more political organization in which people and companies will be jockeying for positions of influence. (The circumstances surrounding the election of Olofsson as vice chairman are cited as ample evidence that big guys get what they want, whether it makes sense or not.)

    One of the things that I’ve always liked about CIES is that it has a low-key demeanor that stresses the work, not the egos. There seems to be a fear that CIES could buckle under the weight of its new structure and a sense of self-importance … something that certainly has happened to other trade associations. It will be up to the new leadership at CIES to make sure that this doesn’t happen … but it may not be easy.

    Good luck with it.

    Published on: June 19, 2009

    The Washington Post reports that some smaller brewers are beginning to expand the number of products available in aluminum cans, “challenging the stigma of canned beer.”

    The logic behind the move: “Cans are opaque, so there's no need to worry about skunky, light-struck beer. They're lighter and more compact than bottles, making them a convenient tote for bikers, backpackers and the beach crowd. They ice down faster than glass. And consumers are more likely to recycle cans.”

    While the big brewing companies have always sold beer in cans, the Post reports that “of the 446 microbreweries and 990 brew pubs known to be operating in the United States, only about 40 can their beer.” So this represents a big shift in the philosophical sense, if not one that will cause markets all over the country to reset their beer cases.
    KC's View:
    Funny that this story popped up today.

    After tasting some 18-year old whiskey at the Suntory reception at the CIES World Food Business Summit last night, I went up to the bar to get a beer… and they offered me a can. My first reaction was negative…I’ve always been taught that draft beer was best, and that long neck bottles were the best second choice.

    But the beer last night was good (and cold, which was even more important), and apparently the can thing is turning around.

    Nothing like a little beer consciousness raising…

    Published on: June 19, 2009

    In Minnesota, the Star Tribune reports that the Mayo Clinic plans to open a facility in the Mall of America “amid the roller coasters, restaurants and retailers.”

    "The Mall of America provides a tremendous opportunity to provide a gateway to services we provide and a platform for innovation," Dr. Glenn Forbes, CEO of Mayo Clinic Rochester, tells the paper, adding: "It's not our intention to replicate what we're doing in Rochester."

    It has not been decided what services will be offered, according to the story, nor when it will open.
    KC's View:

    Published on: June 19, 2009

    BrandWeek reports that as so many retailers embrace private label as a way to offer cash strapped shoppers expanded options, Amazon.com – the world’s biggest e-tailer – is testing the same waters.

    According to the story, a new private label line called Tom Douglas by Pinzon, went live this week, offering a variety of cooking equipment.

    An Amazon spokesperson tells BrandWeek that the retailer also has an outdoor furniture line called Strathwood that serves as a private label, and has offered some private brands since 2004 – though there is no statement from Amazon as to what extent the e-tailer may be considering a further expansion.

    Fast Company analyzes the initiative this way: “The fact that a pioneer of online retailing and maker of such forward-looking products as the Kindle is dabbling in private label linens and patio furniture speaks well of the dexterity of Amazon's leadership. The company can make money selling e-readers, but it can also make money selling miter saws. The move into private labels means Amazon is competing with its obvious online rivals like eBay, but it's also staying competitive with storefront rivals like Target or Kohl's.”
    KC's View:
    I think this is a smart move by Amazon as long as it can keep the quality up and the prices down. Being an unabashed fan of Tom Douglas, I think this is a particularly great alliance. (If only I could order a pizza online from his Serious Pie restaurant in Seattle…preferably the one with cherry bomb peppers and sweet fennel sausage that makes my hungry even at this hour of the morning…)

    Published on: June 19, 2009

    The San Francisco Business Times reports that Safeway is the subject of a patent infringement lawsuit filed by Excentus Corp., which charges that the retailer used “confidential information that was discovered when Safeway was attempting to acquire Excentus and patents owned by Auto-Gas Systems Inc. to create Safeway's own PowerPump Rewards program.

    “Excentus is seeking injunctive relief and damages, asserting in its suit that Safeway and its subsidiaries infringed on four Excentus patents by launching a similarly designed fuel awards program.”
    KC's View:

    Published on: June 19, 2009

    Advertising Age reports that electronics retailer Best Buy has taken a direct shot at Walmart in a new commercial, producing a piece that portrays a customer in a Walmart calling a Best Buy associate to ask for advice on buying a television, and then has the associate saying, : "You're obviously calling us because we're knowledgeable. We've got the price match guarantee, so why don't you come on in?"

    The ad comes out as Walmart ramps up its electronics selection and image, looking to cash in on recent increases in high-definition, flat screen TV sales and the recent demise of Circuit City.

    "If you can't grow as easily because the markets are not necessarily going up, you've got to play for share, and when people are playing for share, they're getting more aggressive in their messaging," Best Buy CMO Barry Judge tells Ad Age. "As it relates to us, landing why we're different is important. The other piece is ensuring that people understand that our prices are very competitive. ... In our own internal studies, we overlap with Walmart in about 90 SKUs in the electronics space. In 70 of those 90 SKUs, our prices are as good or lower."
    KC's View:
    Of course, Walmart is playing for share, too…which is what makes all these battles so interesting.

    The Best Buy lesson is a good one, I think. If you’re going to challenge Walmart, you have to do it on your strengths … and in the supermarket business, that should mean a level of expertise that superstores may not have.

    I say “should,” however, for two reasons. One is that a lot of supermarkets are exactly staffed by food experts, which dilutes any advantage. The other is that in the best Walmart supercenters and Neighborhood Markets, the Bentonville Behemoth is getting a lot better, which flattens the playing field in a way that isn’t good for anyone not named Walmart.

    Published on: June 19, 2009

    Whole Foods Markets announced that it has developed an application for the iPhone that provides the retailer’s entire selection of over 2,000 online recipes to iPhone and iPod touch users.

    Searchable by ingredient, special diets, and other elements like "budget" and "family friendly," each recipe contains detailed preparation instructions and nutritional information, which can be copied and pasted, saved as a personal "favorite," and emailed from within the App itself. The App also includes an "On Hand" feature where customers can enter ingredients and get back meal recommendations.
    KC's View:
    Oh, boy! Another toy for my iPhone. I’ve just downloaded it, and can't wait to play with it.

    Published on: June 19, 2009

    The Washington Business Journal reports that the District of Columbia Council has voted unanimously to charge a five cent fee for all paper and plastic bags handed out by retailers, a move that is designed to generate between $3 million and $4 million a year that will be used to clean up the Anacostia watershed.

    At the same time, Safeway said that it would donate reusable bags to local nonprofit organizations that could be doled out to some10,000 low-income families.
    KC's View:

    Published on: June 19, 2009

    • Tesco said this week that its Fresh & Easy Neighborhood Markets saw sales grow by 174 percent during the first quarter. However, it did not report same-store sales, and the company did open new stores during the first quarter, albeit at a slower pace than originally planned.

    Fresh & Easy currently has about 120 stores operating in California, Nevada and Arizona.
    KC's View:

    Published on: June 19, 2009

    The Conference Board says that its index of lading indicators suggests that the recession is “losing steam,” that seven of 10 indicators were up during May, and that a slow recovery should begin by the end of this year.
    KC's View:

    Published on: June 19, 2009

    • JM Smucker said that its fourth quarter earnings were $94.3 million, up from $37.1 million during the same period a year ago. Q4 sales were up 81 percent to $1.07 billion from $590 million, in part because of Smucker’s Folgers coffee acquisition.

    The company’s full year net income was $266 million, compared to $170.4 million in the previous year, with annual sales up 49 percent to $3.76 billion from $2.52 billion.
    KC's View:

    Published on: June 19, 2009

    …will return. (Things have been a little busy this week. I promise to try to catch up with the email over the weekend…)
    KC's View:

    Published on: June 19, 2009

    The bankruptcy filing by Eddie Bauer this week is a cautionary take that every retailer should take seriously, since it shows what happens when a business – even one with a nine decade tradition and a rich history – loses touch with its core business imperatives. Or, to put it another way, screws up a great brand.

    Eddie Bauer traditionally was known for outdoor clothing, but in recent years, under various owners, it veered severely off course – getting into the casual/dressy clothing business, the furniture business, and various other segments that moved it steadily away from its core and differentiating expertise. One analyst called Eddie Bauer “a good company with a bad balance sheet,’ and the hope is that post-bankruptcy new ownership can get the company back on track.

    This is not to suggest that companies cannot expand beyond a core expertise. But there are strategies, and there are tactics. It seems to me that Eddie Bauer’s management made the mistake of mistaking tactics for strategy … and it should have been far more careful to nurture the connections that made it special.

    This is a mistake, I think, that LL Bean has been careful not to make. While it certainly has expanded beyond its core competency – and, in the interest of full disclosure, I should say here that LL Bean is one of my favorite designers – that company has never lost touch with the central mission and message that distinguishes it.

    Mr. Bauer, meet Mr. Bean. This may be the best role model that you could have.




    Interesting piece in Forbes this week that caught my attention. It seems that while both “The Daily Show with Jon Stewart” and “The Colbert Report” have seen their viewership go up – eight percent for Stewart, nine percent for Colbert – all is not rosy for the Comedy Central stalwarts.

    You see, viewership may be on the increase, but they are the wrong viewers.

    According to the story, the median viewer’s age for both programs also is increasing – up five years to 41.4 for Stewart and up five years to 38.3 for Colbert. And, horror of horrors, the number of people older than 55 watching “The Daily Show” rose by 25 percent, 22 percent for “The Colbert Report.” (The number of people between the ages of 18 and 34 watching Stewart dropped 14 percent, according to the story, and fell 15 percent for Colbert.)

    Speaking as a 54 year old who watches and loves both programs – I’d be tempted to give up MorningNewsBeat if offered a chance to work in either show’s writers room – I actually feel a little guilty about throwing off their demographics.

    But not so guilty that I’m going to stop watching.

    Besides, this story illustrates two things.

    First of all, both Stewart and Colbert also are getting older. They’re hardly gray-hairs at age 46 and 45 respectively, but it makes sense that their audience will age as they do. (Thank goodness the jokes don’t get old and the satire stays sharp.)

    Second, it highlights the need for Comedy Central to find its next big/young stars that will be relevant to a young audience. Just like a retailer, Comedy Central has to continually adjust to an evolving and changing customer/viewer.




    Wait a minute. Sammy Sosa was using steroids?

    Yikes! Now there’s something I never would have guessed.

    The list of baseball stars revealed to be steroid users who now probably are going to have to wait a long time before being inducted into the Hall of Fame grows by one more.

    Bonds. Clemens. McGwire. Tejada. Ramirez. Palmeiro. And now Sosa.

    The question is not whether more names will make the list. It is which name will make the list.




    My wine of the week: the 2007 Erath Pinot Noir, a versatile and delicious red wine that I enjoyed with a thick steak seasoned with Emeril’s Essence. Just great.




    That’s it for this week. Have a great weekend, and I’ll see you Monday.

    Sláinte!!
    KC's View: