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    Published on: June 22, 2009

    Notes & comment by Kevin Coupe

    NEW YORK – Justin King put to rest what he called “myths” about how consumers behave during an economic downturn. Marion Nestle scolded the food industry for what she said were continuing crimes against consumers’ best nutritional interests. Indra Nooyi suggested that it was food manufacturers have to cater to how people live, not how idealists would like them to live. And Lee Scott said the he wished he’d been a better Walmart CEO.

    That was pretty much the gist of the third and final day of presentations made at the 53rd annual CIES World Food Business Summit, which took place here last week.

    High points from Friday’s proceedings:

    • Justin King, the CEO of J. Sainsbury, said he wanted to debunk three myths about consumers’ recessionary behavior.

    One, he said that while most people believe that consumers down-trade during a downturn, and it is true that “they are shopping more carefully and buying more cheaper items,” his company has seen that “they are buying at last as much of even more high quality items,” which suggests that they are compensating for other suspended behaviors in how they eat at home. Two, he said that Sainsbury’s experience is that rather than getting mire selfish during a downturn, he has found that “people get more concerned about people less fortunate than they are,” which is one reason that companies cannot and should not abandon their commitment to ethical sourcing even in a recession. And third, King said that “the middle” remains a critical part of Sainsbury’s business model, that “how you execute is what matters.

    Indeed, King said, when Sainsbury was having troubles a few years ago, “our failure was one of execution, not of positioning.” And he said, Sainsbury has regained its footing not by charting a new course, but rather by rediscovering and remaining true to its core DNA, “staying true to our tradition.”

    • Marion Nestle, professor of nutrition at New York University, returned to the themes she sounded five years ago at the CIES Summit in Rome, criticizing the food industry for making unsubstantiated claims for a wide variety of food products and for pursuing ratings systems that she said were largely unreliable and a form of self-endorsement that was essentially meaningless.

    Interestingly, in a panel discussion that followed her presentation, Sainsbury’s King said that he thought it was “disgraceful” that the industry isn’t engaging with these issues” in a meaningful way, and said that “we are going to reap what we sow if we don't engage on these issues.” King suggested that the food industry is “making it very easy” for the critics to attack the food industry and call for legislative approaches to food labeling and nutrition issues, and that industry will have no complaint if it does not get out in front of these issues in a meaningful way.

    • Some of Nestle’s strongest broadsides were saved for PepsiCo, which she implied was defrauding the American public by self-endorsing itself for creating so-called healthier foods that would not stand the test of scientific analysis. Indra Nooyi, PepsiCo’s chairman/CEO, followed her on the program and offered a small smile and a light defense of the company’s behavior. “She has an interesting point of view,” Nooyi said, noting that “we care as much about obesity as she does,” but that Nestle “doesn’t get remunerated like we do.” Nooyi agreed that companies like PepsiCo “need to transform our portfolios, but not suddenly, not overnight, but over time. We need to take the consumer with us.”

    (In her defense, Nooyi may have gotten bad advice from her PR people. If it had been me, I might have urged her to say with a greater degree of force that it is all well and good for tenured university professors to deliver lectures, but that corporate CEOs don’t have that luxury. I would have urged her to suggest that Pepsi’s portfolio is radically different today than it was 10 years ago, and is likely to be radically different 10 years from now…but that imposing lack of choice on consumers would in fact diminish its ability to create real nutritional change in America. Of course, Nestle believes that processed foods are the root of all nutritional evil … and since Pepsi is in the processed foods business, there is only so far it can go in making its defense. But I might have been a little tougher.)

    • Lee Scott, the now-retired CEO of Walmart who remains as chairman of the executive committee, said that he regretted the fact that he lost time at the beginning of his tenure because he was “homegrown” and not as sophisticated as he should have been about issues like sustainability. “I was so internally grown that it took me too long to get my mind around it,” he said.

    Scott also said that whatever success he enjoyed stemmed from the fact that he “never took credit for anything that other people did,” and that their successes “flowed back” to him. “For me to be a CEO, it took a village,” he said.

    • Finally, Benjamin Zander, conductor of the Boston Philharmonic and author of “The Art of Possibility,” used classical music and humor to urge the delegates to practice a more nurturing approach to management and leadership, suggesting that “ the rhythm of transformation is different than the rhythm of exhortation” because it is lighter and it inspires, and creates possibilities rather than just expectations.

    Ironic words, since the retailer-driven CIES is, as reported here last week, undergoing its own transformation – becoming the Consumer Goods Forum, an organization that is led both by manufacturers and retailers.

    There clearly is a lot of work to be done between now and the 2010 World Food Business Summit, which is scheduled to take place in London. The first step may be to change the company’s website – because as of this morning, it is still

    Change takes time.
    KC's View:
    One of the features of the World Food Business Summit was a series of video segments that gave the global delegates a taste of some of the various food retailing experiences available to US shoppers, with a theme of “ingredients for success.” The videos were sponsored by JohnsonDiversey, and I thank them for their continuing support of a series of video projects that I’ve had the opportunity to work on.

    There is a limited supply of videos available exclusively to the MNB community…and so if you’d like one, send me an email with your name, title, company and street address … and I will pass it along to JohnsonDiversey so they can send you a copy while supplies last

    Published on: June 22, 2009

    Nestlé has recalled all products in which its Toll House refrigerated cookie dough because of concerns about salmonella contamination that may already have sickened 66 people in 28 states.

    The recall includes some 47 products in which the cookie dough is an ingredient. The US Food and Drug Administration (FDA) is recommending that these products be thrown out or returned to retailers.

    According to the Wall Street Journal, the Centers for Disease Control and Prevention (CDC) “notified the Food and Drug Administration about the strong connection with Nestlé Toll House cookie dough Wednesday, and the FDA convened conference calls with the company that day, said FDA spokesman Michael Herndon. Friday, the company voluntarily recalled the products, which include all Nestlé Toll House refrigerated cookie-dough products, ranging from chocolate-chip bars to tubs of gingerbread cookie dough. The recall involves 300,000 cases of products shipped to retailers, each case containing a number of products, said a Nestlé USA spokeswoman.

    “Nestlé USA, a unit of Switzerland-based Nestlé SA, said it hasn't found the E. coli strain implicated in the outbreak in any of its products, and said it is cooperating with the FDA and CDC in the investigation.”

    "If there was anyone left in America who didn’t realize we need to reform the food safety functions at the FDA, this latest recall of Nestle Toll House Cookie Dough provides a sobering wake up call," Sarah Klein an attorney at the Center for Science in the Public Interest, tells Consumer Reports. "Once again the agency is forced to react after illnesses are already occurring, when the focus should be on preventing contamination in the first place."

    And, Consumer Reports writes, “Although there is a known risk of salmonella contamination in raw cookie dough (from uncooked eggs), E. coli contamination is rare. One possible source may be milk products, although that has not yet been determined, according to the FDA.

    “The FDA—and Nestle on its packaging—recommends against eating raw cookie dough but Consumer Reports found in a recent survey that 39 percent of respondents reported eating raw dough while baking.”

    The food safety bill currently before the US Congress would give the FDA the ability to mandate recalls, but under the current system, the Nestlé recall is classified as “voluntary.”
    KC's View:
    Hope the food industry is happy with the safety legislation now making its way through Congress, because new incidents like this one tend to grease the wheels and make passage almost completely certain.

    Probably a good thing, too. Because these things are happening far too often. I just wish I had more faith in the FDA to make things better.

    Published on: June 22, 2009

    The Los Angeles Times reports that while “times are tough for neighborhood supermarkets as cost-conscious consumers defect to Wal-Mart, Costco and other discounters,” Kroger “seems to be bucking that trend … Industry analysts say Cincinnati-based Kroger's success is probably tied to its efforts to attract bargain hunters, aided by its exhaustive electronic tracking of customers' shopping patterns and a push into marketing house brands.”

    Much of the credit is given by Kroger CEO David Dillon to the Dunnhumby marketing system. “We send our very best customers coupon books specifically targeted at what they actually buy. The redemption rate of these coupons is significantly higher than other coupons," Dillon says.

    And, he adds, “Ten years ago we paid too much attention -- almost every day -- looking at what our competition was doing. We can't ignore our competitors, but we have to pay more attention to what our customers want in our stores … Profits are the outcome of focusing on the customer.”
    KC's View:
    Every once in a while, I run into a retailer that has no card program, no tracking program, that allows it to get very specific about who is buying what products, about who the high net worth customers are, that allows it to target shoppers in a highly granular way.

    It simply doesn’t make sense. You have to be able to track what you do. You should only do what you can track. To do otherwise, it seems to me, is to waste time, effort and money at a time when few can afford to do so.

    Published on: June 22, 2009

    The Roanoke Times reports that Ukrop’s Super Markets is looking to build sales in that market – after opening its first store there to strong reviews, sales dropped as customers utilized it for fresh and prepared foods but largely did the bulk of their main grocery shopping elsewhere. According to the company, it is currently not in a “sustainable position.”

    “The family-owned grocer, which marks its two-year anniversary in Roanoke next week, is pulling out all of the stops to entice shoppers,” the Times writes. “ Its Roanoke-specific promotions include Saturdays at Ukrop's, when coupons are tripled, meat and produce items are on sale and free food samples are plentiful. Starting next month, it will add Wednesdays as additional triple coupon days.”

    But the Times notes that Ukrop’s starts with a bit of a disadvantage – it steadfastly refuses to open on Sunday or sell alcohol. And it recently lost its number one market position in its home Richmond market, slipping into second behind Food Lion.
    KC's View:
    Hard times for Ukrop’s; the unfortunate thing is that this kind of bad news tends to come in bunches.

    I have a lot of faith in the company’s management and marketing approach, but I have to believe that at some level people there have to be hoping that the economy turns around by the end of year, as so many people seem to be predicting.

    Meanwhile, Ukrop’s likely will adhere to the approach advocated by Justin King at CIES: staying true to its traditions and making sure that its execution works at every possible level.

    Published on: June 22, 2009

    The Pittsburgh Post-Gazette reports that HJ Heinz has launched an advertising broadside against competitors in the vinegar business, especially private label vinegars, by implying in a series of ads that other vinegars include petroleum in their ingredient list. The company says it is trying to differentiate itself with a branded message in a category that largely has become commoditized.

    "On the vinegar front, the campaign is intended to reinforce Heinz's commitment to always use only corn and apples to make its Distilled White and Apple Cider Vinegar, as we have for more than 100 years," says Heinz spokeswoman Tracey Parsons. "We know that current FDA regulations allow vinegar to be made from petroleum and don't require manufacturers to disclose this on the label."

    Experts tells the Post-Gazette that the issue is something of a red herring – that the real enemy is private brands, and that there are few if any vinegars that actually use petroleum.
    KC's View:
    I have to admit that this seems like a specious campaign to me, and I’m not sure it does anyone any good. It is sort of like the CPG version of all those political ads we’ve all grown to hate – charges without documentation that look to divert rather than focus attention. It may not be technically wrong, but is it right?

    Heinz, it seems to me, should be a little careful. It is attacking not just competing brands, but the retailers who support those private brands. The war could get messy.

    Published on: June 22, 2009

    • The Arkansas Democrat-Gazette reports that in its home markets, Walmart is gaining more and more grocery market share – getting “more than half the grocery dollars spent in Arkansas, Oklahoma and Mississippi and is the top grocer in the other states that border Arkansas.”
    KC's View:

    Published on: June 22, 2009

    Reader’s Digest, a mainstay for decades on supermarket front end magazine racks, is facing difficulties in the print media business by reducing its frequency to 10 times a year from 12, and reducing its rate base from eight million to 5.5 million over an 18-month period.

    However, the company says it will compensate for the moves by rolling out a global web platform.
    KC's View:
    If there’s one magazine that probably needs a print edition, it is Reader’s Digest - the demographic of its readership has to be somewhere north of 85. (Okay, that was a joke and a bit of an exaggeration. But I have to be honest – I don't know anyone younger than my father who reads it.)

    The larger issue, it seems to me, is how a magazine like Reader’s Digest remains relevant for a new generation of readers.

    Published on: June 22, 2009

    Reuters reports that France-based Carrefour is looking to ramp up its Russia expansion plans, noting that Russia’s tough economy may “offer global majors an easier entry into a highly fragmented sector which has more potential than many mature markets and where distressed asset prices are set to plunge.” Carrefour has just opened its first store in Moscow, and it plans to open two more units in that country by the end of the year.

    Auchan, another French retailer, already has 30 stores in Russia. And Walmart has been making considerable noise about opening stores there.

    • Unionized employees at Kroger-owned Smith’s Food and Drug in New Mexico have voted to ratify a new contract that covers more than 2,000 employees working in 26 stores. Details of the new deal were not disclosed.
    KC's View:

    Published on: June 22, 2009

    Between the coverage of the CIES World Food Business Summit in New York last week, as well as a speaking schedule that had me at the All Things Organic conference in Chicago, it was hard to keep up with all the email. Sorry about that…the sheer volume sometimes is a little overwhelming.

    I was getting email about the cookie dough recall almost as soon as it happened, which was after we posted MorningNewsBeat on Friday. One MNB user wrote:

    I'm speechless...mad cow disease made me wary of cheeseburgers, the peanut butter contamination made me put away my spoon, but COOKIE DOUGH?! Sigh! I'm going back to bed; someone wake me when this one's over.

    First of all, it never will be over.

    Second, I suspect this will be a typical consumer response. Which is not good for a food industry that first and foremost is selling trust.

    Got lots of response to Kate McMahon’s “BlogBeat” column about Dell’s unfortunate development of a “Della” computer that condescended to female shoppers.

    MNB user Donna Brockway wrote:

    LOL! This comes under the “What men don’t know about women could fill an ocean” category.

    Two oceans, from my experience.

    Another MNB user wrote:

    Makes me feel good I just bought an HP! What idiots.

    And she signed herself, “a woman who would NEVER buy a laptop for the enticements they presented and, who, in fact, would walk a mile to ensure my business did NOT go in the direction of anyone that dense and loaded with outdated stereotypes about women. They deserve a long-term Internet punishment. Also makes me wonder if they employ any women.”

    On the issue of Walmart’s approach to sustainability issues, MNB user Don Brandt wrote:

    I travel a bit to Asia for my company and run into Wal-Mart suppliers occasionally…peoples’ eyes get big when they talk about Wal-Mart and you can hear the cash register bells ringing (OK so I’ve been around a while)…they claim Wal-Mart is ferocious in seeking price concessions, but many also say they are a better company for having done business with Wal-Mart…Wal-Mart also gives them ways to be better…there are two sides to every coin…

    And, on another issue – a Cooking Light article about making choices and developing priorities about organic food choices in a cash-strapped economy, MNB user Margaret Mittelstadt wrote:

    Farmers markets, CSAs and farm stands are growing exponentially as the demand for food grown close to home is becoming a common reality for today's urban- and suburbanites. What a great way to meet the people who grow the food that feeds you and look them right in the eye - a trusted relationship which is so absent in today's fast food, convenience-oriented marketplace? I certainly advocate for supporting local family farms whenever we can.

    A word on sustainable agriculture and truth in advertising. The USDA certified organic seal exists for a reason, grown out of hard-fought grassroots efforts that date back over 30 years. It ensures that the food item was grown or produced according to strict standards as outlined in the National Organic Program and established by the National Organic Standards Board. This certification must be renewed every year at some expense to the farmer. The consumer can trust that any farmer or farm stand displaying the organic seal is, indeed, a USDA certified farm operating according to these standards. If you find yourself buying from a farmer displaying the USDA organic seal at a CSA, farmers market or farm stand, they should be able to provide you with a copy of their current farm certification if you ask for it. Farmers indicating they practice agriculture using organic methods, beyond organic or other sustainable farming methods, likewise, should also be willing to openly answer any questions as to whether they use or don't use certain farm inputs, products or practices on their farms. This is the kind of dialogue that builds lasting relationships and repeat customers and farmers should be willing to share. Any farmer or farm stand displaying the USDA certified organic seal, but is unwilling or unable to provide farm certification, may be using the seal illegally and could be misleading the customer. If buying USDA certified organic is important to the consumer, they should always make sure they are getting exactly what they paid for. Always ask!

    The debate over whether or not USDA certified organic foods are healthier will, sadly, go on for some time. Certainly for now we can all agree that organic farming practices are healthier for the planet, farmers, farm workers and farm animals. What's not to love about that?

    MNB user Lisa Malmarowski chimed in:

    Most people buy goods, services and food with 'what's in it for ME' being the most important factor in making a decision.

    I suppose one could look at organics this same way but the fact of the matter is that choosing organic has a far wider impact that just 'what's in it for me'. Organic keeps pesticides off the land and out of our waterways and improves the quality of our soil and the health of farm workers.

    We can all continue to go around being, well, selfish and 'choosing' the best organics for our personal needs, when the reality of choosing organic whenever possible improves our lives and the lives of many others.

    And honestly, what you 'save' at the checkout, you do pay for in other ways through farmer subsidies, polluted waterways and increased public health care costs for workers.

    It's not that simple and when I saw the article in Cooking Light, I just shook my head at it's short-sighted slant.

    Regarding the Best Buy TV commercials that promote the retailer’s in-store expertise and contrasting it with what I characterizes as a lack of expertise at Walmart in the electronics area, one MNB user wrote:

    Interesting piece because I just had the exact experience as the one portrayed in the commercial. I wanted to buy a web cam for a couple that just had a baby and was by a Best Buy so I went in. The customer service was excellent and I ended buying the web cam. I asked the guy if they price match and he said they would if I found it lower anywhere else. I ended up at a Walmart shortly after and saw the exact camera for $10 cheaper. I asked an associate if she would take it out from behind the locked glass case and it took her 10 minutes to come back with a key. During that time I saw her putting together a display while I was waiting. So I called Best Buy and asked if they would honor the $10 difference and they said to just come in. I went back and they quickly gave me the difference. I will never buy electronics at Walmart again. The employees know nothing about the product and they’re rude.

    I mentioned in “OffBeat” last Friday that both “The Daily Show with Jon Stewart” and “The Colbert Report” are seeing their viewership get just a bit older…which puts the Comedy Central network in the position of figuring out the next big thing. (Which is what retailers need to do on an ongoing basis, by the way…)

    One MNB user responded:

    I sent the bit about The Daily Show and The Colbert Report to my 21 yr old daughter. She suggested that the reason the viewership among the younger audience may be down is because they're all watching it online. If the viewership numbers don't include online, she might have a point!

    MNB user Sue DeRemer wrote:

    Was that study tracking TV viewing only? If so, most younger people watch those shows on the comedy central website, not on TV.

    A excellent point – which speaks volumes about the information gathering habits of the next generation.

    Another MNB user wrote:

    Speaking as one of the older demographic that watches Colbert and Stewart, I can say that, other than the sharp witted comedy, these shows (particularly the Daily Show) provides some of the best political commentary and insightful interviews on television.

    Television journalism is dead. When CNN first aired, you had no name journalists on a shoestring budget giving very timely information from around the world. If you were to look at their schedule, you would see “News” for 24 hours with the occasional in depth special report. Now, the ‘news’ is all about the commentator rather than the news itself. CNN has gone the way of Eddie Bauer and forgotten their core business imperatives. The once paramount journalism has fallen to a distant third behind the marketing of personalities and high tech gadgets and set pieces. What had been tactics have been mistaken for strategies. I can name most of the CNN broadcasters off the top of my head (Anderson Cooper, Fareed Zakaria, Robin Meade, Dr. Sanjai Gupta), but I can’t tell you one thing they said that was insightful or informative. Today’s major news sources don’t want to offend either political party, so them in order to fill air time they either read posts from Twitter and Facebook or they put a right wing and left wing pundit on the air at the same time and let them shout over each other—“full of sound and fury, signifying nothing.”

    Contrast that with a Daily Show interview. While primarily a comedian, John Stewart is one of the best interviewers on television. When interviewing a political heavy, his questions are insightful and he does not shy away from uncomfortable topics.

    What journalism needs is a 21st century Ted Turner who will create a real news outlet that focuses on real news rather than the person reading it.

    I don't think I would as tough on CNN as you, but I certainly agree about Jon Stewart – he puts people on television that you don’t see anywhere else, and they talk about issues and books not discussed elsewhere in popular culture. I almost always learn something…and I usually get a few belly laughs.

    Still another MNB user wrote:

    Funny that you commented on Jon Stewart today. Last night, I found myself watching him as he had an interview with the author of a book titled “The dangerous Lives of Butterflies” and the hidden message in the book. I was drawn to the story because of Jon’s uncanny way to veer away from the script and ask those questions that many of his viewers would want to ask. The answers were so bizarre that he found himself having to return to the script just to retain composure.

    Good stuff and I will continue to watch his show. Being that I am 44 years old, I guess I am one that helps raise his median age of viewers.

    Me, too.
    KC's View: