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    Published on: July 6, 2009

    David Lazarus of the Los Angeles Times had a column this weekend in which he noted the general astonishment that seems to have accompanied the letter written by Walmart CEO Mike Duke last week to President Barack Obama, supporting a federal mandate that all employers provide health coverage. In his column, Lazarus notes that “Walmart also says it supports a mandate for all uninsured people to buy reasonably priced coverage -- another key element of the healthcare debate.” Furthermore, Lazarus says that a conversation with Walmart spokesman Greg Rossiter left him with the distinct impression that “Wal-Mart apparently remains open to Obama's proposal for a public insurance plan that would compete with private insurers.”

    Not only that, but one of the co-signers on the letter was Andrew Stern, president of the Service Employees International Union, which, Lazarus writes, “has been at odds with Wal-Mart in the past but is aligned with the company on healthcare issues.”

    In addition to general astonishment about Walmart’s position – this is, after all, a company that has been portrayed as being militantly against providing adequate healthcare insurance to its own 1.4 million US employees – there also seems to be a general consensus that the letter makes it harder for others in the business community to argue against the Obama proposals.

    Lazarus does some intriguing analysis about the possible logic behind Walmart’s position:

    “Many healthcare activists are reluctant to go on the record criticizing Wal-Mart for fear they'll discourage the company from continuing down the reform path. But privately, they say it's possible Wal-Mart is backing mandates as a way to head off more onerous legislation. Specifically, the company may be trying to put the kibosh on a ‘free-rider provision’ that would require employers to contribute to individual policies or government programs like Medicaid if workers have no other recourse for coverage.

    “About 52% of Wal-Mart employees are insured through the company, up from roughly 46% several years ago. The rest have to look elsewhere for coverage. Often, coverage ends up being provided by taxpayers. As the nation's largest employer, Wal-Mart would perhaps have the most to lose from a free-rider provision.

    “Another catalyst for the company's born-again reform zeal could be a calculation that its size and income -- $13.4 billion in profit last year -- make it better positioned than rival retailers to withstand the financial burden of a mandate.”
    KC's View:
    In other words, there’s more than a bit of self-interest at work here.

    But that’s okay. Walmart is a public company, and isn’t in the altruism business.

    The thing is, Walmart is doing a very smart thing here - positioning itself as being a “good” company as it continues to rehabilitate an image that has taken its share of beatings in recent years. The rationale almost doesn’t matter if it leads to lower costs and better care. (There will be plenty of people who will argue that some of the health care proposals being made by the Obama administration will do neither. But that’s another argument.)

    Published on: July 6, 2009

    The harvest was significant, considering the garden was small: 73 pounds of lettuce, 12 pounds of peas and one cucumber. But Salon has a good piece this morning about how it was the location of this garden – on the White House grounds – that could be planting some seeds about US food policy:

    “Before President Barack Obama took office, the progressive food community was in such a frenzy expecting changes in the way Americans think about, grow, buy and eat their food that more than a dozen famous chefs threw a dinner party the night before his inauguration to celebrate. Obama had paid slightly more attention to food policy on the campaign trail than most other recent presidential nominees, pledging to help support small independent farmers, not massive corporate agribusinesses. Six months later, though, the garden is probably the most significant step the administration has taken toward the broad goals the campaign laid out last year. The Agriculture Department has only recently filled crucial positions dealing with policy, and what's likely to be the year's biggest showdown over food issues -- legislation in Congress to reauthorize the federal school lunch program -- looms later this summer … Activists say they hope Michelle Obama's events around the garden, aimed mostly at encouraging people to eat more healthful food than the processed junk that's often the cheapest and most plentiful, turn out just to be the vanguard of a busy agenda. And they say not to underestimate the symbolic power that the garden can have.”
    KC's View:
    As the Salon piece makes clear, the White House garden can’t change US food policy all by itself. And there’s even some question about how big a priority food policy is for an administration that already has a full plate.

    But…it seems to me that this isn’t just about food policy. It also is about health care, since the consumption of a more nutritious diet cannot help but have an impact on how long and well people live, and how they access the health care system. And it is about environmental issues, since buying local also has an ecological impact.

    We have to begin looking at these sorts of issues in a broader context, understanding that they all have an impact on each other. I don't think there is any simple approach to these issues…we all just have to try to do the best we can with what we’ve got. (Purists tend to be people of exceptional means and exceptional luck…and they forget that they breathe rarefied air.)

    But there’s no question that food that is local and fresh generally tastes better than alternatives. Which is why a wide range of retailers are investing time and energy in looking for new sources of product…why there ought to be a far more sophisticated and intelligent approach to school lunch programs…and why a White House garden may be harvesting a lot more than lettuce, peas and a cucumber.

    Published on: July 6, 2009

    In North Carolina, the Daily Advance reports that Walmart “has no objections to a ban on single-use plastic bags in the beach areas of three counties and expects to comply fully with the measure now that it’s become law.”

    The three counties affected are the Outer Banks areas of Hyde, Currituck and Dare counties. It requires retailers with five or more stores in North Carolina and at least 5,000 square feet of sales floor space to offer paper bags made from 100-percent recyclable materials or reusable tote bags.

    “This (change) is right in line with our values,” says Chris Neeley, a spokesman for Walmart. “Walmart has been a leader around the country in gradually removing plastic bags from our stores, and easing people in to reusable bags. We’re a corporate leader in the green movement.”

    The law actually affects only one Walmart store, but Neeley says that the company could implement changes in other units based on lessons learned in that single unit.
    KC's View:
    Another case of Walmart doing the right thing. It is easy to imagine Walmart getting ahead of the curve on this issue by announcing that it is eliminating plastic bag usage completely from its stores.

    Published on: July 6, 2009

    The Wall Street Journal reported over the weekend that the days of being sales-tax-free may be winding down for online retailers such as Amazon.com and Overstock.com as a number of states consider legislation that could require them to collect sales taxes if they have affiliates or distribution facilities in those states.

    In North Carolina, for example, officials believe that their efforts could result in the collection of up to $20 million in taxes – which would be a financial boon even in good times, but would be something of a windfall during tough economic times when tax revenues are down and states are taking a hard look at their programs and expenses.

    According to the Journal story, “An effort by some states and retailers to streamline sales tax laws eventually could be used to force e-commerce companies to collect tax in 20 states. Congress has considered bills that would allow states that meet certain uniformity and simplification standards in their tax systems to demand that out of-state sellers collect sales taxes.

    “These new battle lines are being drawn just as the dust settles on the latest confrontations. Over the past month, lawmakers in New York, Rhode Island, North Carolina and Hawaii passed legislation that would force e-commerce companies to collect sales tax if they have in-state online-marketing affiliates, people who get a commission from sales via their Web sites or blogs. The states argue that that those affiliates amount to sales agents with a physical presence, while e-commerce companies say they're more akin to advertising channels. To avoid getting caught by the new laws, Amazon, Overstock, Blue Nile Inc. and others dropped or threatened to drop affiliates in some states.”

    The governors of California and Hawaii have either vetoed or threatened to veto legislation that would require the collection of online sales taxes, saying that such moves would hurt the affiliates, which are, in the end, local businesses; the Journal notes that other states, including Maryland, Minnesota and Tennessee, also have decided not to pursue sales tax collection initiatives for fear of hurting local affiliates.
    KC's View:
    I have to admit to being conflicted about this one. On the one hand, I benefit greatly by the fact that I do a large percentage of my shopping online, and do not pay sales taxes on those items acquired in this fashion. But I also recognize that if I were buying products from local retailers, I would be paying those taxes…which puts the local guys at something of a disadvantage. On the other hand, local retailers don't have to deal with shipping charges…so maybe it all balances out.

    In the interest of fairness, the issue deserves consideration. I’ve concluded that there is virtually no case in which I can remember buying a product online specifically for the purpose of avoiding sales taxes – I buy things online because it generally is more convenient, the selection is better, the prices sharper and the customer service often is superior. Would I stop making such purchases if sales tax were added? In all honesty, probably not…unless the costs became onerous. Would retailers such as Amazon stop offering significant discounts on many of their offerings if a sales tax were added? I’m guessing not…but there could be something in here that I’m not getting.

    The legal issues are for others to resolve; I haven't the foggiest idea whether the efforts by states such as North Carolina and Texas are constitutional or not.

    I want to be fair to all parties, but I also don't want to do anything that would damage the Internet shopping business. That’s not just because I use it a lot, but also because it is in many ways the future…and deserves to be nurtured as much as possible.

    Published on: July 6, 2009

    The Boston Globe reports that Coca-Cola, “faced with a nagging decline in North American sales,” plans to use its iconic contoured bottle “as a key way to set their products apart and try to generate fresh appeal … Consumers will see more sizes and bundles of Coke products at supermarkets and convenience stores. The iconic contour shape also will become even more prominent.”

    A two-liter contoured bottle already is being tested in Alabama and Tennessee, and the company is planning to use its European packaging strategy – which uses more than a dozen different can or bottle sizes – as a way of creating for itself a differentiated advantage.

    The Globe also notes that Pepsi is using packaging as a differentiator, with new logos and package sizes in the hopper.
    KC's View:
    In some ways this may make things more complicated in the supply chain, but it adheres to the MNB theory of modern marketing – in order to appeal to the consumers of 2009 and beyond, you have to give them what they want, when they want it, how they want it, where they want it, at a price they believe to be appropriate.

    Diversity in the pursuit of differentiation seems like a good idea here.

    Published on: July 6, 2009

    IHL Group is out with a new survey saying that self-service transactions will surpass $775 billion in 2009, and are projected to grow to over $1.6 trillion by 2013. The study included self-checkout systems, ticketing kiosks, check-in kiosks, food ordering, postal and other retail kiosks.

    "Most consumers have adapted to self-service as a way of life," said Lee Holman, retail analyst at the IHL Group. "The current recession is actually increasing the acceptance of the technologies, as they are a hedge against increasing labor expenses during a tough economic climate. They allow companies to schedule their workforce for high-volume periods without sacrificing service during non-peak times."
    KC's View:

    Published on: July 6, 2009

    • Walmart announced that it will settle a class action lawsuit charging that it unlawfully reduced its Minnesota employees’ break time and allowed them to work off the clock for more than decade running between 1998 and 2008. The cost of the settlement will be as much as $54.25 million.

    Walmart, which was found guilty in the lawsuit, arrived at the settlement before scheduled hearings that would have set punitive damages. Some estimates were that Walmart could have been hit with as much as $2 billion in penalties, which makes the settlement figure look like a steal.
    KC's View:

    Published on: July 6, 2009

    • The Knoxville News Sentinel reports that Steve Smith, president/CEO of K-VA-T Food Stores, is denying rumors that the company is being sold to Publix – or anyone else, for that matter.

    "There's absolutely no truth to it. Our company is not for sale and probably won't be, at least in my lifetime," Smith tells the paper.

    • Spartan Stores announced last week a new campaign called “Michigan’s best,” aimed at highlighting more than 2,400 products grown or produced in the state. The program reportedly will run in all of Spartan’s banners - D&W Fresh Market, Family Fare, Felpausch, Glen's, Glen's Fresh Market and VG's.

    • Pantry Inc. announced that it has acquired 38 c-stores from Herndon Oil Corp., most of them in Alabama but a few in Florida, Mississippi and Louisiana. Terms of the deal were not disclosed.

    • The Wall Street Journal this morning reports that General Mills is rolling out a line of Betty Crocker gluten-free products – finding that it takes less promotion money to launch such products because they meet a specific, expanding and increasingly vocalized consumer need.
    KC's View:

    Published on: July 6, 2009

    • ConAgra reports that its fourth quarter profit was off 13 percent to $174.7 million, down from $201.3 million a year ago. Q4 sales were up eight percent to $3.3 billion.
    KC's View:

    Published on: July 6, 2009

    What a week.

    It started with the deaths of Michael Jackson and Farrah Fawcett, followed by the deaths of Billy Mays, Karl Malden, Steve McNair, Herb Klein, Harve Presnell, Fred Travalena and Gale Storm.

    And if that wasn’t enough, Sarah Palin decided not to run for re-election in Alaska’s gubernatorial race next year and to step down from the job later this month, and Minnesota now is represented by Senator Al Franken.

    Yikes.

    There also was some stuff that happened in the retail business. (Appropriate – or even inappropriate - commentary is in italics.

    • It has been reported that Safeway and the United Food and Commercial Workers (UFCW) plan to return to the bargaining table next week, and that the two sides have agreed to extend the current – and expired – contract to July 18.

    Before MNB went on holiday, Safeway employees rejected the retailer’s latest contract offer and re-authorized a strike that was first authorized on May 8.

    These two sides can keep extending deadlines and negotiating as long as they want. Neither side can afford a labor action, whether a strike or a lockout, especially in this economy. Of course, it’s possible they’ll keep negotiating until there is a recovery, in which case all bets are off…

    • The Wall Street Journal reported that Procter & Gamble plans to test a cheaper version of its flagship Tide brand – the products will cost roughly 20 percent less and contain none of the bells and whistles (like fragrances) of the regular product. The initial test will be conducted at Walmart and Kroger stores, and will endeavor to see if the product can boost sales during recessionary times.

    Tide Basic will be sold only as a powder, and in yellow packaging that will differentiate it from Tide’s usual orange boxes.

    I understand this in theory, but I have to wonder if this hurts Tide’s brand equity in the long run. I know that P&G will do everything possible to make sure it doesn’t happen, but it sort of minimizes the importance of the bells and whistles in which P&G has invested so much money, time and effort. But then again, what do I know?

    Crain’s Chicago Business reports that Walmart is cautiously optimistic about the possibility of opening a second store within the Chicago city limits. An amendment to a development agreement that would have allowed Walmart to open a store in the 21st Ward has been stalled in committee, but Alderman Howard Brookins Jr. – who has been fighting to bring a Walmart to his community – says he expects that a vote will take place later this month and that he believes he can garner the necessary votes to make it happen.

    Walmart only has one store in Chicago, and has said that it can generate both jobs and sales tax revenue for the city, but union interests have thus far prevented it from achieving expansion plans there.

    • The Wall Street Journal reported that coupon fraud is on the increase – in 2007, there were just nine cases of investigated or prosecuted coupon fraud, but in the past eighteen months there have been a whopping 93 – and the numbers are expected to continue to grow. The cost of the fraud is estimated to be tens of million of dollars, and experts say that continued hard economic times make it likely that things will get worse before they get better.

    • The Dallas Morning News reported that 7-Eleven is offering military veterans the opportunity to purchase franchises for fees that have been reduced by 10 percent.

    "This is the first time we have offered a reduction like this in our franchise fees, and I can't think of a better group to receive this benefit than the men and women who have so selflessly served to protect the freedoms we enjoy in America," said 7-Eleven CEO Joe DePinto.

    You can't help but love this. It just seems like the right thing to do.

    Bloomberg reports that Walgreen “may open ‘several thousand’ work-site health clinics in coming years to tap into the $7.3 billion market for employer-provided care, a company executive said.

    “Walgreen, which currently has 373 employer-sponsored workplace clinics, will slow retail store expansion to focus in part on the initiative, Peter Hotz, president of Walgreen's Take Care Employer Solutions Group, said yesterday in a telephone interview. The facilities provide primary-care physicians, nurse practitioners, nutritionists and other services, he said.”

    According to the story, Walgreen currently “is the largest provider of workplace health clinics, with a 20 percent market share.”

    Add this into the contextual discussion of how health care needs to change in this country. Old boundaries are breaking down, and companies like Walgreen are finding new ways to make new connections with new customers. It’s very smart.

    USA Today reported that some health experts are alarmed at the increased use of energy drinks, especially by high school and college athletes, saying that “athletes who consume too many energy drinks could suffer from dehydration, tremors, heat stroke and heart attacks.”

    There are calls for the Food and Drug Administration (FDA) to require warning labels on energy drinks, but the FDA says it does not have the legal authority to require such labels. And the manufacturer of Red Bull – the biggest and most successful in the category – says that it does not believe that such labeling is necessary.

    I’ve been saying here for years that eventually there will be a major investigation into the health impact of energy drinks, and the news will not be good…and it will leave purveyors of these drinks open to all sorts of litigation. These things are a disaster waiting to happen.

    • McDonald’s announced that it has begun selling its premium Angus Burger – one third of a pound of beef on a high-end bun that comes in three varieties and costs $4 – on a nationwide basis…and will use the rollout to determine whether it should be a permanent menu item. The goal is to compete with fast casual chains such as Five Guys Burgers and Fries, and Smashburger, according to a Dow Jones story.

    Okay, I’m making an admission here. We went to McDonald’s while on vacation last week while on vacation, and I ate one of the Angus burgers. And it wasn't bad.

    It wasn’t Five Guys. It wasn’t as good as any of the burgers that made the list of great burger joints that the MNB community put together some months ago. (At least, the ones that I’ve tried.) And I’ve never had a Smashburger. But my kids would say, it didn’t suck.


    • Starbucks finally delivered on long-promised menu improvements, eliminating trans fats from all of the food items being sold in its US stores. The retailer also is eliminating artificial flavors and dyes, cutting down on artificial preservatives, and using whole grains and berries as a way of appealing to more health-conscious consumers.

    • Baskin-Robbins, according to a story in the Patriot-Ledger, is “trying out two new store concepts designed to appeal to value-conscious customers and more of an upscale.”

    The upscale version is called Cafe BR and “is getting a test run at Patriot Place in Foxboro. Baskin-Robbins is using the store as a proving ground for menu novelties such as ice cream bombes and chocolate-covered cheesecake on a stick.” The value-driven model is called BR Express, and was “designed with today’s harsh economic conditions in mind. Start-up fees are just $1,000. BR Express stores will specialize in soft-serve ice cream available in unusual flavors such as pralines and cream and toppings such as ‘magic sprinkles’ that change colors.”

    Retailers, no matter what business they happen to be in, have to find new ways to connect with shoppers…and there is no reason that Baskin Robbins should be any different. We approve.
    KC's View:

    Published on: July 6, 2009

    Got the following email from MNB fave Glen Terbeek while on vacation…

    Today, we were on our normal weekly trip to the organic farmers' market in La Jolla. To our surprise, Kashi, the "Seven Whole Grain Company" was giving very nice reusable shopping bags to the vendors, who in turn were to give them to their customers. In the bags were a brochure entitled "We Love Farmer Markets". Included in the brochure are farmer market fitness tips (i.e., biking to and from the market); tips on how to pick produce, store it, and its healthy benefits; recipes; ways to feel "better" at the farmers' market; and of course a coupon for Kashi cereal.

    What an interesting concept. They are obviously focusing on the shoppers who are likely to buy their products, as well as helping non-competing vendors with the same attitude towards healthy food. What an interesting way to emphasize the value of their products and differentiating them from the rest. It would be very difficult to achieve the same results within the very large cereal section of the typical supermarket.


    Also interesting because Kashi is owned by Kellogg’s…and it is critical for both big and small manufacturers to find new and interesting ways to reach consumers and create differentiated connections.

    Which clearly Kashi is doing.
    KC's View:

    Published on: July 6, 2009

    At Wimbledon yesterday, Roger Federer faced off against a resurgent Andy Roddick in an epic men’s singles final that went five sets…and resulted in Federer winning 5-7, 7-6, 7-6, 3-6, 16-14. The marathon fifth set alone went 95 minutes – longer than Saturday’s women’s singles final. The Federer win gave him 15 major titles, and sent him past Pete Sampras as the holder of the most major wins.
    KC's View:

    Published on: July 6, 2009

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    KC's View: