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    Published on: July 14, 2009

    by Michael Sansolo

    There’s an old maxim that there are no bad questions, just bad answers. Sadly, I have to disagree. In a recent meeting with a group of retailers from outside the US, I was asked the mythical bad question. The only problem is that I’m afraid it’s a question many others would like to ask.

    The question came after a wide-ranging discussion I was leading for the group on different strategies and ideas to build customer loyalty in the middle of today’s volatile times. Nearly the entire group was involved, discussing the changing meaning of value. Suddenly one retailer said he had heard too much. He didn’t want to hear a discussion or a variety of choices. Rather, he wanted one thing:

    A sure-fire winning idea and nothing more.

    Don’t we all. The problem is, that answer doesn’t exist. If you only want the one answer that works, you can’t possibly find it because you aren’t prepared to wade through all the ideas that don’t work. It’s just that simple. The only sure thing is that there is no sure thing.

    We get a great lesson in this from Lance Armstrong and his incredibly tough sport of bicycle racing. (I cannot claim to being a fan at all, but Armstrong is extremely compelling. How does he do what he does?) A recent article in the Wall Street Journal about this challenging sport made me think twice.

    Bicycle racing is an enormously demanding sport, stressing every part of the body beyond belief. But what the Journal found so interesting is the challenge of what would seem to be the easiest part of a race: going downhill. The Journal article explained that in downhill runs the riders go at extremely high speeds down sharp declines that are loaded with tight turns. On skinny racing tires it’s apparently quite hairy. Sounds a little like business doesn’t it?

    Here’s what got me. Most riders expect to fall; in fact they even practice falling correctly to avoid breaking bones. Apparently you can’t win if you can’t fall properly.

    That’s not an entirely new concept. There have been countless athletes, scholars and generals who have talked about the importance of losing and - no small point - the lessons that come from defeat. In many ways those incidents far outweigh victories.

    Learning to fall or lose is just as important in business. Since there is no sure thing we are all guaranteed to fall and fail again and again. All we can do is make sure we understand falls and failures so they don’t take us out of the race. Dealing with losing will help us win.

    Vision matters too. July 1 marked the 30th anniversary of possibly the least necessary invention ever, but one that we’ve all come to love and continues to grow in use worldwide (even though Apple’ iPod clearly has surpassed it on the “cool” scale). Thirty years ago the head of Sony had a personal request that varies depending on which reports you find. Some say he was an avid tennis player; others say it was about lengthy airplane flights. Either way, he wanted to listen to classical music without disturbing anyone around him. Prior to 1979, you may recall, the only way to do that was by hooking up a weak little earpiece to a transistor radio, which hardly allowed you to program your own music.

    With that request, the Walkman was born. It was an item that actually tested poorly with focus groups because no one knew that they wanted it. But because it had a powerful backer, the Walkman was produced and today, as we all position the ear buds of our iPods, we have to be very glad for that moment.

    At no point was the Walkman or the iPod a sure thing. In fact, both could have been colossal failures, but by taking a chance two companies harnessed incredible success.

    In short, they dared to fall.

    Michael Sansolo can be reached via email at msansolo@morningnewsbeat.com .
    KC's View:

    Published on: July 14, 2009

    Content Guy’s Note: Michael Sansolo is in Australia on assignment this week, and filed this report.

    COOLANGOTTA, Queensland, Australia - It's rarely a good thing when supermarket companies are featured prominently on the news and debates in the government. But that's what is happening right now in Australia and there is a growing sense that social networking devices like Twitter are playing a strong role in the controversy.

    The nation's two largest supermarket chains - Coles and Woolworths - have just begun a special consumer offer: 40 cents off each liter of gasoline for shoppers who spend more than $300 at the stores in one trip sometime over the next three days. (The savings on a fill-up is estimated at about $20. Forty cents Australian is equal to about 32 cents US.) The promotion is the lead story on many newscasts and is now the subject of a government investigation.

    Consumer groups are claiming that the two powerful chains are running the promotion to force shoppers into extra spending (to reach $300) and to drive out independent gasoline competitors. Plus, many claim food prices have been inflated to make up for the lost gasoline revenues. Although the government said the promotion is simply a marketing effort, consumer and opposition groups are calling for changes in the way the companies are regulated and the latitude they have to run such promotions.

    According to some local IGA retailers, the consumer protests and government action was fueled by heavy activity on Twitter, where shoppers are posting concerns about the promotion. One group was able to use the social networking site to get messages through to governmental officials.
    KC's View:
    FYI…MNB will have more on the Twitter revolution tomorrow in “Kate’s BlogBeat.”

    Published on: July 14, 2009

    In the wake of the discovery of E. coli contamination of Nestlé Toll House Refrigerated Cookie Dough and subsequent recall of the product, Paul Bakus, the general manager of the Nestlé USA Baking Group, circulated a letter to retailers yesterday updating them on the situation.

    Excerpts:

    • “While we’ve just conducted one of the most significant product recalls in Nestlé history, I believe it will be remembered not for its size or scope but instead as the best decision a responsible food company could make on behalf of its consumers.

    “As you know, we initiated this voluntary recall less than 24 hours after the Food & Drug Administration (FDA) and the Centers for Disease Control and Prevention (CDC) informed us of the investigation, because the health and safety of our consumers is our primary concern. It’s the reason we immediately offered our full cooperation to the FDA. It’s the reason we recalled 300,000 cases of product. It’s the reason we removed from sale all varieties, all sizes and all production codes of our refrigerated cookie dough products.”

    • “…my colleagues at Nestlé have committed themselves to nearly round-the-clock activities to bring resolution to this issue. In a little over three weeks, we’ve worked with teams of Nestlé microbiologists and FDA investigators to test our facility, our production equipment, ingredients, processes and finished product. We’ve dismantled our production lines for thorough inspection, conducted over 1000 tests on equipment, ingredients and environment, and carefully reviewed our quality and food safety procedures.

    “Over the July 4th weekend, we put the plant back together again while new ingredients began to arrive in Danville. These new ingredients were sampled and tested by our experts at the Nestlé Quality Assurance Center, following exactly the same protocols in use at the FDA. On Tuesday, July 7, we began a controlled start-up of our Danville operations. The standards for this extended testing protocol have been reviewed by the FDA and leading experts in the realm of food safety. The tests are designed to provide all of us with the assurance needed to re-enter the marketplace with Nestlé Toll House refrigerated cookie dough.

    “On Thursday, July 9, the FDA closed its inspection of our Danville facility after days of intensive analysis and testing and concluded that their investigators found no evidence of E.coli O157:H7 in our facility or on our production equipment.”

    • “So, will consumers buy our products again? We’re encouraged by the response we’ve received from our Nestlé Toll House consumers, who are among some of the most loyal in the entire Nestlé franchise. We’ve talked with them in focus groups and as they called our 800#.

    “Our ongoing research tells us that consumer confidence remains very strong. In fact, many tell us they are anxious to have our products return to your stores. They appear to be telling you that as well, as we observe category sales dropping 30% since our products were removed from sale. This information builds our confidence in believing that our Nestlé Toll House business will rebound. We’ll help this along, of course. We’re finalizing relaunch plans this week and we’ll soon announce that our ‘New Batch’ of products will be available in time for baking season.”

    • “We plan to resume full production this week, with new ingredients now inventoried and new testing protocols in place … We’ll begin to build inventory this week and expect to ship the first phase with our top five products on August 3 … A second phase with the majority of our remaining SKUs will ship later in that month … If all goes according to plan, the “New Batch” of Nestlé refrigerated cookie dough products will be back on shelves in mid-August … Consumers will be directed to look for the special “New Batch” label, also in Nestlé blue, which will appear on all new production cookie dough items.”

    • “We’re also exploring the creation of an education program that will target tween’ and teen girls, to provide more information about why raw refrigerated cookie dough should not be consumed.”
    KC's View:
    Nestlé will have some hurdles to get over when the product goes back into the stores, but I can tell you this. There hasn’t been a week since the recall that my 15-year-old daughter has not asked me when she’ll be able to buy Toll House Cookie Dough again. So, that’s a good thing for Nestlé, because I’d guess that she’s not alone.

    That said, I think we’re going to have educate her a bit about eating raw refrigerated cookie dough. Because I’m fairly sure that this is something she’s been doing. (Though as teenaged girls go, I wonder where “eating refrigerated cookie dough” sits on the “risky behaviors” scale?)

    Published on: July 14, 2009

    Marketwire reports that Supervalu is the subject of a class action lawsuit charging it with violation of federal securities laws last year, “including allegations of issuing a series of material misrepresentations to the market which had the effect of artificially inflating the market price.”

    The suit has been filed in United States District Court for the Southern District of New York, and attorneys for the plaintiffs are still seeking new plaintiffs to add to their complaint.

    Supervalu, while not commenting on the suit specifically, reportedly has pledged to fight the charges aggressively.
    KC's View:

    Published on: July 14, 2009

    In North Carolina, the News & Observer reports that Food Lion is expanding its test of a new format catering to Hispanic shoppers.

    The first of the stores opened up about a year ago, with five units in the North Carolina Triangle. According to the paper, “Along with significantly bulked-up selections of dry goods such as beans, tortillas and spices, the stores also carry cuts of meat and produce items popular with Hispanic shoppers. The employees at those stores also undergo training both in the Spanish language and Hispanic culture.”

    The News & Observer writes that “last week, the company opened 13 stores in the Piedmont area all featuring the Hispanic focus, and it didn't take long to see a sales increase … Food Lion will convert another 22 stores, including 10 in the Triangle, this month, with plans to reopen those stores officially on Aug. 12. It will also revamp 19 stores in the Charlotte market this summer, reopening those in September.

    “When all of those conversions have been done, 59 stores, or roughly 10 percent of Food Lion's 503 North Carolina locations, will have the Hispanic focus.”
    KC's View:
    Food Lion continues to impress as it diversifies its business and fleet of stores. Not only does it have its Food Lion, Bloom and Bottom Dollar stores, but now it is further drilling down to target specific customer groups. This is smart marketing.

    Published on: July 14, 2009

    The Denver Post reports that “a new round of negotiations begins today between Safeway and the grocery workers' union, while talks with King Soopers and Albertsons remain at a standstill … Previous proposals have been rejected by the workers. The current contract extension expires Saturday at midnight.”

    As the paper notes, “The three companies have been in negotiations with the United Food and Commercial Workers Local 7 since May.”
    KC's View:

    Published on: July 14, 2009

    Belgium-based Delhaize Group announced that it plans to sell its four German stores to Rewe, the German retailer.

    Terms of the deal have not been disclosed, and the sale must be approved by German antitrust authorities.

    Michel Eeckhout, Chief Executive Officer of Delhaize Belgium, said in a prepared statement: "Despite the continued revenue growth of the last years, we decided in December of last year to sell our non-strategic German activities after an evaluation of our portfolio.” Delhaize first entered the German market in 2003.
    KC's View:

    Published on: July 14, 2009

    The Connecticut Post reports that the town of Fairfield, Connecticut, is considering an ordinance that would ban the handing out of disposable plastic bags by retailers, a move that advocates say would help eliminate waste and litter. The ordinance is said to be similar to one already enacted in adjacent Westport, Connecticut, which passed its ban last year.
    KC's View:
    My position on this is clear – I think it would be better for the planet, and even better for retailers (who could eliminate disposable bag expenses from their balance sheets), if we could get consumers across the board to adopt reusable bags, to keep them in the trunks of their cars, and to use them with enthusiasm.

    I think some of this actually is happening. More and more, I see other people using canvas bags when I go to the store. (I’m religious about it. And, by the way, my unscientific research suggests that non-disposable bag usage goes up when retailers post signs in their parking lots reminding people not to leave them in their cars. Hint, hint, hint…)

    I do think the town-by-town effort is a little inefficient and confusing. But maybe that’s the only way to get it done.

    Now, I realize a lot of this is generational. I was talking last week to a senior industry executive who has a young child who is passionate about the use of canvas bags, while the executive’s spouse is a little skeptical about the whole movement. I get it. I realize that this transition won’t happen overnight, and that the industry has to serve both customers.

    But it is more ethical, more environmentally responsible, to nudge the movement along, to educate even the skeptical consumers, and to explain the process and the rationale.

    Published on: July 14, 2009

    FreshDirect reportedly has launched a new Daily Seafood Rating System that is designed to “take the guess work out of choosing high-quality seafood and eliminate the need to speak with a fishmonger to find out what's best that day … Utilizing a star system similar to that used in its Daily Produce Rating System, FreshDirect's in-house experts inspect its seafood stock each morning to provide customers with recommendations that are accurate for deliveries on the day following the ranking. If soft shell crabs scored a 4-star rating on the Web site Tuesday, they are one of FreshDirect's top selections -- guaranteed to be great for next-day deliveries on Wednesday.”

    The seafood will be rated with stars, based on the following chart:

    • Five Stars: Never Better - Simply outstanding; the best of its kind
    • Four Stars: Great - A don't-miss, peak-season product
    • Three Stars: Good - A dependable product, sure to please
    KC's View:
    This adheres to one of MNB’s central tenets of smart retailing. You can't just be a source of product. You also have to be a resource for information.

    Published on: July 14, 2009

    Daymon Worldwide announced that it has renamed its demonstrations business from Daymon Worldwide Demos to Daymon Interactions, a move that it says more accurately reflects the range of consumer interactive services offered by its San Diego, CA-based subsidiary.

    “We are a company that is focused on engaging, interacting and influencing the consumer,” said Jim King, President of Daymon Interactions. “We do this through a variety of consumer focused experiences that allow the consumer to connect with the brand. More effectively communicating the variety of services we offer will allow us to better achieve our company growth goals.”

    The company says that its demo business has reached the point where it spends more than 500 million minutes connecting with consumers every year. “We are changing our names, logos, websites and, most importantly, how we speak about ourselves because we must tell our brand story and create perception and awareness of our company,” says Alex Miller, President of Daymon Worldwide. “We are no longer a demo company but rather a consumer experience marketing company; we don’t just offer samples, we create consumer experiences. We are shifting our focus more heavily to the consumer rather than the retailer as this is where we really show value for all.”
    KC's View:

    Published on: July 14, 2009

    • The Metropolitan News-Enterprise reports that the Ninth US Circuit Court of Appeals has ruled that Walmart cannot be held responsible for violations of labor standards committed by foreign product suppliers.

    According to the story, the court “granted Walmart’s motion for summary judgment rejecting contract and tort claims on behalf of workers at factories in Bangladesh, China, Indonesia, Nicaragua and Swaziland” who charged that “the companies they worked for failed to pay minimum wage, forced them to work overtime, blocked them from organizing unions,” and violated labor standards that Walmart writes into contracts with suppliers.

    The court ruled that while Walmart has said it will do its best to enforce basic labor standards in foreign countries, it is under no legal obligation to do so and certainly cannot be sued for lapses at other companies in other countries.

    Bloomberg reports that Walmart has stopped buying salmon from Chile “after an outbreak of infectious salmon anemia in the South American nation.” The company has switched to supplier that fish for Atlantic salmon, and, according to spokesperson Caren Epstein, has not had to raise prices on the product.
    KC's View:

    Published on: July 14, 2009

    In Wisconsin, the Herald Times reports that Roundy’s chairman/CEO Robert Mariano is on a six-city tour of the company’s stores that is tied into the company’s “Chairman Bob” advertising campaign. On one of the stops, at a "Meet Chairman Bob Barbecue" in Manitowoc, he offered the following observations on food retailing in an economic downturn:

    • “Consumers want to save money but don't want to buy 'cheap' food for their families. It's a balance … they want to feel good about what they are buying for their family.” (Mariano noted that the company’s Clear-Value private brand has been positioned for the extremely price conscious, while its Roundy’s brand is for more upscale shoppers who are budget conscious.)

    • “Our research shows that higher coupon usage is not necessarily in stores where we have a lower socio-economic, but in middle and upper income areas where shoppers have the time and access to clip and use coupons.”
    KC's View:

    Published on: July 14, 2009

    • In Northern California, save Mart and Lucky Supermarkets are bringing back their SuperProduce Story Time, a weekly children’s nutrition education program that uses storytelling sessions in store produce departments to “help children discover the flavor and excitement of fresh fruits and vegetables.”

    According to the company, the stories story deliver “a message of healthy eating and the children sample a healthy food as a snack such as watermelon, broccoli or baby carrots, sometimes for the first time.”

    Advertising Age reports that major CPG companies are putting pressure on their advertising and marketing agencies to cut their fees and costs, saying that the current economic downturn makes such budget-cutting moves necessary.

    Among the CPG companies that are pushing for such cuts are Procter & Gamble, Unilever, and Reckitt Benckiser.

    • There’s an interesting rumor out there that Amazon.com may be interested in acquiring Netflix, with the latter company’s stock price jumping as a result. While some say that the two companies would be a good fit, others suggest that Netflix’s web of distribution centers all over the country could make it vulnerable to state sales taxes, something it has been assiduously trying to avoid.
    KC's View:

    Published on: July 14, 2009

    MNB took note yesterday of a New York Times story on the continued expansion and success of Redbox, which rents DVDs from in-store kiosks for $1 per night. The suggestion is that Redbox is successfully taking advantage of an economic that favors low price rentals, and that many customers still are willing to go out to rent movies, as opposed to download them onto their computers.

    My comment: I still think that Redbox is a retail concept with an expiration date. We don't know what it is yet, and in fact it could be more than a decade off…and these could be very profitable years for the company. But it is inevitable that downloading eventually could take over.

    MNB user Ben Ball responded:

    If it is “inevitable” that downloading take over – then why does Best Buy still sell music and movies and Borders still sell books? Some people will always prefer the physical over the digital some of the time. That is also “inevitable”.

    MNB user Connie Montgomery wrote:

    It depends on the costs of downloading. A person would need a rather "large" hard drive to hold movies; high Ram, and an exceptionally fast connection. I have DSL and it is not real fast on downloading anything with pictures. I can just imagine the speed of downloading a movie. I doubt those services are $1.00 per movie.

    Personally, most movies seen once is enough. So why download it? For $1.00 at Redbox, it can't be beat to me. They are in so many places. I drive 7 miles to work each day, and I counted them, after the last Redbox discussion, and I pass 4 Redbox locations every day. What can be more convenient than that. There are about 10 within 1 mile from my home.

    I only buy on DVD for a movie that I will watch more than once--i.e. Titanic, Dirty Dancing. Only the great ones are worth watching again.


    And another MNB user chimed in:

    Redbox will have an expiration date that will follow right behind broadband accessibility. Hard as it may be for you to believe, there are still chunks of the United States that do not have either affordable broadband, or any access at all. Until that changes, no one will live long enough to download a movie over dial up. And I have to note that my son, who has had high-speed access via cable for years, is a fan of Redbox.
    I think it's a case of he doesn't think about watching a movie until he sees the kiosk while he's grocery shopping.


    One MNB user responded:

    Sure downloading COULD take over.

    Real Estate investors have been saying this since Blockbuster started expanding in the 80’s. What is taking the consumer so long to catch up?


    Look, I’m not suggesting that this is going to happen overnight.

    But, it also strikes me as shortsighted to suggest that this isn’t the long-term play. It means that broadband will have to be everywhere, it will have to be faster than it is today, and hard drives will have to have a lot more memory than most do presently. But that’s all going to happen. It is inevitable.

    I’ll bet you that Best Buy doesn’t sell a lot of music these days. After all, that’s why the Virgin superstores closed in the US…just not enough business in a world where music downloading is the rule not the exception. If it can happen to music, it can happen to video.

    Inevitably.
    KC's View: