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    Published on: August 25, 2009

    by Michael Sansolo

    Standing on a two-foot wide catwalk, 440 feet above the water of Sydney Harbor, there were a lot of thoughts going through my mind: “I can’t believe the view.” “ I hope it doesn’t rain.” “I hope this skinny little tether holding me to the bridge works.” There, at the top of the magnificent Sydney Harbor Bridge, the last thing I expected was a discussion of business.

    Of course, I got one.

    It came from Bernie, the Australian leading our band of 14 to the top of the bridge (on a tourist experience not to be missed if you ever venture down under.) As we moved single-file up the bridge’s ladders and catwalks, Bernie explained that this sport, unlike many others, rejects competition. Climbing, even controlled climbs like the bridge, require cooperation from the entire team. The better we cooperate, the easier the climb.

    Sometimes we compete; sometimes we cooperate. Knowing the difference is stunningly important, Bernie said. Although I’m not afraid of heights and felt incredibly secure even at the very top of the bride, I saw no point in arguing. Besides, I agreed.

    A number of years ago, Danny Wegman espoused a similar theory when it came to technology. As Danny put it, there are many areas where companies compete—and Danny is no stranger to that. But there are also many places where cooperation is the only way, such as deciding on technology standards that make everything from phone calls to text messages to bar codes capable of working.

    But getting the reminder from Bernie in such a precarious position was extremely timely.

    In so many ways, 2009 should be the year for cooperation in the midst of our pitched battles for market share. As we move through this tumultuous economic moment we need a common message preaching all the potential benefits that eating at home and smart shopping offers our stressed shopper.

    We’ve talked before about the incredible opportunities that lie in the midst of the Great Recession. And while I know it is far easier said (or written) than done, we have to wonder if this is going to get addressed.

    Shoppers are changing their definition of value in so many ways, as frugality is the fashion of the moment. The question is: can the food-at-home industry seize the chance to build sales and relationships or will we see specific retailers and restaurants gaining chunks of market share while others sit idly? Can we begin a dialog on healthy eating and healthy choices at a time when health care dominates the news or will we watch health clubs and others take over the conversation we should be having? Can we talk about the power of mealtime to strengthen family ties at such a moment when so many are unsettled or will that remain unmentioned?

    And, of course, can we use a time when young people are looking for careers to feature ours in such a way that it changes our future labor and management picture beyond recognition and for the better?

    The last point was driven home last week with the annual release of Beloit College’s examination of the world of the freshman class; that is, a compendium of facts that form the world of the class of 2013 that are certain to surprise many of us. For instance, this year’s freshmen have always lived in a world where rap music and tattoos are in the mainstream, but the KGB never officially existed. The European Union has always been around and Dr. Seuss has always been dead.

    The world they enter as college freshmen or high school graduates is the only world they know; their decisions and options are only now forming. In other words, they are a new market all about opportunity as consumers and associates.

    So yes, 2009 is a great year for competition. Some cooperation wouldn’t hurt either.

    Michael Sansolo can be reached via email at .
    KC's View:

    Published on: August 25, 2009

    The President’s Council of Advisors on Science and Technology yesterday sent a report to the White House in which a “plausible scenario” was painted in which between 20 and 40 percent of the US population – or as many as 120 million Americans – could contract the h1n1 swine flu virus this fall and winter. As many as 30,000 to 90,000 people – mostly children and young adults - could die from the flu, the report postulates, emphasizing that this was not a prediction but rather just a worst-case scenario necessary for the government to properly plan.

    It is also possible that half the US population could catch this flu, though the vast majority would not show symptoms nor become seriously ill.

    "This isn't the flu that we're used to," Health and Human Services Secretary Kathleen Sebelius said at a meeting in Atlanta at the Centers for Disease Control and Prevention (CDC). "We won't know until we're in the middle of the flu season how serious this is."
    KC's View:
    This could have enormous impact on the food business, in terms of how it affects employees as well as shopping patterns. It could make it hard for a lot of people to come to work, and it could give the advantage to retailers that offer online ordering and delivery options to shoppers.

    Published on: August 25, 2009

    This afternoon, Information Resources Inc. (IRI) and the National Association of Chain Drug Stores (NACDS) will offer a complimentary webinar on the subject, “Discovering The Real Truth About Shopper Behavior,” which will look at what IRI’s Thom Blischok refers to as the “new conservative shopper.” Blischok, who is IRI’s president of consulting and innovation, is scheduled to offer an in-depth – and actionable – look at what retailers and manufacturers must do to cater to the changing shopper.

    It is Blischok’s contention that the severity of the recession – which he feels has not just caught people by surprise, but will continue to do so as the economic roller coaster continues – will have a persistent and lasting impact on shopper behavior …and that retailers and manufacturers need to do three things: pay “granular attention” to who shops, engage in “assortment redesign” that simplifies what Americans find on their store shelves, and rework “pricing architecture” so that consumers’ value concerns are integrated into what things cost.

    MNB had the opportunity yesterday to chat with the always-fascinating Blischok, who always succeeds in being provocative with his view of the where the worlds of retailing and manufacturing are going. Based on our conversation here are 10 things that he believes that retailers and manufacturers need to know about the changing shopper (items that will be elaborated upon in today’s webinar):

    1) Shoppers are buying between six and 10 percent less than they used to, and virtually every purchase decision is being seen through the “lens of affordability.”

    2) Consumers are redefining what they view as “necessities,” with items like iPods and iPhones – that might have been seen as luxuries in the past – making the cut because they are critical to how shoppers (especially Millennials) connect to the Internet. These same Millennials are saying that they will be “cautious shoppers” for the rest of their lives because of the lessons taught by the current recession.

    3) These connected shoppers are using the Internet to bring buying decisions home – more and more, they are using the information that they are gathering to make shopping lists that determine what they will buy. Impulse purchases are so 20th century.

    4) “Innovative” and “preventative” health care and wellness offerings are likely to offer retailers a long-term growth opportunity because consumers will continue to look for ways to save money; while in-store clinics may be operationally problematic, Blischok says they will evolve into “the new emergency room.”

    5) More than two thirds of shoppers are shifting their purchase decisions by buying things like skincare items, hair coloring and cosmetics in the store rather than going to beauty parlors and spas for such treatments.

    6) Retailers and manufacturers need to address both the need for low prices and “expand the conversation” by reflecting specific value propositions, whether it is “wellness,” “fresh food,” or some other differential advantage.

    7) “There must be an expansion of the dialogue among the consumer, the retailer and the manufacturer,” Blischok says. All three have to be included for maximum impact.

    8) Among Millennials, Hispanics and Baby Boomers, there is broad support for tactics that are helping them survive – shopping multiple stores for the lowest prices, using online resources to find coupons, buying larger quantities earlier in the month and buying more multi-functional items.

    9) Retailers have to go beyond the use of loyalty marketing programs as ways of distributing coupons and offering discounts, instead using them to detect “minute microchanges” in consumer behavior that can help the retailer make better merchandising and marketing decisions.

    10) The bad news, Blischok says, is that the United States could find itself as the world’s third or fourth largest economy in the not-too-distant future. But the good news is that the US may also reclaim its position as “feeder of the world,” using both technology, a diverse climate and the availability of water to compete in an area where most nations cannot.

    To attend the IRI/NACDS webinar, which takes place today from 2 pm-3 pm EDT,

    Click here.
    KC's View:

    Published on: August 25, 2009

    The Business Journal of Milwaukee reports that Roundy’s has opened a new Rainbow Foods store in St. Louis Park, Minnesota, that is 20 percent smaller than most of its Rainbow stores at 55,000 square feet.

    According to the story, the new store “emphasizes fresh foods and offers more services than most other Rainbows, which Roundy's operates mainly in the Minneapolis area. For example, it has a salad bar in the deli, and in the bakery, donuts are handled by employees behind a counter rather than being placed out for self-service.”
    KC's View:

    Published on: August 25, 2009

    • In Virginia, the Orange County Board of Supervisors has approved Walmart’s application to build a supercenter near the Wilderness Battlefield, considered to be one of the Civil War’s most important battlefields. The proposal has been opposed by preservationists, who were concerned about the impact of traffic and commerce on what they see as the sanctity of the area.

    Walmart has said that the store is projected to generate $800,000 in sales tax revenue a year, plus hundreds of jobs for the region.
    KC's View:
    When this story first popped up, my immediate impulse was to side with the preservationists. But after having visited Gettysburg a couple of weeks ago, I had the chance to chat with a businessman from the area last week who told me about the ongoing tension that exists between local businesses and government and the historical interests that want to preserve as much land as possible. While historical preservation is a worthy pursuit, he said, the problem is that each new acquisition of land costs the taxpayers money and takes land off the tax rolls – which, especially today, can put communities in a tough place economically.

    All of which tells me that a legitimate balance has to be struck. I don't know the Wilderness Battlefield area, so I can't pass judgment on that. But it doesn’t help anyone if communities go bankrupt and if people don't have jobs.

    Published on: August 25, 2009

    Marketing Daily reports on a new PricewaterhouseCoopers study saying that while the functional food business is expected to grow between eight and 20 percent annually for the next few years, there seem to be limits on where that growth will come.

    In broad terms, the report seems to suggest that products offering short-term immediate gratification – such as an energy boost – are more likely to see immediate success than products like omega-3 with real benefits with less immediate impact.

    In addition, innovative packaging (such as that offering daily doses) is seen as helping products in the functional foods arena.

    Top categories in the functional foods segment: soft drinks, dairy, bakery/cereals, confectionary and savory snacks.
    KC's View:
    It was interesting that omega-3 was singled out in this story, since there was another piece in Forbes about new research suggesting that this particular supplement is highly effective in preventing heart disease. And, Forbes writes, “In the history of nutritional supplements there's something striking about omega-3: the fact that it works. Much of the $25 billion a year that Americans spend on supplements is money down the drain.”

    That’s part of the problem with supplements and functional foods – it is tough to separate the hype from what really works…which is why people tend to go for immediate gratification.

    And also why retailers and manufacturers need to do a better job of educating consumers about this important segment.

    Published on: August 25, 2009

    Interesting piece in Advertising Age about the Reader’s Digest bankruptcy filing, which became official yesterday.

    For one thing, the emphasis continues to be on the company’s balance sheet, which was judged to be untenable, and that Chapter 11 protection allows the company to resolve.

    But there are two interesting comments from CEO Mary Berner about the approach the company will be taking in the future:

    • “We are channel-agnostic, and we have organized the company that way. We look at Reader's Digest, not Reader's Digest the magazine, including digital, single-issue, single topic magazines -- anything that a customer will want in any platform. Unless media companies get organized that way, you're doomed to fail."

    • "The idea of a general-interest magazine thriving into the future at the circulation levels we're seeing now is simply absurd, because customers want information and entertainment and service from different platforms and channels.”
    KC's View:
    These comments are interesting because they can serve as a metaphor for the retailing business, where, it seems to me, you have to:

    1) Be highly focused on precisely who your customer is and what your customer wants.

    2) Once you know these two things, you have to be channel agnostic, focused on providing it when the customer wants it, where the customer wants it, how the customer wants it, at a price the customer believes is appropriate.

    I still find the Reader’s Digest insistence that it is doing better than most magazines to be interesting, since it is in Chapter 11 and a lot of the others are not. (Maybe the others ought to be more worried…)

    Published on: August 25, 2009

    • Dollar General, the Kohlberg Kravis Roberts-owned discount retailer, has filed for an initial public offering that is looking to raise $750 million.

    • The Wall Street Journal this morning reports that the Federal Trade Commission (FTC) has criticized Anheuser-Busch InBev for using college football team colors on its Bud Light cans, saying that the promotion could encourage underage drinking.

    Anheuser-Busch has responded that the beer is only being sold to people of legal drinking age, that it isn’t being sold near schools that have complained, and that none of the cans have a school name or logo.
    KC's View:

    Published on: August 25, 2009

    • Winn-Dixie said that its fourth quarter profit was $9.4 million, up from a year-ago loss of $5.5 million, on revenue that was up about one percent to $1.72 billion from $1.69 billion last year.

    Fiscal year profit was $39.8 million, from $12.8 million last year. Annual revenue rose about one percent to $7.37 billion from $7.28 billion, on same-store sales that were up 1.6 percent.
    KC's View:

    Published on: August 25, 2009

    MNB had a piece yesterday about the consideration of “sin taxes” that would assess taxes on the sales of products such as sugared soft drinks and foods that don't meet certain nutritional values.

    I commented:

    The more I read this story, the more I got queasy about it. There’s just a social engineering aspect to it that is a littler unappetizing…I’d love to see people eating healthier food, but taxing them into submission doesn’t strike me as the best approach.

    I’m with Jimmy Buffett on this one – a little sin is good for the soul. (Besides, haven't we sort of devalued the nature of sin when we start equating it with sugared soft drinks?)

    I figured this might get some response…

    MNB user Brad Morris wrote:

    As you might imagine, I am biased against the new "Sin" and "Fat" Taxes being proposed as regressive and more than a little silly. That said I had never even thought about the nightmare it would be to administer them on the part of retailers…

    What strikes me most about this whole process is that doesn't even seem likely to actually have any impact on shopping behaviors for the "sinful" products in question. If the price at the shelf is the same between a "sinful" product and its "healthy" competitor do we really think that the shopper is going to think to themselves "Gosh, this has sugar/fat in it, and I know I may be paying a higher sales tax rate so I better switch to something healthier". If the Coca-Cola Classic is the same price at shelf as the Diet Coke, it is unlikely that the shopper is going to be any more likely to buy either product than they were before the tax change went into effect. Shoppers already know the differences between the two products as it relates to their choice to have calories from sweeteners or not. Likewise, does it make sense that one Hershey Bar would be considered "sinful" and the other not even though they have a similar nutritional make ups? Why does having a touch of flour make one bar better than the other?

    This is all very different from cigarettes where generally speaking the state/federal taxes are imposed beforehand and are visible as a part of the regular retail price. The shopper sees the tax and feels the pain. When a shopper pays $5 for a pack of cigarettes they know that a large part of the cost is in the tax.

    Net-net, this is just an opportunity to institute a higher sales taxes to fill budget holes while claiming it is "for the good of the children". I get the idea that taxes are the price we pay to live in a civilized society. Be real. Call it what it is. It is new taxation. It is politics. It is rationalization. Do not insult our intelligence by calling it good public health policy.

    MNB user Jan Matsuno wrote:

    Forget about taxing junk food, just pay subsidies to the fruit and vegetable growers (as we do for corn)!

    Another MNB user wrote:

    Why are you queasy about government getting involved in manipulating people with “sin taxes”? If I remember correctly, you have zero problem taxing tobacco which is certainly selective of you. People can quit “junk” food if they choose just like cigarettes. The Soda pop tax would apply only to those drinking soda pop, a candy tax the same.

    There are always reasons not to do things that are compelling. Everything must be weighed and each argument should be looked at. In my opinion if the money collected would be applied to health care and improving health then wouldn’t it make sense to tax the items that were causing the problem and thereby could reduce their effect, even if it is a small reduction? We tax gasoline to pay for roads. We tax telephones to pay for those who cannot afford the service in rural areas. As stated previously, anyone not wishing to pay the tax on food that is killing them and reducing their quality of life can certainly quit buying those things.. When liquor, wine and beer were taxed no one expected everyone to quit drinking and they obviously didn’t. Soda pop and Twinkies are not going to go away just because they get taxed. One of the proposals being floated was to tax all corn syrup products which went nowhere. The sin tax on sugary products will most likely go the same way since Congress and state legislatures continue to be manipulated by lobby money and we can see where and why that money is being spent. Taxation will never end if we want a civil society, it just moves around from place to place.

    You’re right. I am selective. But isn’t that just the same as making choices…which we do every day?

    Taxation on tobacco is different. It is a product deliberately formulated to addict and that eventually kills. No comparison, in my view.

    MNB user Al Kober wrote:

    I could not agree more with you that we have devalued “sin” to the point where just a little has become OK. Isn’t that what has been done, devalued the nature of sin, when we say that a little sin is good for the soul?

    No sin, of any amount, is good for the soul. God hates sin, even a little. So if God hate it, even a little, so do I.

    Like saying just a little arsenic is good for the body. The problem is sin doesn’t stop at just a little. Just a little can lead to just a lot.

    And finally, MNB user Gregory A. Ten Eyck wrote:

    “A little sin is good for the soul?” Is that really what Jimmy Buffet sings? That just reminds me of why I actually got up and left in protest in the middle of one of his concerts. He sings catchy songs, but I’d had enough of his liberal politicking and anti-Christian rants from the stage. He was offensive to me.

    On the subject of “sin tax,” I agree that equating soda pop to sin is trivializing sin. Just as believing that sin, which condemns our soul, can be somehow “good” for it.

    I double checked, just to be sure, and confirmed that indeed, that is a line from “Grapefruit Juicy Fruit.”

    I am, however, a little surprised by the specific reaction…since Buffett always has struck me as being one of the least political singers out there (unless you count his thinking that politics in general is absurdist, which is hard to argue with). I certainly don't get the anti-Christian reference …

    The line from the song is a little metaphorical, a little satirical, a little poetical, and mostly, I think, designed to be a little amusing and ideally absorbed with a sip of Margarita.
    KC's View: