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    Published on: September 14, 2009

    The Wall Street Journal has a great piece this morning about how the inevitability of aging will impact how and where baby boomer shop as they move into their late sixties and seventies: “Current store layouts present challenges for elderly shoppers, experts say. Worsening eyesight makes finding items more frustrating, arthritis complicates browsing and reduced balance intensifies the strain of stooping or reaching for products.”

    However, manufacturers and retailers may be more motivated to do something about the situation, since aging baby boomers are expected to spend $50 billion or more over the next 10 years on various CPG items … assuming they can see them and find them. Furthermore, the Journal writes, “The number of adults aged 65 and older will reach 71.5 million people by 2030, twice their number in 2000 and representing nearly 20% of the total U.S. population, according to estimates by the Federal Interagency Forum on Aging-Related Statistics.”

    That means coming up with shelves, colors, lighting and typefaces that are user-friendly for aging consumers – and working with companies such as Kimberly Clark, which has developed a program that allows marketers to put themselves in the shoes – literally – of these older shoppers.
    KC's View:
    Every time I can't read a prescription label, or the instructions on a pillbox, or even the nutrition label on a food item, I’m reminded of how fast this time is coming. The Journal has it right – retailers and manufacturers have to prepare now, or be irrelevant tomorrow.

    Published on: September 14, 2009

    Numerous published reports say that more than 300 employees at a Safeway Canada distribution center and ice cream plant in Edmonton have voted to accept the retailer’s most recent contract offer, ending a six-day labor action.

    The contract offer – a pay increase of 14 percent over three years along with a 40-hour workweek to replace the current 37-hour week – originally was rejected by the union, and a strike was authorized. Safeway then hired replacement workers, who now will be laid off.
    KC's View:
    I got in some trouble last week with a number of MNB users when I criticized the union’s position, especially the insistence in a 2009 global economy that somehow the 37-hour workweek needed to be preserved.

    I’m glad the strike is over, and I’m glad saner heads have prevailed.

    I’m also glad the story erupted…because it has made for some interesting discussion here on MNB about the roles of unions and the ideal relationship between management and labor. The discussion continues below, and I suspect even as the Safeway Canada employees go back to work.

    Published on: September 14, 2009

    Excellent interview in the Newark Star Ledger with Eric Claus, CEO at the Great Atlantic & Pacific Tea Co. (A&P), in which he describes the company’s efforts to respond to changing customer tastes and needs, and to have stores that will cater both to high end shoppers and cash-strapped customers. Excerpts:

    Formats: “We have Fresh -- a store that focuses on a premium offering, particularly in the fresh food department. So, it has a higher-end bakery and a vast variety of produce. Instead of commodity tomatoes, it has the nonhydroponic vine ripened tomatoes that really taste like tomatoes. That caters to middle-upper-income to upper-income consumers. The next one is Price Impact under the Pathmark banner. As soon as you walk in you see huge displays and private labels that tell you will save money. That is typically in the more mainstream and inner-city areas.

    “The third is Discount -- a smaller store we brought down from Canada with no service departments. Pricing is significantly less. Instead of four different kinds of ketchup, you might have one brand but at a great price. They are extremely successful. You can find them in East Paterson, Fairview and North Bergen. The fourth one is Gourmet, in New York, which is higher-end. They are about having the best chocolates and the best meats in the world.”

    Pathmark’s problems: “It was at a high price when we bought it. As soon as we bought it we ran into the recession. We had an economically strapped consumer and a number of stores that needed a pricing fix. So, we've dropped our pricing at Pathmark, but it's taken a toll on the bottom line because we don't have the volume yet to offset the reduction in margins we've taken. We believe that we are beginning to see the bottom of the recession and that things should pick up in the first half of 2010.”
    KC's View:
    As noted in this space before, my former skepticism about the quality of A&P’s stores has been pretty much erased by the kind of work that Eric Claus and his team are doing at A&P – there seems to be real clarity of vision for the company, and if they can just get a break with the economy, I think they may be pretty good shape at some point. The Discount format that he refers to strikes me as being exceptionally powerful – when I’ve spent time in those stores, I’m impressed by the kind of traffic they’re generating.

    Published on: September 14, 2009

    A federal appeals court has ruled that the city of San Francisco can ban drugstores from selling tobacco, the San Francisco Chronicle reports, as it rejected an argument by tobacco companies that such a ban violated their constitutional right to free speech.

    The Ninth U.S. Circuit Court of Appeals said the city hasn't restricted freedom of expression, but rather is just limiting the number of places that cigarettes can be sold.

    The city of San Francisco originally instituted the ban on the grounds that customers have a reasonable right to expect that products sold in a drug store would be healthy, and that the sale of tobacco is counter to that expectation.

    No decision reportedly has been reached by tobacco purveyors about whether to appeal the case to the US Supreme Court.

    The paper notes that this was just one of two lawsuits aimed at countermanding the law; the second challenges the law because it did not apply to supermarkets and big box stores that have pharmacies.
    KC's View:
    While my general feeling is that anything that hurts the tobacco companies and makes it hard to get their products is a good thing, I have to admit that I am a little skeptical about the rationale behind this law – it isn’t like drug stores only sell healthy stuff. But maybe the argument actually is that drug stores shouldn't be selling products designed to addict and kill the consumer.

    And I also would agree that consistency would require that it be applied to all retailers with a pharmacy, not just drug stores.

    But the short story is that while I see inconsistencies and problems with the law, I can't help but be in favor of it…and to think more of a city that enforces it.

    Published on: September 14, 2009

    Forbes reports that Walmart is dealing with a “nightmare scenario” in China, where five of its employees have been accused of bludgeoning a suspected shoplifter to death on August 30.

    According to the story, “While the details are murky, it seems that the employees followed a 37-year-old woman out of the store and ordered her to prove that she had bought, not shoplifted, some merchandise she was carrying. The woman, suspicious because the men weren't wearing uniforms, refused to cooperate, and a fight broke out that resulted in her death and the arrest of two people so far … It is still unclear whether all or some of the accused killers were even Walmart employees. Many companies outsource their security, along with other functions like production and accounting, to outside firms, as a way of reducing fixed costs. It certainly does lower costs and does allow companies to be more responsive to market conditions, but many fail to oversee the policies of their outsourcing partners.”
    KC's View:
    No question, this is the downside of globalization…and it could get worse, but there seems like little question that this story could spread virally and hurt the company not just in China, but elsewhere that it does business.

    Published on: September 14, 2009

    The Denver Post reports that a contract extension given to King Soopers employees in the Mile High City has run out, and they have now joined their brethren at Safeway and Albertsons in working without a contract.

    No job action is anticipated, but a stalemate continues between management and labor as there is no sign that Safeway and/or King Soopers employees intend to accept the most recent contract offer made to them – despite the fact that it has been described as the last, best offer that will be made.
    KC's View:

    Published on: September 14, 2009

    Albert Gonzales, 28, the Miami man who was arrested and indicted for the theft of more than 130 million credit card and debit card numbers between late 2006 and early 2008, a scam that affected the computer systems of retailers that included Hannaford Brothers and c-store chain 7-Eleven, as well as Heartland Payment Systems, a payment processor, reportedly has pleaded guilty to 19 counts of conspiracy, computer fraud, wire fraud, access device fraud and aggravated identity theft

    When he is sentenced, on December 8, he could go to prison for as long as 25 years.
    KC's View:

    Published on: September 14, 2009

    The Tampa Tribune writes that Delhaize-owned Sweetbay Supermarkets has opened its first in-store medical clinic there, in partnership with and managed by USF Health, which is described as overseeing “the University of South Florida's medical and health-related schools and the USF Physicians Group.”

    The story notes that while Publix has been in the in-store medical clinic business since 2006, and current has 42 Little Clinics in various stores, “Sweetbay officials said the company waited to find the right fit. Plans to open its first clinic in New Tampa jelled when the supermarket chain joined forces with USF Health. No plans for a second clinic have been confirmed,” though the company seems confident.
    KC's View:
    I become a bigger fan of this concept ever time I use one. Stopped at the local CVS on Friday for a flu shot, and was out the door in about 15 minutes feeling fully armed against normal versions of influenza … with a promise that they’d be in touch as soon as H1N1 vaccinations are in-stock.

    For food companies, especially, this is a great way to focus on wellness in the broadest sense … and to establish some credibility in this area among customers.

    Published on: September 14, 2009

    • The New York Times reports that while Procter & Gamble executives do not necessarily believe that market conditions will improve substantially later this year, they are confident that their strategic and tactical moves – cutting prices and focusing on the company’s overall value proposition for consumers – will help sales rebound this fall.

    Among the steps being taken by P&G: developing a low-cost version of Tide and cutting prices on Cheer detergent.

    “We firmly believe we’ve made the right choices in the past year to deal with the global economic crisis, but we also know that we can and must deliver better overall results,” Jon Moeller, P&G’s chief financial offer, tells the Times.

    • The Chicago Sun Times> reports that “the U.S. Equal Employment Opportunity Commission filed its second lawsuit this month against Jewel-Osco and parent company Supervalu Inc. alleging the grocery chain discriminated against disabled employees” and violated the Americans With Disabilities Act (ADA).

    Reuters reports that Smithfield Foods is focusing the bulk of its efforts on becoming a global leader in the packaged meats business, selling under brands that include Armour, Eckrich and Farmland, and spending less time in the hog and low margin pork business.

    We are on the cusp of changing who this company is," Chief Executive Larry Pope told the Barclays Capital Back-to-School Consumer Conference, adding, “We are looking more like a consumer packaged goods company than we are an agribusiness player."
    KC's View:

    Published on: September 14, 2009

    • Campbell Soup Co. said that its fourth quarter profit fell to $69 million, from $89 million a year earlier. Q4 net sales fell 11 percent to $1.53 billion, with foreign-currency impacts accounting for 4 percentage points of the decline. The latest quarter was also one week shorter than the prior-year period.
    KC's View:

    Published on: September 14, 2009

    Larry Gelbart, one of the creative forces behind the “M*A*S*H” television series, as well as the film “Tootsie” and the play “A Funny Thing Happened On The Way To The Forum,” and a vast number of other films, television shows and plays, died Friday at age 81.
    KC's View:
    The New York Times had a great line from Gelbart’s memoirs, in which he wrote about getting old: “Contrary to popular belief,” he wrote, “it’s not the legs that go first, it’s remembering the word for legs.”

    That just made me laugh out loud.

    Published on: September 14, 2009

    We continue to get email about my stated position that when supermarkets carry brands that compete with them for share of stomach (like Dunkin’ Donuts coffee, or Burger King French fries), they could be seen as damaging their own brand equity in the long term.

    There was, to put the following email in context, an email last week that observed that “people have not ALWAYS eaten out. It is the failure of supermarkets to simplify, provide and educate about other solutions that has led to almost 50% of food dollars going to the likes of Burger King.”

    Which led MNB user Ken Wagar to write:

    I really hate to keep harping on the issue of competitors’ brands in the supermarket but I just can’t let it go. It seems to me you have a vested interest in seeing supermarkets be successful as your living is tied to the continuation and improvement of the business. Yet I suspect that you eat out in restaurants much more frequently than the average American. Now I don’t have any issue with that but when you endorse comments such as the one (that) would suggest that your being a regular at the Mexican Restaurant or going out for Indian on the last day of your vacation were due to a failure by your local supermarkets. I find that to be ridiculous. I would suggest you think long and hard about why you eat out when you do, what the motivating factors are and why you didn’t instead make the apparently simple decision to prepare your meal yourself in your home.

    I would be flabbergasted if you could actually say your decisions are the result of the failure of supermarkets.

    I also think we need to be cognizant of the number of items carried in the supermarket that got their start and established their brand elsewhere first. Ice Cream Brands that started in Dairy stores or Ice Cream Shops, Coke which began as a fountain item in Drug Stores, cookware marketed by restaurant chefs, BBQ sauces that came from Restaurant beginnings and on and on. Heinz Catsup is the #1 brand in food service should we quit carrying it because of that? What about Certified Angus Beef, which established credibility by being featured on Restaurant menus? What about Wal-Marts Steakhouse Cuts of fresh beef which in a way indicates the best steaks come from Food Service not the supermarket.

    I think it is a very slippery slope and leads to comments like that of your reader above. A leap from BK fries to the restaurant business being a result of Supermarket failure.

    Give me a break!

    First of all, let’s be clear. I am making a broad argument that ought not be taken literally…which is that sometimes supermarkets don't play hardball when it comes to share of stomach. I’m using these competitive brands as an example…

    That said, I think an argument can be made that supermarkets were asleep at the switch to some extent when fast food restaurants started a trend that moved a lot of the food business away from the supermarket business…and that this happened, in fact, because a lot of supermarkets thought they were in the business of selling other people’s brands, and thought in terms of boxes and cartons and bottles and jars. They forgot they were in the food business…and that, combined with strong marketing by the competition and a lot of societal changes, created the competitive challenges they face today.

    I’m not sure how my restaurant habits factor into this, exactly, but I would also point out that while I may have a vested interested in how food retailers do, I am not a cheerleader. At least not all the time. And I like to think that at least some of my dispassionate observations – as well as my passionate ones – have some value in terms of adding perspective.

    On the other hand, there is a very good argument that I’m completely wrong on this, as was pointed out by one MNB user, who threw my own quote back at me when I referred to the MNB mantra – in the 21st century, effective retailers need top be where consumers want them, when consumers want them, how consumers want them, selling products at prices that consumers believe are appropriate…

    And this MNB user wrote:

    Except when that customer is looking for BK French fries, or Dunkin Doughnuts coffee...?

    I had to laugh at this…I love it when I get hoisted on my own petard.

    And now, I’ll have to think about it.

    Had a story last week about how Aldi is doing a small test in the US, accepting credit cards for a fee. MNB user Matt Muir, who certainly qualifies as one of MNB’s more far-flung readers, sent this email from Down Under:

    In Australia, Aldi suffered initially when offering higher priced goods whilst not offering a credit card payment method. They have now offered credit card payment for some time, with a small % fee charged.

    They are probably the only bricks & mortar retailer to do so, and I can't say that I've ever heard anyone complaining profusely about the charge.

    Thanks for that.

    And, on the subject of labor vs. management, one MNB user wrote:

    I am 62 and my parents are doing well - they have told me numerous times that they think things have gotten worse over time due to corporate greed.

    My Dad as most neighbors did, went to work and Mom stayed home to raise the kids. Then they retired comfortably with only one parent working 40 hours a day all those years ago.

    Today in most traditional families, both Dad and Mom must work and this is 80 hours compared to 40 hours years ago.

    With all our productivity increases - where has the gain gone for the families and workers. It is still a 80 hour grind for to days Dad and Mom trying to survive and who knows about retirement anymore.

    Corporations and their execs are far better off today than they were 50 years ago but most of us dumb workerbees are not.

    KC's View:

    Published on: September 14, 2009

    In Week One of National Football League action…

    Miami 7
    Atlanta 19

    Philadelphia 38
    Carolina 10

    Minnesota 34
    Cleveland 20

    Jacksonville 12
    Indianapolis 14

    Dallas 34
    Tampa Bay 21

    Kansas City 24
    Baltimore 38

    Denver 12
    Cincinnati 7

    NY Jets 24
    Houston 7

    Detroit 27
    New Orleans 45

    Washington 17
    NY Giants 23

    San Francisco 20
    Arizona 16

    St. Louis 0
    Seattle 28

    Chicago 15
    Green Bay 21
    KC's View: