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    Published on: October 23, 2009

    Notes and comment from The Content Guy

    PORTLAND, OREGON -- It was a throwaway line, but one that resonated.

    “As my grandmother used to say, he puts feet to the prayers.”

    The specific reference, made by a former student, was to Al Carey, president/CEO of Frito-Lay, who was receiving the 2009 Roger Ahlbrandt from the Portland State University (PSU) Food Industry Leadership Center for his longtime work with the program, especially his dedication to diversity in the workplace.

    But it was a sentiment that went beyond the moment, because in a personally and professionally competitive world, the ability to implement, to have an impact, is of critical importance.

    That was the clear message from Kroger CEO Dave Dillon, who gave the evening’s keynote address and talked about some of the profound changes that have been implemented at kroger over the past few years to make it a more relevant and responsive company. He said that by putting the customer first not just in word, but by using every tool available to connect with them, Kroger had created a more sustainable business model for the long term.

    Dillon used a sports metaphor to illustrate the notion that constant improvement is a requirement, not an option: Cesar Cielo of Brazil recently set a world’s record for the 100 meter freestyle with a time of 46.91 seconds, which is remarkable considering that in 1972 the record was set by Mark Spitz at 51.22 seconds, and in 1924 it was held by Johnny Weissmuller at 57.44 seconds. Same race, but the bar for success keeps getting set higher and higher ... and those who wish to excel have no choice but to push themselves harder and harder. “We either get better, or we get worse,” Dillon said, leaving no doubt that only one of those options is acceptable at Kroger.

    In addition, the notion of “feet to the prayers” was at the core of a panel discussion with four PSU students that explored their work experience and attitudes toward the industry. I had the privilege of moderating the session and was especially struck by the stories of two of them.

    Hannah Gallagher, who will be graduating next spring, spoke of bumping into an attitude that some seemed to hold that Generation Y isn’t all that hard-working, and at the moment is really only good at using the various online social networking skills that they have developed to communicate with other members of their generation. In fact, very little of this description seemed to fit Gallagher, who recently found herself carrying an 18-credit load, working as an intern, and holding a part-time job to pay her bills at the same time. This was one very impressive young woman - strong-minded and highly focused - and her moments on the stage should have dispelled that generation Y myth for everyone in attendance.

    (After all, there are lazy people in every generation. Members of Generation Y are, in fact, indispensable to an industry that must market to them. Condescension would seem to be a counter-productive attitude.)

    I was especially touched by another student, Isiaka Adigun, who came to the US from Nigeria just two years ago and will be graduating next spring. Adigun, who speaks with a soft voice and a deep passion, spoke of his commitment to customer service, and of his internship at Costco. At one point, he said, he found himself refusing to allow a woman to buy a particular chicken because it had been in the case for just over two hours; Costco’s rule is that after 120 minutes, the chickens get pulled. While the woman resisted at first, she eventually accepted his explanation, bought a newer chicken, and later came back to thank him for watching out for her.

    It is hard to explain why, but Adigun seemed to have an almost visceral connection to the notion of customer service. It wasn’t just an abstract concept to him - there was an emotional component to it, as if it represented the core of why he came to the US and wants to live and work here.

    In other words, it is his “feet to the prayers.”

    In the church of the food industry, it was fascinating to see four very different disciples - Dillon, Carey, Gallagher and Adigun - and get a sense that they were connected by something more than just an industry. There’s something else going on there, something both tangible and intangible, that speaks volumes about what the food industry should and sometimes does represent and achieve.

    For a few hours this week, it was on display in Portland, Oregon.

    “Feet to the prayers.”
    KC's View:

    Published on: October 23, 2009

    PepsiCo announced yesterday that it has removed from the Internet the controversial iPhone app for its Amp energy drink.

    "We have decided to discontinue the Amp iPhone application," the company said in a prepared statement. "We've listened to a variety of audiences and determined this was the most appropriate course of action."

    The application told young men how to score with 24 “types” – such as Sorority Girl, Cougar, Rebound Chick and Goth – and provided pickup lines and links to resources for the effort.
    It also urged them to post information about their conquests online. The controversy was a double-edged sword - it created a firestorm among some critics who said that the company was guilty of exploiting women, but it also made the free app one of the most popular in the iTunes Store.

    The company previously had apologized for having offended anyone, but left the app up, which led some people to suggest that there was a certain lack of sincerity in the apology.
    KC's View:
    ’d like to suggest that Pepsi didn’t back down until the folks there read the withering comments made about the app here on MNB this week. But that’s probably not the case.

    Still, we believe here that Pepsi did the right thing, if a little late. And I’d be willing to bet that company CEO Indra Nooyi had something to do with the decision - it may have gotten a little personal when it was suggested that, as the mother of daughters, she might not want to let them hang out with guys who had iPhones.

    Not everybody agrees. Some people think this is political correctness gone wild.

    But we think they are wrong. This app exploited base instincts and demeaned the people who used it. And just for the record, I am anything but a prude. But I am a dad, and I try not to forget that in the pursuit of profit and “buzz.”

    Published on: October 23, 2009

    The Chicago Tribune reports that Supervalu-owned Jewel-Osco has decided to abandon the Urban Fresh small store concept, featuring such items as gourmet fresh foods and organic produce, that it has been testing in the city’s Lincoln Park area.

    According to the story, the store will close at the end of the month and the company has no plans to build any more.

    The Tribune notes that at the time the store opened in September 2008, “Supervalu Chairman Jeff Noddle said the experiment would allow the company to expand into urban areas where real estate for larger stores is hard to find.”

    But Noddle no longer is in charge at Supervalu, having been replaced by former Walmart executive Craig Herkert.
    KC's View:
    Maybe it was just a case of bad timing - the store did open, after all, right at the beginning of the recession.

    On the other hand, this could be a bellwether of the kind of company Herkert plans on operating. This is not a criticism, just an observation ... one based on a number of conversations with people who probably would know.

    I would have to believe that there is a place in upscale urban communities for stores like Urban Fresh; I’d been there, and I liked it. but maybe there just isn’t a place for it within the Supervalu community.

    We’ll see.

    Published on: October 23, 2009

    Lots of news about Walmart this week...

    • The Financial Times reports that Walmart is planning “a new US expansion drive in major cities using smaller and more efficient versions of its superstores, even as it continued to reduce its rate of annual square-footage growth in the US.” In other words, it plans on going where no Walmart has gone before.

    “We do have considerable opportunities to expand here in the US and especially in major metropolitan areas; and we will introduce new innovative formats here in the US,” CEO Mike Duke told analysts meeting this week.

    Walmart had previously announced that it plans to dedicate new money and staff to its small store initiatives. Also on the table - more of its 39,000 square foot Supermercado de Walmart Hispanic supermarkets to build on the success of two opened this year in Texas and Arizona.

    Eduardo Castro-Wright, head of Walmart’s US stores division, said the moves “will help us penetrate markets that have been traditionally difficult for us.”

    FT also reports that Walmart “expects its international store footprint to grow faster than its US operations next year, accounting for more than two-thirds of its new square footage growth ... This year marked the first in Walmart's history in which its US store footprint has expanded more slowly than its international business.”

    The story also notes that Walmart expects “to accelerate store growth in the US in 2011 as the economy recovers, after focusing capital expenditure for the coming year on remodels aimed at improving returns from its existing stores.”

    Reuters reports that the company’s Sam’s Club division “is shifting its focus from opening new clubs to remodeling existing ones as it strives to increase sales ... The No. 2 U.S. warehouse club operator also said it is testing a new store layout, revamping merchandise to add more food and drugs, and streamlining operations so it can reduce labor hours in its clubs 6 percent to 8 percent over the next five years.”

    The company said it would “increase space in its clubs for produce, meat and bakery items, over-the-counter drugs, and health and beauty-care items. It is cutting space for large appliances, sporting goods, furniture, movies and DVDs,” according to the Reuters story.

    "We are absolutely raising the bar on club productivity, while also focusing on improving that in-club experience," Sam's Club CEO Brian Cornell told analysts this week.
    KC's View:
    Not sure what it is, but one gets the sense that Walmart suddenly has thrown its marketing vehicle into a higher gear...perhaps (to stretch the metaphor a little further) because the engine has been firing on pretty much all cylinders.

    In which case, it is going to be an even tougher competitor.

    Bring your A game, folks. You’re going to need it.

    Published on: October 23, 2009

    In the UK, the Daily Mail reports that Tesco has opened its first self-checkout-only store in Kingsley, Northampton, which “has a total of five self-scan tills overseen by a single member of staff but no manned checkouts. It is described by the company as an 'assisted service store' designed to increase efficiency and speed up the shopping process.”

    According to the story, the new Tesco Express store is raising some concerns, with critics warning that “the move marks the end of basic human interaction during weekly shopping trips and could eventually cost thousands of jobs.”

    And a spokesman for Walmart-owned Asda Group, one of Tesco’s biggest competitors, tells the Daily Mail that “hell would probably freeze over before we had a store with no customer interaction at all on the checkouts.”

    Tesco says it has gotten no complaints and that lines seem to be moving faster in the new store.
    KC's View:
    irst of all, I’m not entirely sure I buy into the notion that manned checkout lanes equal a quality interaction between two human beings. It can, but not necessarily. in fact, not so much.

    Too often, the person manning the checkout line is too busy talking to her friend on the adjacent lane to actually talk to the shopper. Or just finds interaction too much trouble.

    My question to Tesco would be, are you using the self-checkout lanes purely to save money on labor? Or are you taking at least some of the people that you used to have at the front end, and placing them at strategic places in the store where they can actually talk to customers, help them find things and maybe ever (gasp!) sell stuff? Because this approach could ratchet up the human interaction, not eliminate it.

    Furthermore, I have to say that to be honest, there are shopping trips when the whole idea of human interaction is way overrated. Not always, but sometimes. On those days, for those trips, maybe the Tesco Express in Kingsley, Northampton, would prove to be my store of choice and that the self-checkouts there would actually be a differential advantage.

    Published on: October 23, 2009

    Brand Week reports on a new study on the efficacy of in-store marketing from retail consultancy Miller Zell, suggesting that:

    • 32 percent of shoppers say that in-store marketing is “very effective,” compared to 27 percent who said the same thing about ads outside the store.
    • 70 percent of those polled said that endcaps are the most engaging displays in store, “followed by merchandising displays (62 percent), and department signage (58 percent). Ceiling banners and overhead mobiles have the least impact.”
    • According to the story, “shelf strips (55 percent) and shelf blades (50 percent) have become more important, especially among the Gen X and Gen Y crowds, who feel the more information the better, per the report.”
    • “Overall, women and Gen Y consumers were most influenced by in-store marketing efforts.”

    In addition, almost half of those polled said they would like to see more product information as part of in-store advertising and promotional efforts.
    KC's View:
    This last bit of information supports a central mantra here at MNB: transparency is everything.

    Published on: October 23, 2009

    Yesterday, based on a number of news stories, MNB reported that the city of San Francisco would be considering a new bill that would ban the use of paper bags by grocery stores and drug stores. According to the stories we read, the proposed legislation would not just ban paper bags, but also would require that people who bring in their own reusable bags be given a 10 cent discount for each bag used.

    MNB user Dave Heylen of the California Grocers Association (CGA), offered the following response, which we are posting in its entirety:

    “Recent media stories reporting that San Francisco is considering a ban on paper bags are incorrect.

    “Here are the facts:

    “The same San Francisco Supervisor who introduced the city’s plastic bag ban ordinance several years ago has proposed new legislation that would require large grocery stores and pharmacies to provide a 10-cent rebate as an incentive for customers to bring their own carryout bag. The proposed legislation does not prohibit grocery retailers from using paper bags, it only require retailers to provide a 10-cent per bag used rebate for consumers who bring their own carryout bag(s).

    “In addition, the ordinance calls for fines of $100 to $500 for retailers failing to provide the rebate.

    “In 2007, San Francisco passed its compostable carryout bag mandate which basically eliminated plastic bag use in large grocery stores and pharmacies.  After the plastic bag ban was implemented, San Francisco actually saw an increase in plastic bag litter according to the city’s own survey.”

    In other words, most of us got it wrong.

    It illustrates a common problem in the news and punditry business. One person writes or says something, and before long it becomes conventional wisdom...even if it is inaccurate. This one was my fault, and I apologize.
    KC's View:
    I’m not sure the actual provisions of the bill, as described by Dave Heylen, are any better than the ones originally described.

    If stores want to offer a rebate for people who bring in their own shopping bags, that probably ought to be up to them - it can serve as one more way to attract customers, rather than being mandated by government. On the other hand, I’m not philosophically opposed to bottle laws, which mandate rebates on bottles and cans returned to the store.

    So maybe I’m inconsistent on this. I do know I am uneasy about it.

    Published on: October 23, 2009

    The Newark Star-Ledger reports that Andreas Guldin, a member of the board of directors at the Great Atlantic & Pacific Tea Co. (A&P) as well as an executive managing director at the company, has been named vice chairman and chief strategy officer. The move comes in the wake this week of the forced resignation of CEO Eric Claus.
    KC's View:
    Good luck with that.

    Just for the hell of it, I did a quick check on the Internet and found the following Forbes profile of Guldin:

    “Dr. Guldin was a Senior Executive Vice President (Corporate Finance) and Co-CFO of Tengelmann, a role which he held from July 2005 until April 2007. He has also served as an advisor to the Executive Chairman and Board of Directors of the Company and he was lead negotiator in the acquisition of Pathmark Stores, Inc. ('Pathmark'). Prior to joining Tengelmann, Dr. Guldin served from May 1995 to March 2005 as a member of the Executive Management Team and Chief Financial Officer ('CFO') at E. Breuninger GmbH & Co. (Germany), the most prestigious department store and fashion retailer in Germany. Since 2008, Dr. Guldin has served as CEO of Emil Capital Partners, LLC ('ECP'), an investment, management and consulting entity focused on business activities in North America. ECP is a wholly-owned subsidiary of Tengelmann and is a Company stockholder. Dr. Guldin is a Visiting Faculty Member at the University Stuttgart and Dusseldorf for Finance and Performance Management. He holds a masters degree in Psychology from J.W. Goethe University in Frankfurt, Germany; a masters degree in Business Administration from London Business School, UK; and a doctorate degree in Economics and Business Administration from University of Hohenheim, Germany.”

    I don’t mean to be cynical here, but you tell me. Does this guy sound like he’s the guy to figure out a strategy that will save A&P in the rough and tumble New York and New jersey marketplace? I’m assuming it won’t be the same multi-format strategy, with a heavy emphasis on value-driven stores, that Eric Claus was working on...because if they thought that was the answer, they wouldn’t have gotten rid of a smart, respected, hard-driving CEO.

    Two things stand out to me. He was CFO at a “prestigious department store and fashion retailer,” and he led the negotiations to acquire Pathmark, which has been a nightmare for A&P.

    Like I said, good luck with that.

    Published on: October 23, 2009

    • Call it another reality check for print journalism. Less than two weeks after Conde Nast decided to close down a number of its magazines, including Gourmet, Time Inc. announced that it will cut back by about 25 percent the number of Fortune issues that it publishes each year. According to the Wall Street Journal, this is seen as a prelude to broader cuts at Time Warner.
    KC's View:

    Published on: October 23, 2009

    • yesterday reported a whopping 69 percent increase in third quarter net income, to $199 million, compared to $118 million during the same period a year ago. Q3 sales were up 28 percent to $5.45 billion.

    According to the Bloomberg story, CEO Jeff Bezos said that the positive financial performance came because the company “attracted customers by expanding overseas, offering shipping promotions and introducing new versions of the Kindle electronic reader.”

    • McDonald’s announced yesterday that its third quarter profit was up almost six percent to $1.26 billion, from $1.19 billion during the same period a year ago. Q3 revenue was down 3.5 percent to $6.05 billion, though global same-store sales were up 3.8 percent.
    KC's View:

    Published on: October 23, 2009

    ...will return.
    KC's View:

    Published on: October 23, 2009

    In game five of the best-of-seven American League Championship Series, the Los Angeles Angels held on to defeat the New York Yankees 7-6; the Yankees have a 3-2 lead in the series, which now returns to New York to determine who will go to the World Series to face the National league champion Philadelphia Phillies.
    KC's View:
    Both Sansolo and I are rooting incredibly hard for the Angels, because as Mets fans, a World Series between the Yankees and the Phillies would be almost more than we could bear. In fact, he sent me an email yesterday from Tokyo saying that “if we end up with Yanks-Phils, I'm rooting for weather just bad enough to make sure this thing never comes to a conclusion.”

    Published on: October 23, 2009

    Traveling in the Pacific Northwest this week on business, I made a series of deliberate choices in how I get around.

    Arriving in Portland, Oregon, instead of renting a car or taking a cab from the airport, I instead took the light rail train into the city, where it deposited me just a couple of blocks from my hotel. Quick, easy and inexpensive. Not to mention environmentally preferable.

    Then, when it was time to leave the city, I walked about two blocks from the hotel to catch a ride on Portland’s excellent streetcar system from one end of the city to Union Station. Quick, easy..and in this case, free because I was in the fare-less zone.

    At Union Station, I caught the Amtrak train to Seattle. It took about three hours - around the same time it would have taken to drive, and if you factor in time to and from airports, checking and going through security, probably about the same amount of time it would have cost to fly there. And not only was the ride cheap - about $30 - but the views were spectacular, I got a lot of work done, and at the end of the trip was in the middle of Seattle’s downtown.

    If I need a car today, I’m going to use Zipcar - the wonderful car sharing service that allows subscribers to have access to environmentally friendly vehicles such as Minis for a by-the-hour rental fee. This system removes the need to rent a car for long periods of time if you are only going to need one for an hour or two, and it works beautifully, in my experience. (If you actually lived in the city, you might not even need to own a car.)

    Tonight, when I venture out to Seattle’s airport to fly home on the red-eye, I’m going to use the city’s new light rail system to get there. The nearest stop is about two blocks from my hotel, and the trains look both new and comfortable. The only glitch in the system is that at the moment, the light rail doesn’t go all the way to the airport, and I’ll have to catch a shuttle bus for the last mile...but this will be remedied in a few months when the airport light rail station opens.

    This is the way things are supposed to work. Some of it is luck and good fortune on my part, because of where my hotels have been situated and how the timing has worked out, but my sense is that these two wonderful cities in the Pacific Northwest have adopted a smarter, almost European approach to public transportation.

    It is yet another reason that Mrs. Content Guy is convinced that at some point, I’m going to venture to Seattle or Portland and simply not come home. I’ll shoot her an email saying that I found a place to live, and if she’d like to join me, she’s welcome.

    The new season of “30 Rock” just confirms it. Alec Baldwin is the funniest man on the planet. Maybe the Solar System.

    Two excellent wines to suggest to you this week.

    The J. Bookwalter Subplot #23 is an intense blend that was perfect, when I had it, with smoked beef brisket sliders at a neat place called bin on the Lake in Kirkland, Washington. (I checked, and it goes for about $20 a bottle, for those keeping score.)

    And another blend - the Townshend Cellars Red Table Wine - was perfect when I had it with this amazing smoked chicken tortilla soup at Etta’s in Seattle. (This one goes for about $10 a bottle - a recession steal, in my view.)

    Just finished the new Robert B. Parker Spenser novel, “The Professional.” While it isn’t A+ Spenser (like “Early Autumn,” still my favorite in the series), this one certainly gets a B. Not enough fighting and not enough Hawk, but lots of food, Susan Silverman isn't too annoying, and an interesting moral dilemma for our hero to navigate, which is what the books are really about.  Certainly better than average Spenser...IMHO.

    Expecting some exciting MNB news next week. Stay tuned.

    Have a good weekend, and I’ll see you Monday.

    KC's View: