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    Published on: January 29, 2010

    Walmart yesterday announced a series of initiatives that the company’s vice chairman, Eduardo Castro-Wright, said would be "important elements in the company's strategy to deliver even greater value to its customers and shareholders."

    The goal, according to the announcement, is to “position the company to leverage its global scale to reduce costs of goods, accelerate speed to market, and improve the quality of products.

    “Walmart's new global sourcing strategy involves the creation of Global Merchandising Centers, a change in leadership and structure, and a strategic alliance with Li & Fung, a global sourcing organization.”

    The consolidated global sourcing structure centered around new Global Merchandising Centers (GMCs) was first announced at the company’s annual meeting last October, and Castro-Wright said they “represent the largest and most important element of our new sourcing strategy. These centers will create alignment between sourcing and merchandising and drive efficiencies across various merchandise categories." The company said that the core of the company's overall global sourcing strategy will be to continue increasing direct sourcing for the company's private brands.  Today, private brand merchandise represents more than $100 billion in purchasing annually.

    Walmart said yesterday that Ed Kolodzieski, currently president and CEO of Walmart Japan Holdings G.K. and Seiyu, has been promoted to executive vice president and will lead Walmart's Global Sourcing, reporting to Castro-Wright.  

    Walmart also said yesterday that it has “finalized a series of agreements with Li & Fung.  The agreements are non-exclusive and do not include volume or shipment commitments.  The strategic alliance between the two companies will allow Walmart to realize the benefits of consolidating a portion of its sourcing portfolio.  Li & Fung, which is forming a new company to manage the Walmart account, is expected to build capacity that would enable it to act as a buying agent for goods valued around US$2 billion within the first year.”

    In addition, the Wall Street Journal reports, Walmart “is consolidating its U.S. realty, store operations and logistics divisions, which will operate under three geographic business units, as the world's biggest retailer aims to become more efficient and lower operational costs.” The company “plans to break up its U.S. business into North, South and Western regions, each of which would have its own real estate teams to scout and build new stores, and merchandising teams to fine-tune the mix of products sold to suit local customs. The new model more closely resembles the company's international operations, which are headed by country presidents with similar teams working underneath them.”

    Castro-Wright, in a memo to employees, said that the regionalized approach "will also support our efforts to accelerate our speed to market with new formats.”
    KC's View:
    Not much to say about these announcements except that yet again, Walmart proves that it is restless about both efficiency and effectiveness.

    I do have to admit that I smile every time I see Ed Kolodzieski’s name, because in all my years of doing this, Ed is the only person (that I know of) who, when he took me on some store tours, was armed.

    For good reason. (Having nothing to do with me.) As I recall, this was when Ed was working for Kash n’ Karry in Florida, and one of the things that he’s always done in the various places he has worked is get involved in the police auxiliary. Which means that you have to be prepared, and why I noticed that he was wearing a gun on an ankle holster. (Trust me. He may not have been worried about me, but I didn’t ask him any tough questions that day. No fool I.)

    Published on: January 29, 2010

    The Albany Times Union reports that Price Chopper has filed suit against bankrupt Penn Traffic, saying that the company broke its contract to sell it 22 supermarkets for $54 million when it signed another deal to sell 79 stores to Tops Markets for $85 million ... In the filing, Price Chopper claims ‘significant economic losses and damages’ and seeks a ‘break-up fee’ of about $1.6 million, or three percent of the $54 million purchase price.”

    "They were not entitled to go out and peddle that deal," Neil Golub, president and chief executive of Golub Corp., which operates Price Chopper stores, tells the paper. "But they did that."

    The Times Union reports that Penn Traffic attorneys could not be reached for comment .
    KC's View:

    Published on: January 29, 2010

    USA Today reports that the National Retail Federation (NRF) seems to be feeling pretty good these days, projecting a 2.5 percent retail sales increase in 2010 - which would be a five point turnaround from the 2.5 percent sales decrease seen in 2009.

    However, this projection is linked to the notion that retailers are going to change the way they do business, aligning their products and services more closely with the needs and desires of shoppers...who are themselves realigning their priorities.

    According to the story, there are four likely changes over the coming year:

    • Stores will be more precise about what they offer and when, choosing to under-buy rather than over-stock, and focusing whenever possible on private brand or exclusive merchandise.

    • Price will continue to be a critical component, with value being an over-arching concern for consumers. That means that retailers will be looking for sizes and packaging that will allow them to charge less whenever possible.

    • Informational retailing is expected to be as major trend, as stores look for ways to not just be a source of product, but a resource for relevant information.

    • And finally, retailers will be looking for ways to go green - in part because consumers demand it, but also because there is clear evidence that a green strategy can have a positive impact on the bottom line.
    KC's View:
    No argument here. These conclusions sound a lot like those reported by IRI’s Thom Blischok in his speech to the FMI Midwinter Executive Conference, as reported here earlier this week.

    Published on: January 29, 2010

    The Boston Globe reports this morning on how “a growing number of consumers ... are ditching their beloved Kellogg’s Raisin Bran and Wonder Bread for less expensive versions without the familiar packaging. Unit sales of private label goods have jumped 8 percent since 2007, while brand names have declined roughly 4 percent, according to Nielsen Co.

    “Many shoppers are finding that sugar, shredded cheddar, and milk peddled under store labels cost up to 40 percent less and often taste just as good as nationally known brands. Some items are even made by the same manufacturers.”

    The story goes on to say that the recession may have instigated this trend, for many customers it will be a permanent switch. And, the story suggests, this means that Americans are simply coming to thew realization that Europeans came to years ago - that private brands are an acceptable, even preferred alternative in certain cases.
    KC's View:
    None of this is new information. It is the just the Globe version of a story that is being repeated over and over in newspapers and on television broadcasts around the country. But the point is that the story is being repeated often...and is gaining traction. Which does tend to change the game permanently.

    Which creates two challenges. The obvious one is to CPG companies, which now have to compete not just with each other, but also with their retail customers.

    But the other challenge is to retailers, which have to live up to the promise. Nothing will kill private brands faster than retailers that take them for granted, that do not focus on quality, that do not use them as a clear differentiator.

    Published on: January 29, 2010

    The San Antonio Express-News reports that HEB is testing a new Men’s Zone concept in three of its stores, a place that “contains 534 products, many touted to de-stress skin, anti-puff eyes, repair wrinkles, soothe scalps and keep guys smelling citrusy-fresh all day.

    “Many men, shopping baskets in hand, find what they want and leave. But others, pushing carts filled with produce, meat and paper towels, stop to talk sports while hanging out by TVs that broadcast soccer, car racing, basketball and, soon, the Winter Olympics. The only thing missing is the beer (that's near Aisle 2) and a recliner (the Home and Garden aisle probably has something).

    “These men say they have the time to linger because they no longer need to search for their pretty-boy munitions among the arsenal of women's roll-ons, speed sticks, moisturizers, hair sprays and shavers, which are spread across multiple lanes.”

    Best news of all - sales of products sold in the Men’s Zone are up 10 percent overall since the section was brought together.

    The Express-News notes that “it's no secret the male grooming ritual has undergone a radical transformation, especially among aging boomers and younger men. They support an industry that generates $4 billion annually in the U.S. and $43 billion globally. The latter has averaged an annual growth rate of 8 percent during the past five years, estimates consumer-goods maker Procter & Gamble.”
    KC's View:
    Go figure. I went to Google and entered “Texas” and “metrosexuals,” and found out that there are close to 700,000 entries.

    Just FYI...P&G had a version of the Men’s Zone operating at the recent Food Marketing Institute (FMI) Midwinter Executive Conference in Orlando, and was actually giving shaves and facials to a wide range of guys who seemed up for a little pampering. One guy I know, who always seems to have a five o’clock shadow ten minutes after shaving, said he got the closest shave of his life...and loved it.

    Clearly, there’s a business opportunity here.

    Maybe, under the skin, we’re all metrosexuals.

    Even if we’re not from Texas.

    Published on: January 29, 2010

    • The BBC reports that Cadbury employees have staged a protest outside the company’s Bournville factory, expressing a concern about jobs that could be lost when the company is taken over by Kraft Foods.
    KC's View:

    Published on: January 29, 2010

    • Harris Teeter said that its first quarter sales were up 4.7 percent to $972.,3 million, on same-store sales that were off 2.4 percent. Q1 profit declined to $42.3 million from $44.3 million in the year-ago period.

    • Ingles Markets reports first quarter sales of $841 million, up 4.5 percent compared to the same period a year ago, on same-store sales (excluding gasoline) that were up 0.8 percent. Q1 net income was $6.0 million compared with net income of $11.1 million for the year-ago quarter.

    • Rite Aid Corp. said that its January revenue fell 3.3 percent for the period, to $1.91 billion from $1.98 billion, on same-store sales that were down 2.1 percent.

    • Amazon.com said yesterday that its fourth quarter net sales were up 42 percent over the year before, to $9.52 billion. Q4 net income increased 71 percent to $384 million, compared with net income of $225 million a year ago.

    • Procter & Gamble said that its second fiscal quarter earnings were $4.66 billion, down from $5 billion during the same period a year ago. Q2 sales were up 6.4 percent to $21.03 billion.

    • Colgate reports that its fiscal fourth quarter sales were up 11.4 percent to $4.08 billion, with earnings of $631 million, up 27 percent from the same period a year ago.
    KC's View:

    Published on: January 29, 2010

    J.D. Salinger, the famously reclusive author who changed literature with a single novel - “The Catcher in the Rye” - died yesterday of natural causes at his home in Cornish, New Hampshire. He was 91.
    KC's View:
    I haven’t read “The Catcher in the Rye” in decades. It is not like “The Great Gatsby,” which I try to read every year or two. Still, I can vividly remember reading it while in high school and knowing that, even though I had a vastly different life than either Salinger or his protagonist, Holden Caulfield, the novel was tapping into something visceral and universal.

    If you want to know something about that book, which is set at the dawn of the 1950’s, just find a copy that is owned by pretty much any teenaged boy. Let it fall open to just any page...and almost every time, it will open to the scene in the New York hotel room. It doesn’t matter how sophisticated kids get, or how much they see on TV or the internet. There is something dangerous and compelling about those paragraphs that remains so even today.

    I think it is called great writing.

    Published on: January 29, 2010

    ...will return.
    KC's View:

    Published on: January 29, 2010

    While MNB is a global community, I know there are a lot of readers in the New York metropolitan area, specifically in Westchester and Fairfield counties. Which is why we want to let you know that “Content Guy” Kevin Coupe will be at the River Cat Grill in Rowayton, Connecticut, this Sunday, January 31, from 12-1:30 pm to talk about and sign copies of The Big Picture: Essential Business Lessons from the Movies, which he co-authored with Michael Sansolo.

    There will be books available for sale, courtesy of the local Barrett Bookstore ... and Mrs. Content Guy will even be there to say hi to anyone who is more interested in meeting her (which is probably most of you). And, you can see for yourself the hospitality that propelled the River Cat into the pages of The Big Picture.

    For directions, go to: http://www.rivercatgrill.com

    Hope we see you!
    KC's View:

    Published on: January 29, 2010

    You may not have heard, but Michael Sansolo and I have a new book out that looks at business lessons from the movies. We must be onto something, because lately it seems like we keep seeing references to this theme in various places, even if they don’t specifically mention the book.

    The latest was in the DailyBeast.com, which had an extremely interesting column the other day called “The Fall of Harrison Ford.”

    The premise of the piece is this:

    “Throughout the ‘80s and ‘90s, Harrison Ford reigned as the unchallenged star of middle-of-the-road cinema. Almost unique in modern history, he not only created two iconic characters - Han Solo and Indiana Jones - but also managed to step away from them, into a hugely successful leading-man career in movies such as Working Girl, Patriot Games, and The Fugitive, to name a few. He excelled in grownup action roles, respectably above the pyrotechnic-driven thrills of Stallone and Schwarzenegger - but he was also able to charm as a romantic lead.

    “As one-note as Ford’s performances were, audiences seemed never to tire of that note. Until one day, they did.”

    Except for the tepid Indiana Jones and the Kingdom of the Crystal Skull, which garnered audiences but little respect, Ford hasn’t had a hit in a decade. His latest, Extraordinary Measures, out last week, looks like yet another bomb, well-meaning but uninspired. (To be honest, I have not seen it. But I feel no compulsion to run out and do so. Which is the problem.)

    The story analyzes some of the problems that make it hard for Ford at this point in his career. Among them:

    A single-note actor eventually goes off-key. Let’s face it. Han Solo isn’t all that different from Indiana Jones, or from Ford’s Jack Ryan, or even from his Richard Kimble. And he probably wasn’t talented enough actor, in the end, to do wildly different projects. Eventually, the audience just gets tired of you. (The corollary to this is the “every actor has an expiration date” rule.)

    Disappointment hurts. There was hardly anyone not looking forward to Indiana Jones and the Kingdom of the Crystal Skull, but it speaks volumes that almost nobody is talking about a fifth movie in the series. (The corollary to this rule is, “don’t let George Lucas write your script.”) The movie just wasn’t very good, and disappointed in the way that the three Star Wars prequels did. (There’s that George Lucas rule again.)

    But here’s the concluding paragraph of the piece, which brought it home for me:

    “Business seminars could use the Ford implosion as a case study to show the need to remain agile and change with the times. And it is possible that when the actor passes out of this period, he could have an On Golden Pond moment, and, like Henry Fonda was then, be rewarded for his longevity. His fans yearn for that next phase to come. Because in the end, when Hollywood Homicide has long been forgotten, Han Solo and Indiana Jones will live on, along with Blade Runner and The Fugitive. He leaves us with the Harrison Ford we once loved moderately intact.

    “Which these days in a celebrity, is far more than we’ve come to expect.”

    Let’s rerun that phrase one more time, for good measure:

    Business seminars could use the Ford implosion as a case study to show the need to remain agile and change with the times.

    Whether you are an actor, a CPG company or a retailer, it is critical to continue to innovate, to play different notes, to move forward in terms of both vision and execution.

    Or the curtain will inevitably fall.




    After watching the announcement of the new iPad this week by Steve Jobs, Mrs. Content Guy asked me if I planned on getting one.

    My response: “I just can’t imagine why I’d want one.”

    But I quickly amended that statement, to: “Actually, I just can’t imagine why I’d need one right now. But I know I want one. A lot.”

    That’s the real genius of Jobs and Apple. They make products so innovative that even if we don’t need them, we want them.

    Immediately.




    My wine of the week: the 2006 Giant Steps Sexton Dijon Clones Pinot Noir from Australia, which is bright and smooth and yummy. (This one also gets the Mrs. Content Guy imprimatur, by the way...and she’s a tougher judger than I am.)




    That’s it for this week. have a great weekend, and I’ll see you Monday.

    Slainte!
    KC's View: