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    Published on: February 8, 2010

    Advertising Age reports that in an effort to streamline its SKU count, “Walmart has sent Glad and Hefty bags packing from its food-storage shelves ... In food bags, Walmart has consolidated nationally with one brand, SC Johnson's Ziploc, and its own private label, Great Value, wiping Glad and Pactiv Corp.'s Hefty off its shelves, according to a person familiar with the matter. (Pactiv confirmed the move for its brand, while spokespeople for Walmart, Clorox and SCJ declined to comment.)

    “In trash bags, Glad and Hefty have retained their places on the shelves, two people familiar with the matter say, but Hefty now has a smaller assortment limited to its CinchSak line. This position was most likely preserved, says Consumer Edge Research analyst Bill Pecoriello, by Pactiv Corp.'s agreement to take over all private-label manufacturing for Walmart's Great Value trash and food bags.

    “The clearest winner in the Walmart bag war - besides the retailer's own Great Value - appears to be SC Johnson's Ziploc, with mixed results for Glad, owned 80% by Clorox Co. and 20% by Procter & Gamble Co., and Pactiv Corp.'s Hefty.”

    And, Ad Age writes, “Similar decisions are likely to play out across other categories over the course of the year, as Walmart steps up efforts to streamline brand assortments, often to the benefit of its fast-expanding Great Value brand and national brands that survive the vetting.”

    The Wall Street Journal also reports on this trend, reporting:

    “Private-label sales accounted for 13.4% of a basket of U.S. groceries in 1994, but likely reached a new high of 17.5% in 2009, fuelled by tougher times, says Robert Moskow of Credit Suisse.

    “The key question is whether Americans will stick with generics if the economy improves. In some consumer-product categories such as razor blades, differences in quality are noticeable. A better shave is probably worth paying for again as soon as it becomes affordable. But for many commodity-like products, second-best has proven good enough. Private-label products account for 26.2% of ketchup and condiment consumption in U.S. households, up 4.2 percentage points from 1994, according to Consumer Edge Research. The firm found that 63.3% of shoppers were ‘very satisfied’ with generic condiments, nearly the highest rate of all categories surveyed.

    “Spices could be in the same boat. Like ketchup, spices can be hard to distinguish from premium alternatives, apart from packaging. Spice manufacturer McCormick saw private label's share of its markets rise to 14.5% in 2009 from 13.5% in 2008, Mr. Moskow says.

    “The shift appears have jolted even brand-focused Wal-Mart into action. The retail giant has scrambled to accommodate consumer tastes by offering more generic foods in recent years. McCormick generates 11% of its revenue from sales to Wal-Mart, mainly by selling brand-name spices. But Wal-Mart has considered switching to private-label spices, testing the idea by replacing McCormick products with generics in some stores.

    “True, McCormick's sales at Wal-Mart may not be wiped out altogether if such a switch gathered pace. The company also produces private-label spices that could replace some of its brand-name products on Wal-Mart's shelves.

    “Even so, McCormick's margins could take a big hit. The company's generic spices sell for 30% to 40% less than its regular products. On the cost side, materials and packaging expenses are probably only slightly lower for private-label spices. And the company could hardly risk cutting its advertising budget.”
    KC's View:
    This is ironic, to say the least.

    Come with me now back to April 1, 2004, when we had our annual April Fool’s Day gag on MNB. And this is what we wrote:

    Wal-Mart announced today that it has decided to significantly cut back on its SKU count in nonfood sections where, according to one senior executive, "it just doesn’t matter."

    The Bentonville Behemoth said that starting today, April 1, it will only carry two brands of laundry detergent - Tide, and a new private label brand, "Roy's Best Shot," which is named after founder Sam Walton's dead dog. These two brands will be carried in just two sizes apiece - a two-gallon jug, and a one-gallon jug.

    Once this roll out is completed, the anonymous executive said, the same philosophy will be applied to other categories in the traditional supermarket mix where taste is not an issue: toilet paper, paper towels, napkins, dishwasher detergent, and the like.

    "It's really very simple," the executive told MNB in an exclusive interview conducted in the deserted parking lot of a Kmart. "We think there are simply too many products out there, so we're just going to carry the number one national brand in these non-taste categories, and our own label. Do you seriously think for a moment that anyone will stop shopping at Wal-Mart because we have an edited selection in these products? No way. They will choose between the national brand and our brand, which will be about half the price."

    Asked if the company was concerned about the impact on all the other laundry detergents that counted on Wal-Mart for a significant percentage of their sales, and now could be facing financial ruin, the executive snorted. "Heck, no," he said. "If it weren't for us, they'd have been out of business years ago.

    "What none of these manufacturers seemed to comprehend," he added, "was that while everyone was worried about us putting a lot of smaller retailers out of business, they should have been figuring out how to keep us from putting manufacturers out of business."

    I was trying to be funny, but I also was trying to make a serious point. And go figure, for once in my life, I may actually have gotten one right. (Though I did take the Saints in the Super Bowl, so I’m feeling pretty good this morning.) My recollection is that at least one or two people accused me of being irresponsible by giving Walmart ideas, but I’ll resist the impulse to suggest that this all started with MNB...

    The broader trend is not necessarily a revolution in SKU count, but a creeping evolution that could change the complexion of both the supermarket and CPG industries.

    Think about it. The growth of formats such as Aldi and Trader Joe’s shows that people are willing to shop at stores that offer limited selection. Supervalu is putting ever-greater emphasis on its Save-A-Lot format, which mirrors what Aldi is doing. Club stores such as Costco, Sam’s and BJ’s continue to be highly formidable competitors. And just a couple of weeks ago, at the panel I moderated at the excellent marketing conference held at Northwestern University’s Kellogg School of Management in Chicago, there was considerable discussion of the likelihood that in some stores, secondary and tertiary brands would be threatened as the retailers focus more on primary and private brands.

    As Buffalo Springfield sang

    There's something happening here
    What it is ain't exactly clear...

    And added:

    There's battle lines being drawn
    Nobody's right if everybody's wrong...

    Published on: February 8, 2010

    In Syracuse, the Post-Standard reports that “Wegmans is dropping its in-store, dry-cleaning drop-off and pickup service. The motive, the company says, is to make more room to allow Wegmans stores to do what it says they do best: sell food, not peripherals.

    “If it’s the start of the trend, or a one-and-done for Wegmans only, it will be interesting to watch. In the ‘90s and into the 2000s, supermarkets couldn’t get enough of the added-on services: photo, video, child-care, salons, restaurants, pharmacies and more.

    “Don’t expect to see pharmacies leave supermarkets - far too profitable - but let’s watch and see if this is a move by grocers to get away from having too much on the side, taking the eye off a retailer’s core business. If it’s the start of the trend, or a one-and-done for Wegmans only, it will be interesting to watch. In the ‘90s and into the 2000s, supermarkets couldn’t get enough of the added-on services: photo, video, child-care, salons, restaurants, pharmacies and more.”
    KC's View:
    The story correctly notes that Wegmans has never been a company to be complacent about products and services. In the past, it eliminated photo counters when digital photography got popular, dropped video rentals when Redbox got hot, and even got rid of its home improvement stores when it got to be a distraction from the core food business.

    The lesson is simple. To be relevant, one has to be willing to constantly re-evaluate every product and service in the store.

    Published on: February 8, 2010

    The Wall Street Journal reports that a new study by the US Department of Agriculture (USDA) reveals that fewer than one percent of the nation’s farms actually are organic - and that in 2008 there were precisely 14,540 organic farms generating $3.16 billion in annual sales.

    Of course, “precisely” may not be the most precise word to use in this case, since the tally includes farms certified as organic by the USDA, or so small (with annual sales lower than $5,000) that they are exempt from USDA rules.

    According to the study, organic farms remain just a small fraction of the nation’s total, representing about 4.1 million acres of land versus 922 million of farmland in the nation overall.

    The Journal writes, “The USDA conducted the organic farming survey in part to establish a baseline for tracking the health of the sector, which doesn't yet produce enough to satisfy all domestic needs. While U.S. consumers are willing to pay a premium price for organic products, some U.S. food companies must import organic ingredients from overseas, such as soybeans from China.”
    KC's View:

    Published on: February 8, 2010

    The Buffalo News has an interview with Tops Markets CEO Frank Curci, in which he addresses the challenges facing his company now that it has more than doubled its size by acquiring bankrupt Penn Traffic’s 79-store grocery chain.

    Some excerpts:

    “We’ve got to get the stores back to their normal condition before we can start making improvements. We plan to [renovate] more stores than fewer. We will have to prioritize and decide what will give people faster returns.”

    “As you can imagine, these stores have been capital-starved for years. Right now we’ve got to figure out the condition of the company, then clean up the stores, get them filled with merchandise and [hire more people.]”

    “We can’t do everything in one year. Penn Traffic didn’t go into bankruptcy overnight, and the stores aren’t going to be up to our standards overnight, either. There were smart people running the company, but they were in a position where their hands were tied. It’s difficult running a company under bankruptcy. These stores were underinvested in.”
    KC's View:

    Published on: February 8, 2010

    • PriceSmart, which operates membership club stores in Latin America and the Caribbean, announced that its January sales went up 9.2 percent to $106.4 million, from $97.4 million during the same month a year earlier. Same-store sales were up 5.8 percent.

    • Wal-Mart de Mexico said Friday that its January sales were up 12 percent to the equivalent of $1.84 billion, on same-store sales that were up 5.5 percent.
    KC's View:

    Published on: February 8, 2010

    • Nash-Finch Company announced the promotion of Christopher A. Brown to President and Chief Operating Officer of Nash Finch Wholesale. Mr. Brown will remain an Executive Vice President of the Nash Finch Company.
    KC's View:

    Published on: February 8, 2010

    There was an interesting moment last Friday during Tony Kornheiser’s radio program, which runs mornings from 10 am - 12 noon on WTEM-AM radio in Washington, DC.

    Kornheiser was kvetching about the coming blizzard, when he started talking about the Broad Branch Market near his house in DC, and how it had let people in the neighborhood know that if the storm created conditions that prevented them from getting out of their houses to buy food, “we’ll go to your house...we’ve got some trucks, we’ll go to your house.”

    Kornheiser said that he mentioned this to his daughter, Elizabeth, who responded: “That’s the kind of bakery or restaurant or market that I want to open. I want to open something in a neighborhood where you have those relationships.”

    While conceding that such services can cost money, which means that products and services can cost more, Kornheiser added:

    “The difference is that in the last 30 years in that all the things that you need and all the things that you want are now given to you by faceless, nameless people or you get it out of catalogs or you order over the internet. And the local merchant, who your parents grew up with, caring about, that guy is gone.”

    This observation led to an extended discussion of whether the tide is turning back, and whether we’ll ever be a country again where people will pay more for great service.

    Which is an interesting discussion. But what made it most intriguing was what precipitated it - one store demonstrating both business sense and compassion in the same offering, and it being recognized as having value by a young woman in her twenties.

    Hope springs eternal.
    KC's View:

    Published on: February 8, 2010

    Notes & comments by the Content Guy

    For me, there is no debate about the best, most surprising and funniest commercial run during the Super Bowl last night. It was the commercial that, I suspect, that had most viewers wondering 1) how they did that, 2) if it was real, and 3) if it was real, once again, how they did that.

    And that was the commercial for “The Late Show with David Letterman,” which featured Letterman, Oprah Winfrey and, most improbably, Jay Leno.

    The set up was similar. Letterman was seen on a couch, complaining that he was at the worst Super Bowl party ever. The camera pulled back to reveal Winfrey, saying that he should be nice. And then, the commercial revealed Leno sitting on the same couch, saying that Letterman was only complaining because he was there, and then Letterman mockedLeno with a quick imitation, and then it was over.

    And I’m fairly sure that most people did what I did - I ran to my laptop immediately to find out if Leno was really in the ad, or if somehow they’d done it with a technological trick. It ends up that Leno was really in the ad, that the feuding comics had decided to bury the hatchet to get a laugh, and in the end I suspect that it improves the image of both men.

    The thing about this ad - unlike most of the other ads during the Super Bowl - is that it was completely unexpected, and totally unpredictable. And you can remember what the product was.

    Which is what great advertising should be.

    Here are some of my other favorite commercials from the Super Bowl:

    • The commercial for Snickers, featuring Betty White and Abe Vigoda. Just plain funny...and it is always great to see these old folks show up on screen.

    • The Coke ad featuring the Simpsons...which managed to be both uplifting and unexpected (mostly because I didn’t expect the Simpsons show up in a commercial).

    • The Bridgestone commercial with the whale...which benefitted from having a punch line that gave me a belly laugh.

    • The Audi commercial featuring the “Green Police.” It made me want to buy the car.

    • The Bud Light commercial with the “Lost” theme...which was my favorite of all the Bud commercials. (A note here, though. My 15-year-old daughter hated the beer commercials because, as she said, she felt that they imply that the only way to have fun is by drinking. She has a point.)

    • The Google ad, which was smart, specific, and aspirational - it made you feel good about being a Google user. (On “Morning Joe” this morning, they suggested it was in a league with the Apple “Think Different” ads of 1997.

    Honorable mention goes to the “National Lampoon’s Vacation”-themed ad, starring Chevy Chase, for It wasn’t a great commercial, but seeing him play Clark Griswold again made me smile.

    The commercials I hated included the dopy BoostMobile ad; the ad for the new film “Robin Hood,” starring Russell Crowe, which looked like “Gladiator II”; and the commercials, which are just an abomination.

    One other note: What is it about all the commercials with men in underwear? Oy!

    And a last comment: Jim Nantz may want to reconsider doing commercials during which he offers commentary on male-female relationships.

    Just a thought.
    KC's View:

    Published on: February 8, 2010

    On Friday, it was reported that the US Department of Labor said that the unemployment rate for January 2010 dropped to 9.7 percent, down from 10 percent in December. At the same time, the data shows that the US economy shed 20,000 jobs during the month, which the New York Times says deepens concern that relief from the deepest economic downturn in a generation would be slow to come.”

    I commented:

    This stuff makes my hair hurt. You would think that an increase in the unemployment rate would be a good thing, but economists don’t seem so sure. And the experts are predicting that the stock market probably won’t do well off these numbers.

    Beats me. Probably a good thing that I do what I do, instead of what economists do.

    MNB user Carla Baughman wrote:

    I remain befuddled that the so-called economic experts say the recession is over when the unemployment rate remains so high. (1) This rate doesn’t factor in those that gave up looking for a job. (2) This report fails to capture those that took cuts to pay/benefits in order to keep the jobs they have. The recovery is far from over.

    Another MNB usder wrote:

    I agree with you that the joblessness at 9.7% news should be good news. Why does the press report it so tepidly? I heard today from economist Robert Reich today that the US savings rate has gone up to 4.8% and you would think that was good news too but he too said it was negative news because consumers aren't spending money! And yet there are other economists who argued that the worst recession since the 1930's was caused (among other things) by the lowest savings rate ever because consumers don't have the savings to carry them through rough times. Do economists ever march in concert with their theories?

    The answer to that question actually came from another MNB user:

    Seriously…any time you get three Economist in the room…you’ll get four opinions…of which five will change…

    MNB user Richard Thorpe wrote:

    According to an article I read this morning the 9.7% unemployment rate reflects only those workers unemployed and looking for work in the last four week period. The real unemployment rate is 17% or roughly one in six.

    MNB user Greg VanOverloop wrote:

    It is my understanding the report does not account for people that stopped looking for work.  For example, metro Detroit had an improvement in the number because 30,000 people looking for work, stopped looking.  They were removed from the accounting of the jobless number and therefore the jobless number dropped. Add to this the number of people looking for full-time work because they are part time and you have a dismal fact that almost one in four people in Michigan are looking for full-time employment.  The jobless rate is no reflection of reality but a has fallen into a function of politics.  It is worse than reported.

    I don;t get distressed much...but there were a couple of emails I got last week that threw me for a loop.

    The story involved had the following headline:

    The Other Obama Gets Focused On Childhood Obesity Fight

    And the story read:

    The Washington Post reports that “a bipartisan group of lawmakers and cabinet members” went to the White House this week to meet with Michelle Obama, “to help firm up plans for her national campaign against childhood obesity. The meeting signaled the first lady's intent to be involved not just in talking about the problem, but in crafting specific solutions. She wants to get families, schools, businesses, nonprofits and government working together on the issue.”

    According to the story, “Revising federal child nutrition programs, including school lunches, will be a big part the initiative, she said, offering ‘an opportunity to impact more than 30 millions kids.’

    “The first lady plans to release specifics of her ‘ground-up’ plan to fight child obesity next week, including steps to encourage schools to promote healthy eating, increase physical activity for kids, improve families' access to healthy foods and give parents better information about healthy choices.”

    MNB user Anne O'Connell wrote:

    I find your reference to the First Lady Michelle Obama as the “Other Obama” appalling.

    And MNB user Marty Gillen wrote:

    I must say that your reference to First Lady Michelle Obama today as the "other Obama" strikes me as disrespectful and you never once mention her by name in your comments.  I'm sure it was unintentional, but she is doing some great work as First Lady and deserves to be referred to as more than "the other Obama"   Sounds like you've been  watching too much Fox cable TV lately.

    I actually wrote back to Marty Gillen to note that I had, in fact, referred to Michelle by both name and title in the body of the story, and only used “the other Obama” reference in the headline. And he wrote back:

    I stand corrected but you miss the whole point and I still say you show disrespect. I know how stubborn you can be in your newsletter, which I enjoy reading every day,  so let's leave it at that.

    Me, stubborn?

    I’ve always thought my myself as a reasonable, open-minded, let’s-come-together kind of guy.

    I don’t know what the hell you are talking about.

    (Last week, I was accused of being just another elitist liberal pundit. So go figure.)

    But seriously...I had absolutely no intention of denigrating or even marginalizing Michelle Obama. I think she is terrific, and I think her choice of priorities is critically important.

    So apologies to anyone who thought I was showing disrespect. That was the farthest thing from my mind.
    KC's View:

    Published on: February 8, 2010

    In one of the most exciting Super Bowls in memory, during which Sean Payton showed himself to be a daring play-caller, the New Orleans Saints defeated the Indianapolis Colts 31-17.

    It was simply a great game. The Colts dominated the first quarter, and then everything seemed pretty even during the second quarter, despite the fact that at the end of the first half, the Colts were ahead 10-6. But the Saints came back in the second half, starting with an onside kick that they recovered and then sterling play by quarterback Drew Brees.

    KC's View:
    I loved seeing The Who, even though it seemed like Roger Daltrey’s voice was pretty much gone.

    It also occurred to me that even though it was never mentioned, the band’s selections served as a de facto commercial for its franchise of “CSI” shows - since various Who songs serve as themes for the Las Vegas, Miami and New York editions.

    That's synergy, baby.