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    Published on: March 8, 2010

    In Colorado, the Longwood Times call reports that Smart & Final will open a new format - SmartCo Foods - in Denver this summer, with five stores located in former Albertsons properties.

    “We plan to open all five in the summertime,” Smart & Final spokesman Randall Oliver tells the paper. “The first one will be in Denver. It’ll open in late June, and the others will follow. They will all be open by the end of July.”

    According to the story, SmartCo Foods are designed to be more than twice the size of a typical Smart & Final (which tend to come in at somewhere under 20,000 square feet), and will feature fresh foods departments that are typical of a traditional supermarket and will not replicate the membership-club-store-without-the-membership feel of a Smart & Final unit. Spokesman Oliver tells the paper that one thing that SmartCo will have in common with Smart & Final is an emphasis on business-to-business sales.
    KC's View:
    Without seeing a SmartCo, it is hard to have a sense about how it will appeal to shoppers. But on the face of it, it seems smart to create a new format that allows Smart & Final to expand into areas where its traditional format might not make sense. It’s like a major league baseball pitcher - it always is good to develop another pitch that can keep the competition off balance.

    Published on: March 8, 2010

    There is a nice piece in Bloomberg Business Week about Ron Burkle, the billionaire owner of investment firm Yucaipa Cos., who has made a fortune buying and selling retailers, including supermarket chains.

    In a rare interview, Burkle tells Bloomberg Business Week, "We always try to buy companies that are doing O.K. but that have some issues. We buy at a price that if they just muddle through, we don't go broke. And if they do better, we make a lot. Since I was 13, I've been buying things because they are ridiculously cheap. I tell my people, 'Don't explain what we're doing. They'll think we're geniuses if they don't know.' "

    Here’s what the article says about his acquisition of Whole Foods stock, which came in the middle of the recession:

    “Burkle wanted to invest one-third of Yucaipa's money right away. Among the companies that piqued his interest were Whole Foods Market, a seeming relic of a more prosperous era ... When considering Whole Foods, Burkle's 40-person team conducted pricing surveys, met with suppliers, talked to customers, visited stores, and undertook the kind of exhaustive study that might seem unnecessary for someone who grew up in the grocery business. Burkle, though, doesn't trust his gut. ‘I don't pay attention to how I feel about anything,’ he says. ‘What I like or use is irrelevant. I may still wear s——y khakis and these shirts, but I know I'm not in consumers' heads. I don't know what's going on in America. I know what people in New York and Beverly Hills think about Whole Foods, but I don't know what people anywhere else think.’

    “Yucaipa's research showed that Whole Foods' customers weren't ready to abandon the place, even if some of its prices were unaccountably high. Throughout the autumn and winter of 2008, Burkle bought Whole Foods stock, eventually spending $100 million and accumulating close to a 10% stake. Burkle won't discuss his thoughts on Whole Foods' strategy, but according to sources close to Yucaipa, he advocated opening fewer stores, improving logistics, offering more house brands, and doing bigger promotions. Whole Foods CEO John Mackey has done some of this. In the past several months, as the company's fortunes have improved and its stock price has increased, Burkle has sold almost all of his shares. Yucaipa says its return was about 200%.”
    KC's View:
    There is not a similar success story to be told about Burkle’s acquisition of close to 30 percent of A&P’s stock...though one suspects the words “just muddle through” might be get used a bit when referring to how the company is operating.

    Published on: March 8, 2010

    The Wall Street Journal reports that the American Beverage Association (ABA) plans to release a study today saying that “sales of soda and other drinks in U.S. secondary schools have dropped sharply since 2004, in a sign that efforts to improve nutrition in schools are progressing.

    “The report comes as first lady Michelle Obama is leading a campaign to combat childhood obesity and as Congress is poised to consider regulating the drinks allowed in school-vending machines.”

    Specifically, the Journal writes, “Sales volume of beverages shipped to schools from bottlers fell 72% between the first semester of the 2004-05 school year and the first semester of the current academic year ... The report showed a 95% decline in sales volume of full-calorie soft drinks, such as Coca-Cola and Pepsi-Cola, and a 94% decline in juice drinks. Full-calorie soft drinks accounted for just 6.8% of beverage volume shipped to schools last semester, while they made up 40% of the product mix in 2004.”

    In other soft drink-related news the New York Times is reporting that New York City Mayor Michael Bloomberg is saying that he is ever more convinced that the state legislature ought to “pass a penny-per-ounce tax on soda to stave off major service cuts to education and health care.”

    In his weekly radio address, Bloomberg said: ““In these tough economic times, easy fixes to our problems are hard to come by,” he said. “But the soda tax is a fix that just makes sense. It would save lives. It would cut rising health care costs. And it would keep thousands of teachers and nurses where they belong: in the classrooms and clinics.”
    KC's View:
    At the moment, Bloomberg is one of the few New York politicians who seems untouched by scandal - and analysts believe he may have the persuasive powers and political will to force such a tax through. And he may have nothing to lose - he’s not going to run for a fourth term as mayor, and he may see this as a legacy issue. And the campaign being waged by Michelle Obama gives him some momentum to work with.

    On the other hand, if the high level of disgust and distrust expressed in emails to MNB about similar taxes being considered elsewhere is any indication, there could be considerable opposition to such a tax, especially from the business community, not to mention from people unconvinced that the money will be used to do anything but line politicians’ bankbooks.

    I’ve always thought of this kind of tax and/or regulation as last-ditch proposals to be used if industry doesn’t do the right thing on its own. But the educational data seems to suggest that things are moving in the right direction ... so it is harder to justify action of this kind.

    Published on: March 8, 2010

    It is being reported this morning that the employees of Ahold-owned Stop & Shop represented by the United Food and Commercial Workers (UFCW) have ratified a new contract that will give them improved wages and health benefits.

    The agreement averts a threatened strike.

    As of last Friday, the UFCW had issued a 24-hour strike notice, and Stop & Shop was preparing to hire replacement workers.
    KC's View:

    Published on: March 8, 2010

    Reuters reports this morning that Kraft Foods is the subject of an investigation in the UK, with regulators concerned that that company may have misled employees and shareholders about its plans for Cadbury, which the company acquired in January for $18.4 billion (US).

    At issue, the story says, is a statement by Kraft before the acquisition took place that it planned to keep open a candy factory near Bristol, a decision that since has been reversed; the factory now will be closed and the production moved to Poland.
    KC's View:

    Published on: March 8, 2010

    Reuters reports this morning that Kraft Foods is the subject of an investigation in the UK, with regulators concerned that that company may have misled employees and shareholders about its plans for Cadbury, which the company acquired in January for $18.4 billion (US).

    At issue, the story says, is a statement by Kraft before the acquisition took place that it planned to keep open a candy factory near Bristol, a decision that since has been reversed; the factory now will be closed and the production moved to Poland.
    KC's View:

    Published on: March 8, 2010

    The Brookshire Grocery Co. announced that its CFO, Tim King, died last week at age 49 after a brief illness.

    The company noted that “King joined BGC, a privately held grocery chain based in Tyler, Texas, at the age of 16, working as a part-time warehouseman while attending Robert E. Lee High School. He continued to work for BGC as a part-time sacker and stocker until he completed a BBA degree from the University of Texas in Austin in 1984.

    “King worked at Squyres, Johnson, Squyres Accounting Firm for five years and earned his CPA licensure in 1989.

    “In 1990 he joined BGC corporate as a financial accountant. King went on to serve as corporate tax manager, director financial accounting, vice president/controller, senior VP/CFO controller, executive VP/CFO/controller, and most recently executive vice president and chief financial officer.”

    In a prepared statement, Rick Rayford, BGC’s president/CEO, said, “Tim was a wise, brilliant and excellent business partner. More importantly, his honesty and integrity were impeccable, his Christian beliefs were uplifting, his love for his family was inspiring, his leadership skills were exceptional, and his love of life was a constant encouragement to all. He was truly a servant leader who was loved by all who had the unique opportunity to work with him.”

    He is survived by Lisa, his wife of 23 years, and two sons.
    KC's View:

    Published on: March 8, 2010

    • Supervalu-owned Shaw’s Supermarkets said last week that when it closes and/or sells its Connecticut stores, it will result in the laying off of 967 employees, though both ShopRite and Stop & Shop - which are buying most of the Shaw’s units - have said that they are interested in rehiring many of the employees once they take over the locations.

    However, two Shaw’s stores still have not been acquired - in New Haven and Manchester - and those closure will result in the unemployment of 260 people.
    KC's View:

    Published on: March 8, 2010

    • PriceSmart, which operates membership club stores in Latin America and the Caribbean, announced that its February sales were up 11.6 percent to $100.4 million, on same-store sales that were up 7.1 percent.
    KC's View:

    Published on: March 8, 2010

    Last week’s MNB Radio piece was about something that I referred to as the “transparent corporation.” Not everybody is buying, however, as one MNB user wrote:

    I generally love your commentary, but I really must say that you are a wide-eyed idealist when it comes to the transparency issue!  I do agree with many of your points and generally agree that things need to be more transparent in certain areas such as environmentalism, HR related issues, etc.  However, certain other areas are problematic for various reason.  I will list a few below:

    1. Cost transparency to retailers-- The Walmart's of the world would love to know their suppliers' every cost component down to the 1000th of a penny. (And if you think I'm exaggerating, you obviously haven't seen their bid forms)  Do you think it's wise for a manufacturer/supplier to provide this information to Walmart?  Perhaps some of it is truly wise to share, but as a business person, I feel strongly that at a certain point you have competitive advantages that are best kept quiet -- unless you intend on forking over your hard earned profits.  Call me a heartless capitalist, but if I devise a proprietary way of making a widget better, cheaper, and faster, I believe that I should be rewarded for that effort  with sales and profits-- rather than share it with my customer who then intends to share it with my competitor.

    Health Claims-- While I agree that health claims should be transparent, to some extent, this information has become so complex, contradictory, and confusing, that consumers have no idea what to make of it.  Honest to God, I have no idea if drinking a cup of coffee a day will prevent Alzheimer's, increase my brain function, or cause bladder cancer and brain tumors... I swear there's a study out there that will prove and disprove each of these claims-- and for far more products than just coffee.  There are some notable exceptions where the evidence is pretty convincing (say... cigarettes???), but to me, as a consumer, it's almost all just noise at this point. One week's studies say we should be consuming more chocolate, wine, juice, and coffee so we can live a long, healthy, disease-free life, and the next week's studies tell you that all of these things will make you obese or give you cancer.  Who can tease out the truth?  I don't even bother keeping up with most of it anymore.  The the only conclusions I can draw are that too many calories make you gain weight and that moderation is probably the best policy on almost every food.

    In this case, sometimes too much information serves to confuse, not inform.  In the "Transparency Utopia" you dream of, do consumers have the time and the mental energy to digest the reams of data that will be thrust at them?

    3. Implementation Cost-- Transparency is great... but at what cost?  Even your beloved country of origin rules, which seem perfectly reasonable, will COST money to implement, especially in certain industries with large, commingled, global food supply chains.  As a businessperson living in the real world, my experience is that even a small increase in costs has a large impact on quantity purchased (in the food industry in particular).  What's wrong with letting the free market determine COO?  If you believe that  nothing good comes out of China, refuse to buy anything that isn't labeled otherwise.  Shop exclusively at places like Trader Joe's and Whole Foods that won't stock anything from China.   If enough people shop at those places, and demand COO information, they will grow and the market will sort itself out.  Funny thing though, this is all available today and things haven't really changed much.  The truth is... there are some high end consumers willing to pay high end prices.... but the vast majority of people are more focused on low prices and though they might like COO, they probably aren't willing to pay 5% more for their weekly grocery bill get it.

    I guess my point is that some transparency is good and we don't have enough of it in our society today, but there is sometimes a tendency to go overboard.  Transparency is a nice concept when applied to certain issues, but it is not a panacea.

    You may be right. I’ve been accused of far worse things than being a “wide eyed idealist.”

    I think that some of the objections you raise might not be issues if a level of transparency is achieved through natural evolution, as opposed to having it imposed upon companies. I understand that cost transparency may not be an advantage if you are dealing with Walmart, but it may be a requirement on the part of investors in a company...and I’m guessing that some sort of balance will have to be achieved. As for transparency of information, I actually think that when companies are transparent, people may actually trust them more and not need to access all the available information.

    I guess what I’m saying is that in the long run, transparency may be a differential advantage. And I would suggest that a lot of the problems that companies have today is because of a lack of transparency.

    We’ll see.

    Another MNB user had an interesting take on this:

    I believe all the buzzwords swirling throughout newsletters, seminars, NGOs, social media, research articles, etc. are tied to a general movement towards natural capitalism and away from predatory capitalism.

    Predatory capitalism values only two things capital and capital investments (money in their pocket and things they own) with little regard for people and natural resources consumed. Natural capitalism regards capital, capital investments, people and natural resources with equal standing.

    All of this is explained much better in the book, “Natural Capitalism: Creating the Next Industrial Revolution.” (Available on Kindle…)

    I’ll look it up.

    On another subject, one MNB user wrote:

    Regarding Friday's responder who wanted government service to be performed by business people, I was struck by which business people were to be selected. The responder later argued how these full time public servants ignored the will of the people to pass the bank, brokerage, and auto bailouts.

    Did the responder envision Bob Rubin, who was a senior executive with Goldman Sachs before serving in the Clinton administration as Treasury Secretary? Rubin left the Clinton administration to take a senior position at Citibank, which only exists because of bank bailouts. Is it possible that Citibank avoided bankruptcy because of the bailouts? Is it possible that Rubin used his position as an advisor to the current president to help Goldman Sachs and Citibank?

    Or did the responder envision Dick Cheney, who served as secretary of defense for Bush the Elder? Cheney served as a president with Halliburton before returning to public service as Bush the Younger's vice president. Halliburton reported a string of record profits because of its war contracts in Iraq and Afghanistan. Is it possible that Halliburton benefited financially from a policy driven by Cheney?

    The notion that our founding fathers did not intend for a permanent public service is pure hokum; a straw man argument at best and an ignorance of history at worse. Jefferson preached limited government and the role of Congress until France presented the Louisiana purchase. Washington spent the vast majority of his adult life in the role of public service including the British army, the Continental army, various political bodies in Virginia, and later as a two-term president.

    The founding fathers could not imagine a business on the scale or scope of Ford, Monsanto, or Hyundai.

    Finally, how many school boards and/or town councils has the responder served on? Where is his or her time dedicated to public service?

    I am so tired of the well worn troupe that government must be run like a business. Government is not a business. Businesses are not in the business of regulation. They are not in the business of keeping people safe. Unfortunately, our government does not seem to be in the business of keeping people safe. As the signs mount that our food is not safe, that our cars are not safe, and that our financial system is not particularly safe, perhaps we need government to behave more like a government and less like a business.

    I actually started this with my comment about Jim Sinegal, CEO of Costco, being perhaps an ideal person to run the economy.

    All I was suggesting is that Sinegal seems to understand the value of people, the importance of efficiency, and the primary role of effectiveness. I would never suggest that government should be run like a business. They are, in fact, very different types of institutions. And I fundamentally believe what I think Robert F. Kennedy said about government - that it is there to protect the oldest, the youngest, the weakest, the poorest and the sickest in our society. Which isn’t always the case with business.

    Responding to one section of Friday’s “OffBeat,” MNB user Steve Sullivan wrote:

    Thank you for passing along the eulogy for Robert Parker by his son.  Having the Irish in me, I’m sitting here with tears in my eyes.  Partly, because they are lovely words and sentiments.  Partly because it made me hope that MY son has taken something like that from MY life.  I will be printing it and hanging it in my cubicle.

    Again, this is another instance where you have not just provided the boring and too real look at business life but shared a very human and valuable moment.

    And MNB user Steven Ritchey wrote:

    It’s funny how all the main recurring characters in Parkers novels exhibited and lived by those same qualities.

    In High School I had an English teacher my Senior year who made the classics come alive like no teacher I’d had before or since.  Her influence is what made me begin to appreciate good literature, and while I don’t read as much as I would like to, I think of her often.  I found out after she’d died that she was a huge fan of Parker, particularly his Spenser novels.  When I learned that I felt cheated, we could have spent many hours dissecting his books and enjoying every minute of it.

    The year after I graduated, she was moved from the classroom to the administration office over the districts English program.  In true Bettye style, when one of  her teachers called in sick, if she was able to, she would go out to the classroom and teach that class for the day.  Many teachers look for ways to get out of the classroom and in administration, she looked for ways to get back into the classroom.

    She and I went to the same church, and one year the church put together  a Lenten devotional book and asked for contributions, my former teacher was the editor.  I wrote a brief devotional and sent it to her.  She included it in the book, she also sent me back my contribution, marked up and graded in red ink.

    Sounds like a wonderful teacher.

    I had pretty much the same conversation the other day with Tom Gillpatrick of Portland State University, who was saying that he was always amazed when students come back after many years and remember with great specificity the stories told in the classroom. That’s the great thing about stories...and why Robert B. Parker’s death created the vacuum it did.

    In our book, “The Big Picture: Essential Business Lessons from the Movies,” I mention in the acknowledgments a teacher, Mike Callahan, from whom I took numerous courses at Loyola Marymount University back in the mid-seventies. I hadn’t talked to Mike in more than 30 years, but I felt compelled to mention him because of the impact he had on me.

    A couple of weeks ago, I actually tracked him down, and we spent well over an hour on the phone - and I think he was surprised at how much I remembered from three decades ago. Mike didn’t just have great stories that he integrated into his lessons...he was a great storyteller.

    And if we haven;t made it clear by now, I’ll say it again. The power of a great story - a great narrative - is that it makes a vision clear and actionable. That’s what our book is all about...and I hope it is a message that is conveyed often here on MNB.
    KC's View:

    Published on: March 8, 2010

    Last night was the Academy Awards, and the big prizes went to:

    Best Picture: The Hurt Locker
    Best Actor: Jeff Bridges, Crazy Heart
    Best Actress: Sandra Bullock, The Blind Side
    Best Supporting Actor: Christoph Waltz, Inglourious Basterds
    Best Supporting Actress: Mo'Nique, Precious
    Best Director: Kathryn Bigelow, The Hurt Locker
    KC's View:
    And for the record, based on my predictions on Friday, I went five for six...