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    Published on: April 7, 2010

    by Kate McMahon

    What’s worse than your company’s candy bar being depicted as a chocolate covered, blood-spurting finger of a dead orangutan all over YouTube and around the world?

    An ill-prepared, defensive and downright snarky reaction.

    And that’s exactly what Nestle did in a social media fracas that is already being billed as a classic case study in what not to do when controversy erupts. It’s unfathomable that Nestle, the largest nutrition and food products company in the world, could stumble into such an “epic fail” on the internet.

    To summarize the two-week battle that has been lighting up cyberspace, Greenpeace posted a fake commercial on YouTube dubbing Nestle’s KitKat bar as Killer, alleging it was made with palm oil produced from the destroyed rainforest homes of the last orangutans in Indonesia.

    Nestle demanded that Google pull the clip from YouTube, citing copyright infringement, and it was yanked. But the clip went viral nonetheless, with over 700,000 viewings. The combination of Nestle’s heavy-handed approach, and Greenpeace’s well-honed guerilla tactics, prompted activists to move the debate from their blogs to Twitter and to Nestle’s Facebook page.

    If 95,000 protesters storming Nestle’s Facebook page calling for boycotts wasn’t bad enough, the Nestle moderator replying to the comments fueled the fire.

    One post politely questioned the firm’s “dogmatic approach” and noted “social media is about embracing your market, engaging and having a conversation rather than preaching!"

    The Nestle moderator's official response: "Thanks for the lesson in manners. Consider yourself embraced. But it's our page, we set the rules, it was ever thus."

    It was every thus? Wait, there’s more. Undeterred by an avalanche of criticism, Nestle then threatened to delete comments left by individuals using modified versions of their birds in a nest logo as avatars. The anti-Nestle avalanche only intensified.

    Lost in the negativity was Nestle’s announcement that it was no longer purchasing palm oil from Indonesia’s largest palm oil producer and has made a commitment to using only “certified sustainable palm oil” by 2015, when sufficient quantities should be available.

    In other words, Nestle had a positive story to tell. But it was so tone-deaf, so defensive, that it blew the moment.

    Also lost was Nestle’s attempt to regain its footing on this issue, address the complex palm oil issue in a responsible manner and a spokesperson’s belated admission that “what we take out of this is you have to engage.”

    As I’ve said before, companies must engage in order to connect with their consumers. Attempts such as Nestle’s to control or censor social networking are destined to backfire. The conversation will take place on the internet, whether you have an established social media presence or not. What you can control is your response, and a swift and honest response can help contain any tempest.

    No doubt Nestle has a new opinion on the “rules” of engagement.

    Kate McMahon can be reached via email at .
    KC's View:

    Published on: April 7, 2010

    The Pittsburgh Business Times reports that 200-unit Giant Eagle has made a deal to acquire five former Penn Traffic units in Pennsylvania from Tops Markets, which recently acquired Penn Traffic’s retail assets.

    According to the story, “The purchased stores include BiLo Foods in Brookville, DuBois, Johnstown and St. Marys, and the Quality Market in Titusville.”
    KC's View:
    It is a pretty safe bet that whoever takes over these former Penn Traffic units, the real winners will be consumers, who are suddenly going to be offered better stores and better shopping experiences than they’ve been used to.

    Published on: April 7, 2010

    The Kroger Co. has announced its endorsement of the Rapid Recall Exchange, an online service that standardizes and accelerates food and product recalls and withdrawals. Kroger says that it is the first national retail chain to encourage its suppliers to subscribe to the program, which was developed by GS1 US in collaboration with the Food Marketing Institute and Grocery Manufacturers Association.

    Kroger wants its suppliers to be part of the Exchange by July 1, 2010.

    The Rapid Recall Exchange is described as “the industry's only online standardized recall notification system. Using consistent forms and processes, retailers receive the same complete information, including product images and handling instructions, when a recall is issued.”

    "Using Rapid Recall Exchange provides Kroger with timely and accurate recall data. The need for speed is crucial in recall situations and this will help us be more efficient in removing recalled product from our shelves and communicating with our customers about recalls," said Dr. Payton Pruett, vice president of corporate food safety for Kroger.
    KC's View:

    Published on: April 7, 2010

    USA Today has a story saying that the Business Select Committee of the British Parliament is accusing Kraft Foods of acting “irresponsibly and unwisely” in its $17.5 billion acquisition of Cadbury, and has called on the UK Takeover Panel to consider a revision of rules covering the purchase of British companies by foreign entities.

    The central issue is a Cadbury factory in Somerdale, which Cadbury - a company with an almost two century British pedigree - had planned to close and move production to Poland; when it was looking to get British regulators’ approval of its Cadbury acquisition, Kraft pledged to keep the facility open, which would have saved some 400 jobs. Alas, once approvals were given and the deal consummated, Kraft decided to close the factory after all...which has led to accusations that it behaved cynically and deliberately lied to regulators.

    Kraft CEO Irene Rosenfeld has even come in for some personal criticism for not attending hearings into the matter, which one member of the House of Commons described as a “sizable discourtesy.”

    Kraft reportedly has promised not to close any more Cadbury facilities in the UK for the foreseeable future...but politicians there seem unwilling to accept this on faith.
    KC's View:
    Kraft’s decision to close the factory seems impolitic at best...and it sounds like it could have protectionist implications that could affect moves by it or other companies to acquire other operations in the UK.

    I am, by the way, glad I don’t work in the UK. Because I sort of make a living at being “sizably discourteous.”

    Published on: April 7, 2010

    Coming off a two-week period in which it lost the private label business at both Safeway and Supervalu, Daymon Worldwide announced this morning that it has landed ICA Norway as a new client and will develop and manage its Private Brand and Fancy brand assortments.

    ICA is one of the four largest retailers in Norway with a 10 percent market share, operates more than 1,000 stores across four banners, and is the only international retail operator in Norway – the others are exclusively domestic.

    “Part of our vision and strategy as a company is to continue to focus on international growth and this new addition nicely rounds out our portfolio,” says President and CEO Alex Miller. “We now operate in 22 countries outside of the US ... We have always been known as change agents, and this addition to our growing portfolio is yet another example of how we continue to move forward.”
    KC's View:
    This ought to be good for morale. Daymon is doing what all companies have to do - you have to spread your bets around the table, and (to mix the metaphors a bit) make sure all your eggs are not in one basket.

    Published on: April 7, 2010

    BJ’s Wholesale Club says this morning that it is adding four solar photovoltaic (PV) systems to its roster of 12 rooftop solar power installations in six states.

    The installations are being created through a partnership with Tioga Energy, a supplier of renewable energy services to commercial, government, and non-profit institutions. The first two rooftop systems, currently under construction at clubs in Leominster and South Attleboro, Mass., are scheduled for completion next month, with two additional projects in New Jersey to be completed in this summer. The company says that the systems will be installed and financed through Power Purchase Agreements (PPAs) with Tioga, allowing the clubs to implement solar energy without upfront costs. In addition to the clean power provided by the systems, Tioga’s SurePathSM Solar PPA offers BJ’s predictable energy prices, providing up to twenty-two percent of the club’s yearly electrical needs, at a cost lower than the standard utility rates utilities.
    KC's View:

    Published on: April 7, 2010

    ConAgra Foods announced this week that it plans to reduce its greenhouse gas emissions by 20 percent, its water usage by 15 percent, and its packaging by 10 percent by 2015. In addition, ConAgra said that it will increase by 25 percent its use of recycled content in product packaging.
    KC's View:

    Published on: April 7, 2010

    • The Walmart Foundation today announced a total of $3.4 million in grants to nonprofits focused on helping Americans get back to work. Specifically supporting programs that take regional approaches to developing and deploying a skilled workforce, this funding from the Walmart Foundation will benefit seven nonprofits across the U.S.
    KC's View:

    Published on: April 7, 2010

    Reuters reports that the U.S. Second Circuit Court of Appeals in Manhattan has affirmed a lower court ruling that “Sears Holdings Corp. is not liable to former Kmart Holding Corp. shareholders who accused that retailer of trying to drive down Kmart's stock price to let executives buy shares cheaply ... In the class-action lawsuit, the plaintiffs alleged that Kmart deliberately understated the value of its real estate assets by several billion dollars, to give (Sears Chairman Edward) Lampert and (onetime Kmart CEO Julian) Day a chance to acquire Kmart shares at less than their true worth.”

    • Brookshire Grocery Co. announced that its manufacturing team won the Quality Assurance-Best Ice Cream Plant and Quality Assurance-Best Yogurt Plant awards from the All Star Dairy Association (ASDA). According to the announcement, “ASDA reviewed some 250 dairy and ice cream plants in 45 states, as well as in Canada and Puerto Rico. BGC manufacturing excelled in the association’s plant inspections, sensory evaluation of products and laboratory tests.”

    Crain’s Chicago Business reports that Sara Lee “is launching a line of single-cup coffee capsules in France this week aimed at stealing sales from Nestlé PLC. Sara Lee is the first rival to sell single-serve capsules compatible with Nestlé's proprietary Nespresso machines ... Sara Lee's new L'Or coffee capsules for Nespresso machines will sell for 10% to 20% less than Nestlé's and will be available at grocers such as Carrefour, while Nestlé sells most of its capsules through mail order.”

    The story notes that CEO Brenda Barnes is depending on wins in the coffee category to power company growth at a time when she is divesting Sara Lee’s household and personal care operations, which have been profitable though not in synch with her definition of core business.
    KC's View:

    Published on: April 7, 2010

    • The California Grocers Association (CGA) announced that Jill Rulon, its senior vice president, has resigned from the organization after a 13-year tenure to pursue other opportunities.
    KC's View:
    Jill was always a classy representative of a classy organization. (Though I have a bias here...I write a regular column for CGA’s magazine.) I wish her good luck ... and hope that CGA is fortunate in its choice of a successor.

    Published on: April 7, 2010

    CNN reports that Spirit Airlines, not satisfied with charging passengers for checked luggage, now will begin charging for carry-on bags - $30 if you pay online in advance, or $45 if you pay at the gate. Personal items, such as laptop bags, briefcases and purses, will still be free if they can go under the seat.

    "In addition to reducing fares even further, this will reduce the number of carry-on bags, which will improve inflight safety and efficiency by speeding up the boarding and deplaning process, all of which ultimately improve the overall customer experience," COO Ken McKenzie said in a statement.

    CNN writes that “The new carry-on fee went into effect Monday and applies to flights booked for Aug. 1 or later. Fliers who pay in advance for their carry-on luggage will be the first to board the airplane.”
    KC's View:
    This just seems absurd on so many levels and is, all by itself, a reason to avoid Spirit Airlines. Next thing you know, once the airports start installing those full-body scanners, they’ll start charging us for the stuff we keep in our pockets.

    Of course, this could go two ways. Spirit could get so eviscerated in the media that it has to change it mind and backtrack. Or, the other airlines could say, “Gee, what a good idea,” and suddenly we’ll all be dealing with this crap.

    To my mind, though, this is a great example of a company looking for short-term financial gain without seeing the broader context and long-term implications. Retailers should use this as a model for what not to do.

    Published on: April 7, 2010

    We’ve had a number of emails about the business lost by Daymon over the past couple of weeks, and this MNB user, who asked to remain anonymous, wanted to weigh in:

    I am an ex-Daymon Associate who has been self-employed - I compete with Daymon as an independent Manufacturers rep - for over 8 years now. It is important for someone in our industry - I would hope it would be the PLMA and the vendor community - to stand up against the arguably illegal relationship between Daymon - and other in-house brokers - and the U.S. retailers with whom they partner with. The industry has ignored the guidelines laid out by the Robinson Patman Act. The reason is simple - "FEAR"!

    I have heard the term many times from Daymon upper management - "we would rather have our principles - the vendors that pay us - Fear us as opposed to liking us or respecting us" - Fear wins every time!

    The vendor community becomes fearful that the retailers will not award them business if they do not appoint Daymon as their rep - the vendors know very well that Daymon does not work for them - they work for the retailer. The vendor also knows that Daymon is not their loyal representative because they represent all of the competitors offering the same items - it is a win/win for Daymon - not for the vendors paying the commissions! Another key point - Daymon refuses to work in partnership with the local representative of a supplier because their commission would be reduced and control over the supplier diminished.

    I have no problem if Daymon, Crossmark, MMI, or any other Store Brand Rep Firm wants to represent vendors selling store brands to U.S. retailers. They have every right to call on any customer  - they do not have the legal right to be inside their building! It is an illegal relationship - based on Robinson Patman - when a retailer invites a broker in our industry into its building and inside its business, its systems, and its cost of goods.

    In House Brokers do not work for the manufacturers they represent - they work for the retailer and earn revenues from the vendors doing business with those retailers or wholesalers. Daymon can be defensive about it and call it what they want but at the end of the day they do kick back the revenues to the retailer's bottom line - illegal money laundering activities!

    It may sound like I have sour grapes - I was told by many vendors that I worked with when I was with Daymon that I was "the best Daymon rep they have" - that is sad considering beyond the top two revenue producing principals on my desk, I had little to no time to devote to the other 30+ vendors I was responsible for. I left Daymon for the manufacturing community when I was offered 40k more a year, with a company car, better benefits, and a better career path - I was one of the lucky ones that broke free from being a part of an illegal and unethical industry - the in-house broker industry.

    It is time that the Store brand industry recognize that the relationship between in house brokers - one in which Daymon Associates dominates - is not an ethical, legal, or responsible relationship!

    These are serious charges, and to be honest, I debated with myself long and hard about posting this email. In the end, I decided that it would be intellectually dishonest not to ... especially because I happen to like the people at Daymon and would argue that these accusations - “illegal money laundering”???? - are overwrought and, in fact, do sound like sour grapes. But it isn’t my job to stifle discussion, but to encourage and provoke it.

    I also think it would be a mistake to suggest that the decisions by Safeway and Supervalu to change the way they do private brand business were made for reasons other than a belief - perhaps accurate, perhaps misguided - that they could save money and exert greater control by bringing Daymon’s functions in-house. We’ll see how that plays out in the long run.

    Responding to a story the other day about the slowly improving job numbers, one MNB user wrote:

    Right now the economy is exploding with growth but unemployment is still high.  Plenty of new opportunity but no one seems to want to work.  One reason might be we keep extending unemployment benefits.  Perhaps once the benefits expire, people will opt back into the workforce.  I think right now, much of unemployment is a lifestyle choice.  If it was that bad, people would be migrating to the lowest unemployment rate states and they really don't seem to be.  Remember the recession of the early 1980s and cities like Houston, Dallas and Oklahoma City were exploding with population growth?  People were migrating there to take jobs.  Now with public assistance so lucrative, why bother to move?

    This seems like a horribly cynical view of America’s work ethic. While there may be some who fit this description, I find it difficult to believe that most people would rather be on unemployment because of the extravagant benefits they are getting from the government.

    We had a brief piece yesterday about a new “Double Down” sandwich being sold by KFC that uses two boneless chicken fillets as the bun - then squeezes two pieces of bacon, two slices of cheese and some sauce in between. I was disgusted by it.

    MNB user David L. White wrote:

    KFC needs to understand that just because you can make something like the “Double Down” doesn’t mean that you should.

    MNB user Steve Sullivan wrote:

    My first reaction was to check the date.  Nope, it’s NOT still April 1.  My second reaction (one I’m hoping is echoing around the country): EWWWWWWWWWWW!

    And MNB user Kevin Bamford wrote:

    I would have expected to see this story on April 1st.

    Even I, with a perverse sense of humor, could not have come up with this one. Though it has me thinking about next year...

    I waxed rhapsodic yesterday about the NY Mets winning their first game of the season, which led MNB user Tom Devlin to write:

    Break up the Mets !!!

    Okay just kidding but the first inning home run by David Wright  could set a tone. Thank goodness he did not strikeout four time or Castillo drop a ball or Santana get hurt. As a Met fan I agree, enjoy it while we can.....because we live in the middle of Yankee, Red Sox and Phillies Fans ,  Not a fun task. we have to bark like a Chihuahua to get heard. !!!!

    But another MNB user was not so understanding:

    Thanks for mentioning Albert Pujols!  Have you heard of him?  3-4/ 2 home runs MVP & why would you want to be a Mets fan?!

    Because I was born in New York City and love National League baseball. (I would have been a Brooklyn Dodgers fan had they not moved to Los Angeles.)

    This does not mean that I do not respect Albert Pujols. I do. Immensely. And St. Louis is one of my favorite places to watch a ballgame ... I was lucky enough to be invited by my great friend Joanie Taylor to attend (with my son) the last regular season game at the old Busch Stadium. And I’m hoping to make it to St. Louis this summer to see a game at the new ballpark.


    Finally, a note from an MNB user about the men’s NCAA basketball finals:

    What a great tribute to the Butler basketball program. They played a great game and had two decent chances to go ahead and/or win the game. I think they had more shots from inside the paint that could have won them the game if they would have fallen in. For them to step us against the mighty Duke program just shows that it is not always about the money but about heart. Did this not play exactly to the movie (Hoosiers), right down to the last shot? I was very impressed with the Butler team and how they handled themselves. They now have a new fan.

    More than one, I’d guess.

    Tells you a lot about the independent spirit. Great metaphor for business.
    KC's View:

    Published on: April 7, 2010

    In the NCAA Women’s Basketball Tournament, the University of Connecticut Huskies defeated Stanford University 53-47... winning its second national championship in a row and its 78th consecutive game over two seasons.
    KC's View: