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    Published on: May 24, 2010

    The Richmond Times Dispatch had a column over the weekend by Gray Poehler in which he addresses what he calls the “obsolete” notion of customer service in the retail business, noting that the now-extinct Ukrop’s brand was “a prime example of a business that grew and prospered by putting the customer first.”

    Here’s some of what Poehler had to say:

    • “Given the current economic slowdown, job losses and other uncertainties, it is no wonder that the masses look to save a penny any way they can. The big-box retailers and discount stores are the beneficiaries of this mentality. However, when they compete solely on price, you should expect to deal with certain inconveniences, such as a lack of helpful sales clerks and long checkout lines.

    • “That we now live in an increasingly impersonal world is no secret. Try getting a live person on the phone at any major service provider. We have been programmed to deal with automation and the Internet. When you are lucky enough to reach a human being, you are usually referred to another department, which requires that you repeat the process.”

    • “Many retail-store clerks, when you can locate one, seem indifferent to whether you buy something or not, unless they work on commission. Many are not that knowledgeable about their products or services. It is, therefore, quite refreshing when you come face to face with a sales clerk who takes a genuine interest in "helping" versus selling.

    When was the last time you came across someone whose sole motivation was to help you make a wise and informed decision?

    “Thankfully, many people still value their time and are willing to pay a little more for the personal touch.

    “These ‘valued customers’ like to shop at places where they are greeted by name -- where service personnel remember their preferences, are knowledgeable and make them feel appreciated. They not only will come back often, but also will tell their friends."
    KC's View:
    I thought these words were worth reading this morning because it has long been the contention around here that too many retailers ignore the importance of making human connections in-store.

    I’ve always expressed certain reservations about self-checkout simply because they remove what often is the only human contact that takes place in a food store; it was interesting to me last week when the Whole Foods opened around the corner from my house in Connecticut that there is no self-checkout and the checkout folks are very, very friendly. Human contact matters.

    Now, I’m not saying that self-checkout is a bad idea. It is a component of the shopping experience that appeals to a lot of people...but I’m not sure that it has to be mutually exclusive with human connections.

    It is sometimes a good thing to remind ourselves how people not involved in retailing and manufacturing perceive the customer service equation.

    Published on: May 24, 2010

    There is an Associated Press story that seems to be in almost every paper this morning about how People for the Ethical Treatment of Animals (PETA) is attempting to influence the animal rights debate - by becoming a shareholder in the very companies that it criticizes.

    According to the story, PETA “has been buying shares for seven years and now owns a piece of at least 80 companies, including McDonald's and Kraft Foods. It hopes to influence their animal welfare policies on such things as how chickens are slaughtered or buying pork from suppliers that keep pregnant sows in small crates. By buying stock, PETA is guaranteed the right to present its ideas directly to officials and other shareholders, many of whom would otherwise would likely pay little attention to the group.”

    Ashley Byrne, a senior campaigner for PETA, tells AP that “PETA tries to negotiate agreements with companies behind closed doors, but if that fails, the group submits shareholder resolutions with its proposed changes at shareholder meetings.

    “Companies don't always change their policies, but Byrne said the effort has paid off. After PETA bought stock, Safeway grocery stores and restaurant companies Ruby Tuesday, Sonic and Burger King agreed to give purchasing preference to suppliers that abide by what the group says are more humane rules, such as not confining chicken and hogs in small cages, she said.”

    However, AP writes, “Byrne said PETA's attempt to work from within companies didn't signal an end to its more visible, and often outrageous, protests aimed at improving the condition of animals and encouraging people to stop eating meat. Those events include PETA members stripping to protest the fur industry, nearly naked women taking showers on busy street corners to demonstrate the amount of water used to produce meat, and people squeezing into cages to focus attention on livestock confinement.”
    KC's View:
    PETA’s biggest problem is that the mainstream identifies it as being part of the fringe. I’m not sure if the nearly-naked women showering on street corners helps its image or hurts it. Probably depends on who the women are.

    Published on: May 24, 2010

    The Wall Street Journal reports this morning that soft drink manufacturers “have intensified a fight against proposed taxes on their products, as a growing number of cities and states are weighing the measures to help fill depleted coffers ... The moves come as officials in at least 20 cities and states have proposed new taxes or the removal of tax exemptions on non-alcoholic beverages so far this year. The beverage industry has spent millions of dollars since 2009 on lobbying and advertising against proposed taxes, including a federal tax initially proposed as part of the health-care reform bill.”

    Among the initiatives being taken by manufacturers:

    • “A soft-drink bottler offered what it called a $10 million good-will-gesture donation for health and recreation programs in Philadelphia, as city officials there considered a proposal for an excise tax to help plug a budget hole and fight obesity.”

    • “Industry officials are also considering trying to organize a referendum in Washington state to repeal a three-year excise tax on carbonated beverages of two cents on every 12 ounces.”

    The Journal notes that when it comes to soda taxes, there actually has been more smoke than fire - few taxes have actually been implemented, with only the state of Washington approving such a tax.
    KC's View:

    Published on: May 24, 2010

    Manufacturer Grace Foods USA reportedly has recalled two batches of corned beef - more than 22,000 cans - because they contained higher than acceptable levels of Ivermectin, a drug used to treat cattle for parasites.

    Ivermectin is commonly used in cattle, but this is a case of too much of a good thing - there is at least a possibility that it could make people who eat the corned beef sick.
    KC's View:

    Published on: May 24, 2010

    HealthDay News reports that the adding of certain spices - in particular fingerroot, rosemary and tumeric - to ground beef “seem to direct the greatest amount of antioxidant activity towards preventing the formation of heterocyclic amines (HCAs). HCAs, they note, are the cancer-causing compounds that are produced when foods such as beef are barbecued, grilled, broiled or fried.”

    In other, less clinical words, that means that these spices cut down on the risk of cancer that has been associated with the cooking of such beef.

    The report was authored by scientists at Kansas State University.
    KC's View:
    I’m going to have to go home and check my favorite rub - Dorothy Lane’s Prime Rib Rub - to see if it contains any of these cancer fighters. Though I have to admit that it really doesn’t matter...because when it comes to rubs, I go with taste. And to be honest, I have no idea what fingerroot tastes like.

    Published on: May 24, 2010

    Planet Retail is out with a new report suggesting that CPG manufacturers need to be careful as they address what they perceive as the growing threat of private brands.

    “In the recession, many brand manufacturers responded to the private label threat by launching their own value sub-brands. While these brands may have helped to retain shoppers from defecting to private label, they could do damage to the brand in the long-run,” said co-author Matthias Queck, who also serves as the company’s research director.

    At the same time, the report says that CPG companies should be careful about their new direct-to-consumer models, such as the one announced by Procter & Gamble last week.

    According to Natalie Berg, another co-author of the report, “Retailers have been stripping out the middleman for years by pushing their private labels. Brand manufacturers are now recognising an opportunity to do the same by going direct-to-consumer through brand stores, services and online channels.” Berg says that these tactics are beneficial in terms of driving brand awareness but are unlikely to be profit centres in their own right. The more successful and sustainable strategy is for retailers and manufacturers to work together in the form of joint planning, promotions and co-branding in certain cases.
    KC's View:
    I have dual reactions to this.

    I agree that CPG companies have to be careful about diluting their brands when responding to private brands. They represent something different, and it seems to me that people and brands succeed when they play their own game, not the other guy’s.

    As for direct-to-consumer efforts...I’m not entirely sure that they won’t be profit centers, mostly because I don’t think we know what shape these programs will take. It’s a new model...and there no doubt will be various iterations. I would not be so quick to discount them.

    Published on: May 24, 2010

    This story has almost nothing to do with with MNB’s normal portfolio...but it carried a headline that we simply could not ignore. The story comes from the San Jose Mercury News and is entitled:

    Cow chips may power computer chips.

    Here’s the basic story...

    “Giving new meaning to the term "server farm," a team of Hewlett-Packard (HP) researchers has come up with a plan for combining cow chips and computer chips to build an environmentally friendly data center — powered by manure. In a paper set for release this week, HP scientists have proposed using a ‘biogas’ recovery system that would convert livestock waste into methane, to be used as fuel to generate electricity for data centers, those cutting-edge computer facilities that serve as the nerve centers for an increasingly Internet-dependent world.

    “In turn, the system would use the heat produced by the banks of server computers - sometimes referred to as server farms - to assist the process of converting the animal waste into fuel.

    “The result is what Chandrakant Patel, a scientist at HP Labs in Palo Alto, Calif., calls "a symbiotic relationship between manure and IT."
    KC's View:
    "Nuff said.

    Published on: May 24, 2010

    • There will be four new ShopRite stores operating in Connecticut this week, as locations in Canton, Enfield, Hamden and Stratford open up, part of the group of 11 former Shaw’s stores that were acquired by Wakefern Food Corp. when Supervalu-owned Shaw’s decided to bail out of the Nutmeg State.

    Four more former Shaw’s stores are slated to reopen under their new banners next month, with three more to be unveiled later this year.

    Reuters wrote that Kraft Foods has “increased the list price of some Maxwell House and Yuban roast and ground coffee by about 4 percent, effective Friday,” with the company saying that “the increase is due to sustained increases in arabica coffee, as well as crude oil and other costs.”
    KC's View:

    Published on: May 24, 2010

    MNB took note last week of a Bloomberg report that Walmart wants to “take over U.S. transportation services from suppliers in an effort to reduce the cost of hauling goods.

    “The company is contacting all manufacturers that provide products to its more than 4,000 U.S. stores and Sam’s Club membership warehouse clubs ... The goal is to take over deliveries in instances where Wal-Mart can do the same job for less and use those savings to reduce prices in stores ... Under the program, Wal-Mart is increasing the use of contractors, as well as its own private fleet of trucks, to pick up products directly from manufacturers and transport the goods to its distribution centers and stores. The retailer currently moves most goods only from its distribution centers to stores.”

    Negotiations won’t be easy. however. According to the story, Walmart is asking for a six percent reduction in the cost of goods based on its calculation of transportation costs, while suppliers apparently calculate the cost of transportation as being closer to three percent.” But Walmart is saying that it expects to resolve any differences in the spirit of collaboration that it brings to all its supplier relationships.

    My comment:

    Sure. Resolved in Walmart’s favor. Because many, if not most, manufacturers would say that Walmart’s definition of “collaborative” is a little different than other retailers’.

    I don’t know nearly enough about trucking and product transportation to be able to comment intelligently on this story. (Not that ignorance generally gets in my way...)

    But here is the question I would ask. Is Walmart’s biggest problem right now the cost of goods? Or is it a store environment that somehow is not working for US consumers?

    Thank goodness I got email from folks who seem to know more about transportation issues than I do...

    One MNB user wrote:

    I was under the opinion that most manufacturers have always offered Back Haul Allowances and these allowances were regulated by interstate transportation to be close to actual costs of shipping goods to a customers warehouse facility.  Meaning, a customer that is close to a manufacturing facility would receive a smaller back haul allowance than a customer that is several hundred miles away.  Under this analogy it would be impossible to give a percentage for all pick ups of merchandise at a manufacturing facility.

    Another MNB user wrote:

    I read this article with interest because I assumed that Wal-Mart were already doing this.  It was a practice that was introduced in Woolworths in Australia in ~2003, and it's aim was to share the savings between Vendor & Retailer.

    Of course, true costs on both sides were rarely disclosed, so the regular negotiations took place.  And you'd have to think that not too many Vendors would be paying the same low freight rates as Wal-Mart should be able to achieve.

    It makes complete sense - Wal-Mart would be driving past many Vendor warehouses on the way back to their own DC, often with near empty trucks. So even if Wal-Mart charge the freight amount that it costs them, their still in front as they no longer have to pay for the return journey.

    I wonder if this is Roger Corbett's influence on the board?

    If you think this is interesting, wait until they do Primary Shipping - handling the sea freight at Wal-Mart rates....   Let the cost savings roll....

    Another MNB user chimed in:

    Depending on the commodities and class of freight, 6% is about twice the rate we regularly get including any fuel surcharge.  Backhauling could make sense but not at that rate for us.

    WM has had a pretty good run, clearing the clutter, widening the aisles and the re-models, more electronics have been good for business. I think the recent SKU rationalization just about negated everything good they have been able to accomplish over the last 15 or so months.  Trying to swamp everything with private label I think, has driven many of the up-demographic consumers back to their old stores.  Some of the other full-grocery operations tried to follow the WM lead, but have nearly abandoned the their own SKU rationalization(s).
    It takes more than roll-backs to retain new customers.  The very-limited assortments have had a bonanza.  WM vendors on the wrong end of the rationalization are heavy on inventory and turn around and sell to Save-A-Lot and others, who end up with discounted national brand on an in and-out…even the $ Stores, even the pharmacies ...
    Something to consider, beyond the 'cost of services' they're calculating.... Many companies contract out their carriers based on volume & lanes.  Depending on what % of your total business Walmart represents, if you suddenly lose a large chunk of your transportation needs, it could end up costing you significantly more to cart the remainder of your products to other accounts...  As various companies ONLY support one customer the new 'cost of doing business' could be substantial.   Just sayin'...

    Still another MNB user wrote:

    I’m hearing a lot of complaints from the trucking industry, and “truckers” in particular. Between the increased cost of fuel, surcharges and general operation of their rigs, they are averaging less than $6-7.00 an hour for all of their hours on the road. Not enough to live on, for sure, unless they operate them in excess of 60 or more hours a week. Seems unfair that Walmart would take even that away from them, since all they are into is lower prices, which is great, believe me, but not when it comes to a living wage. I foresee a conundrum coming….

    MNB user Chris Connolly wrote:

    If I understand this story correctly, it implies that Wal-Mart's trucks currently only ship merchandise from the DC to the stores and return empty.      It's absolutely amazing to me that Wal-Mart hadn't already been using backhauls to deliver merchandise to their distribution centers on return trips from their stores. 

    Are my assumptions correct?

    Lots of grocery chains have been using backhauls to cut their cost of goods sold for years……why would this be new to the "Bentonville Behemoth"? 

    And an other MNB user wrote:

    I’ll sell what ever part of my  400 trucks I need to before I will let the 800-pound gorilla dictate the rate market. They are the slowest

    Pay on top of being the king for short pays.  Enough is enough.

    KC's View: