retail news in context, analysis with attitude

Published on: July 13, 2010

by Michael Sansolo

So your agenda is full, your balance sheet is troubling and the last thing you need is yet another reminder that inertia is a problem. Sorry, my job is to point out such stuff and this week we have a couple of reminders of the perils of standing still. Consider them both cautionary lessons.

In just the last seven days the spotlight fell on the problems of two American businesses that just a few years back seemed models of innovation and the ability to meet changing consumer demands.

The first concerns one of the quirkiest cars to hit the roads in the past few decades, the Chrysler PT Cruiser. It’s hardly a surprise that Chrysler is having a problem. Simply Google Chrysler problems and you’ll get 10 million suggestions in the usual 0.2 seconds. The Cruiser’s problem is the most common for the ailing company: nobody is buying it.

At one point the Cruiser fascinated me. Its unique design - something of a throwback to cars I’d only seen in old movies - was kind of gripping. I’d rented and driven it once and found it nothing special, except its quirkiness just seemed fun. Apparently, I wasn’t alone.

Years ago, when I was working at the Food Marketing Institute (FMI), we hired Dr. Clotaire Rapaille, a French-born psychoanalyst and a major influence in the design of the PT Cruiser, to speak at a conference. Rapaille talked about how the car appealed to basic instincts in the consumer that allowed it to stand out from the crowd in unexpected ways. It had something to do with the most basic, reptilian parts of our brains.

The PG-rated version of this is that the Cruiser had the ability to appeal to both masculine and feminine instincts at the same time, which allowed it to break through the clutter of car choices and power unexpected growth for Chrysler. Sadly, that was a decade ago. In the intervening years, Chrysler let the breakaway design linger unchanged, quality slipped and those masculine/feminine attributes got buried under usual consumer concerns. Last week, Chrysler manufactured its last Cruiser.

Example two. Failing to build on a great idea is apparently also pounding Curves, a rather unique gym that, owing to my gender, I will never use. Curves was designed as a new type of gym for busy women. The appeal was simple: a quick series of exercises designed to minimize the time busy women had to spending in the gym. Plus, Curves was for women only, removing the drawback of having us guys around—a situation I can understand.

In addition, the business case was fairly simple, as Curves had limited equipment and costs, making it profitable with a relatively small number of members. That led to Curves facilities popping up like Subway franchises.

Only Curves has apparently sat on its idea a little too long. Times change and demands in workouts shift. New equipment and classes are needed to break the routine and keep things exciting. Curves apparently hasn’t kept up and around the country the ubiquitous facilities are starting to close.

Taken together or apart, the stories of the Cruiser and Curves are hardly shocking or sadly unique. Far too many business catch lightening with a special idea and simply milk it too long, forgetting that even the boldest innovation becomes stale after a while. It is, to be honest, a really old business story that scarcely bears repeating because everyone knows it.

So why does it keep happening?

Michael Sansolo can be reached via email at msansolo@morningnewsbeat.com . His new book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available by clicking here .

Published on: July 13, 2010

Kraft Foods announced the release of a new iPad app called “Big Fork, Little Fork,” which it says “provides parents with an interactive resource to help them teach their children valuable cooking knowledge, smart eating habits and basic kitchen skills. The app features 300 delicious recipes, how-to videos, entertaining and educational games, and interactive elements to help transform the way parents involve their kids at mealtime.”

The company says that “this new iPad app demonstrates Kraft Foods’ ability and commitment to leveraging new technology to engage consumers in innovative ways.”

The app costs $1.99 on the iTunes Stores.

According to the company, “Starting this fall, Kraft Foods will partner with a select group of celebrity chefs to develop chef-branded content packs available for download through in-app purchase. Marcus Samuelsson, winner of Top Chef Masters, will be the first featured chef showcasing his recipes, tips and photos, and bringing his global perspective of food and flavors to ‘Big Fork Little Fork’.”

Published on: July 13, 2010

Wegmans has announced a new cooking class for teens at its Pittsford store in Rochester, New York, promising that “You’ll emerge from this very hands-on (and fingers intact) class feeling like a true teen chef, knowing how to handle cutting chores with ease. You’ll use your cutting-edge work to create Asparagus Jicama Salad and Gazpacho and enjoy them with chef-prepared Thin-Rope Sausage.”

The class is scheduled for the day after tomorrow, is aimed at people between the ages of 12 and 18, and costs $29 per person.

Published on: July 13, 2010

Okay, here are two new food product developments...about which you can draw your own conclusions.

• In the UK, the Mirror reports that Tesco has launched a new “lasagne sandwich,” described as “two thick slices of bread with a filling of diced beef in a tangy tomato and herb sauce, layered with cooked pasta sheets and finished with a creamy cheddar, ricotta and mayonnaise dressing.” The sandwich is said to be targeted at students who like eating leftover lasagne for breakfast or as a quick meal between classes.

• There also are reports today that Carl’s Jr. is testing a new footlong cheeseburger at some California outlets; it is said to come in both plain and deluxe (with onions, lettuce and tomato) varieties. The new foot-long cheeseburger is said to be a response to Sonic’s recent introduction of foot-long quarter-pound Coney hot dog, which comes with chili and melted cheese.

Published on: July 13, 2010

Advertising Age reports on how Walmart is grappling with concerns about its SKU rationalization process that was designed to reduce the number of items in the store and improve the profile of higher-margin private brand products. Here’s how Ad Age frames the story:

“There's a legend circulating around Bentonville: Walmart Chairman Lee Scott enters a Friday morning senior-management meeting with two bags of groceries from Harps, the Arkansas retail chain that has somehow survived the dominance of its much bigger hometown rival.

“The bags, the story goes, were filled with items Mr. Scott's wife had purchased that week because she couldn't find them at Walmart. The implication: The chain's assortment cutbacks under so-called Project Impact to declutter aisles and make the shopping experience more upscale had gone too far.”

Company spokespeople say that the story is the stuff of urban legend, but acknowledge that Project Impact has been the subject of debate and reconsideration in Bentonville.

“With two principal architects of Project Impact either heading to a new role at the retailer or set to leave the company by next month,” Ad Age writes, “several people close to the retail behemoth believe much of the merchandising and marketing programs they led -- which caused much consternation among suppliers -- might be on the way out, too.”

Walmart officials say that Project Impact remains in place, and that a certain amount of tweaking is inevitable as they listen to customers and gauge reactions.

In fact, Ad Age suggests, Walmart may have bigger strategic issues with which to deal than just Project Impact:

“For the past decade, Walmart's strategy has swung from combating the more-upscale competitive threat from the likes of Target and Costco to addressing the downscale threat from dollar stores. But efforts to hold on to more upscale consumers it attracted during the recession appear to have largely missed. Walmart appears increasingly focused on the downscale threat, which also appears to be the biggest based on aggressive expansion plans by chains such as Dollar General and hard discounters Aldi and Save-A-Lot.

“Key to that are initiatives increasingly discussed by (CEO Mike) Duke in recent months to refocus on price through its Rollback program and to test smaller-store formats that can bypass zoning restrictions in big metropolitan areas as well as take on smaller rivals that beat Walmart in convenience shopping trips. But there are big challenges on both fronts. Walmart has yet to find a small-store format that produces the sales and profits of its supercenters, and it faces another branding challenge in putting forward hybrid supermarket/supercenter stores that appear to offer the price and selection a supercenter does without fully delivering...”

Published on: July 13, 2010

Reuters reports that Canada-based Alimentation Couche-Tard has extended its takeover bid for U.S. convenience store chain Casey's General Stores by nearly a month, saying the offer will expire on August 6 instead of July 9. Terms of the offer - $36 per share, or $1.85 billion (US) - were not adjusted.

The story notes that as of last Friday, only 19.2 percent of Casey’s shares, or 9.8 million, had been tendered to Couche-Tard.

Casey’s has recommended that shareholders not accept the Couche-Tard offer, and has filed a complaint with the federal government, saying that Couche-Tard tried to manipulate the market so it could buy casey’s shares at an artificially low price.

Published on: July 13, 2010

• The Washington Examiner reports that Walmart is expected to shortly find itself back in court in Virginia, as it looks to defend its right to build a store near a historic Civil War battlefield in the northern part of the state. While the county has approved the store, that decision is being challenged by local residents and historical groups; a court date is expected to be set shortly.

Published on: July 13, 2010

Grocers Supply Co. announced yesterday that it is becoming a member of Topco Associates, and will use its Dairy/Bakery, Grocery, Health & Beauty Care/General Merchandise, Pharmacy, Processed Meat, Produce/Floral, Fresh Meat and Not-for-Resale programs.

The move “will enable us to continue our tradition of offering high levels of service while providing quality products at competitive prices,” said Grocers Supply COO David D’Arezzo. “Our growth and success are tied to our unwavering commitment to our customers and meeting their consumer’s evolving needs.”

Grocers Supply is a family-owned, full-service grocery wholesaler with an estimated $3 billion in sales that is based in Texas and serves supermarkets and convenience stores throughout Texas, Oklahoma, Arkansas and Louisiana; Topco describes itself as “a $10.6 billion, privately held company that provides aggregation, innovation and knowledge management solutions for leading food industry member-owners and customers.”

Published on: July 13, 2010

• The Oregonian reports that the US Food and Drug Administration (FDA) has enacted new rules “aimed at curbing salmonella-tainted eggs that kill about 30 people each year in the United States and sicken 79,000. The new regulations cover producers that have 50,000 or more laying hens — about 80 percent of production. Starting today, they have to adopt certain preventative measures, including testing for the bacteria and using refrigeration during storage and transport ... The new regulations require producers to buy chicks and hens from suppliers who monitor for the bacteria ... Producers also have to refrigerate eggs at 45 degrees starting 36 hours after they are laid. The refrigeration rule applies to both storage and transport.”

Published on: July 13, 2010

Loved this email from an MNB user about the proposal made by the US Postal Service (USPS) that first class mail rates be increased from 44 cents to 46 cents:

Certainly consistent with the Federal government's version of the Law of Supply-and Demand:  When demand goes down, prices go up.

They ought to go talk to Ireland Senator Feargal Quinn, who a long time ago was brought in to run the Irish Post Office when it was in major trouble. If I recall correctly, he reduced prices to a penny...and jump started the whole system. I’m not sure that would work today, since Feargal Quinn did not have to deal with email as a competitor, but I also am pretty sure that he’d figure out a way to compete effectively.




On the difference between lobsters with claws and clawless lobster, one MNB user wrote:

I've had the opportunity to compare various lobster types side by side, in particular, Pacific (clawless red), Australian (clawless white), and Maine (clawed red). From my experience, the lobster fishermen have nothing to worry about. The Maine lobster wins, hands down, in terms of tenderness and taste. If I'm going to splurge on lobster, I'm getting Maine lobster and I expect I'm not alone.
 



We had a piece last week about how the state of Pennsylvania is testing a new concept in wine sales - vending machines that allow people to swipe their drivers’ licenses, blow into a breath sensor, and then buy a bottle of wine using a credit card. The kiosks are being tested inside two supermarkets, and if successful, could lead to its expansion throughout the state.

One MNb user responded:

Brilliant!  And how are they going to guarantee that the blower is going to be the drinker?




MNB reported that Consumers Union, the nonprofit publisher of Consumer Reports, released new poll data showing that 80 percent of Americans want Congress to immediately give the U.S. Food and Drug Administration (FDA) the power to recall food when it poses a danger to health and safety.

To which one MNB user responded:

Ask anyone in the food industry, for all practical purposes FDA already has the "power" to recall food when it poses a danger to health and safety.   While these recalls are called "voluntary" they are usually as voluntary as the act of handing your wallet over to a mugger that has a gun pressed to your belly.  Actually, giving the FDA the "power" to mandate recalls might actually reduce their number.  Many of the "voluntary recalls" you see today for foods involve situations that do not really present any significant danger to health and safety.  FDA might be more hesitant to order a recall in some of these situations, perhaps for fear of being held liable for errors such as occurred several years ago when a faulty FDA analysis led to a recall of a major brand of shredded cheese.   Frankly, I suspect that FDA would prefer the current "voluntary" approach but stating that position would not be politically correct.




On another subject, MNB user Mike Martin wrote:

Johnson & Johnson is viewed as having done a near perfect job handling the cyanide-laced Tylenol crisis in the early 1980s.  Apparently, all who were involved are gone from J&J and they developed a bad case of amnesia.  They seem to have gone from top to bottom in crisis response, seemingly overnight.  It would make a good case study to determine what changed within the organization to allow the most recent miscues to happen.
 



The other day I wrote a piece suggesting that postcards were old world technology that eventually will be obsolete because people will simply email pictures or post them on Facebook, which led MNB userBrian Fox to disagree vociferously, suggesting that his grandchildren love getting postcards. I suggested, tongue in cheek, that these same grandkids probably also liked watching Super 8 movies of his vacations, which led him to write back:

In fact they do LOVE the old super 8 movies of their Dad, Uncle and their cousins although they now get to watch ‘em off the DVD that their Mom & Dad had made for us as a Christmas (can I still say that?) present a few years ago! And yes you’re right the 7 year old uses my netbook and her Nintendo DS like a veteran! I also have to admit that even I was astounded last week when grand baby #4 was born and Gramma took a picture of the whole family in the hospital, our two year old grandson was the first to say lemme see, lemme see… two years old I didn’t even know what a picture was let alone ask to immediately see it…. Wait a few weeks until the old drug store MAILED them away to get processed…..digital world is so much better in oh so many ways…

Agreed.

MNB user Lorri Putnam chimed in:

My 20-year-old daughter is coming home tomorrow from a 7-week jaunt through Europe (Paris to Istanbul).  Before she left, she sent a message (via Facebook, of course) to friends all over the US and the world asking them to send their mailing addresses if they wanted postcards from her.  She was overwhelmed with the response – everyone wanted postcards from exotic locations they may only dream about visiting.  She says that her largest discretionary expense was postage.

Maybe I’m wrong on this, but I don’t think so. Postcards may continue to have some currency because of some romantic notion about the past...but I have to believe that they pretty much will go the way of Super 8 movies.




Responding to my comment that the Center for Science in the Public Interest (CSPI) threatened lawsuit against McDonald’s as it looks to get rid of toys in Happy Meals is ludicrous, and that parents ought to decide whether Happy Meals are appropriate or not, MNB user Steven Barry wrote:

Welcome to the world of personal responsibility.  It’s nice to see you hear once in a while..lol.

To support your view on this, I believe that it is still legal for parents to allow their children to bungi-jump, Han glide, motocross and buy the most ridicules food items being sold in the grocery stores..  I have my own judgments on whether or not these are good for these children and do voice my opinion from time to time as that is my right to do so as it is they’re right to choose what is right for their children.  But if we keep on discussing this, you know we’ll end up in a healthcare argument again…..I’m just saying……….sometimes lessons are learned the hard way – let’s allow people and children to learn them….

I don’t think I’ve changed my position on this. I think you just noticed.




On the subject of “new views of the new normal,” and consumer shifts that are taking place, one MNB user wrote:

I am especially looking forward to articles reporting how consumers from different generations emerge from this economic disturbance and how their long-term purchasing behavior and economic values have been altered or formed by this economic disturbance… the differences between the first half of the generation versus the second half (X & Y) and Millennials from either side of the millennium. I’m very curious about Gen X (1967 to 1987/8 and Millennial generation (1988/9 through 2009/10) since they will soon be in charge…




I raved yesterday about Jimmy Buffett’s free concert on the Gulf Shores, used to bring some tourist energy to an area that has been devastated by the BP oil spill. Which led one MNB user to write:

You obviously missed on the news where Jimmy Buffet went on about the whole gulf oil spill being Bush’s fault – not BP’s.  Forget the fact that Obama, Bush and Clinton all allowed drilling in the gulf, and Obama had just ok’d expansion before the disaster and his administration as with past administrations was “too cozy” with the oil industry.

For his comments, I would only give Buffet credit for furthering the political divide in the country and prefer to find him a place in history as a bonehead.  Nothing turns me off faster to a celebrity on either side of the aisle then for them to use their status to make ill informed statements.  I’ll skip the margarita and stick to the facts.

Actually, I knew what Buffett said ... it was something about the regulatory situation in the Gulf being akin to letting vampires run a blood bank. Which strikes me as true...and, by the way, when he sang on Sunday, he said “it’s all BP’s fault.”

Yes, he blamed Bush...and I agree that the blame for not regulating the oil industry needs to be spread around a lot more.

But furthering the political divide? Jimmy Buffett? Give me a break. He’s a child of the Gulf who is watching his home region get devastated by corporate greed and mismanagement, and a government that has not done its job in this area for decades.