retail news in context, analysis with attitude

Published on: July 20, 2010

by Michael Sansolo

According to one popular business philosophy, if things aren’t broken…break them. In other words, change is good, the status quo is bad. And in most cases, I’d agree, but there are few rules that work every time.

Given how often we talk about the need to innovate and change here at MNB, it might seem somewhat contradictory to say this, but at times innovation can be a bad idea. Because unless you are making a product, store or service better, sometimes the innovation does little more than turn loyal consumers into annoyed customers. And no one wants that.

Possibly the single best example of this is facing an enormous portion of you MNB readers today. Unless statistics are wrong, there are many of you are reading this on-line newsletter on computers running a program that should have been dumped long ago. That program is Microsoft Windows XP.

The Wall Street Journal reported recently that nine-year-old XP remains the program of choice at many businesses. Unbelievably, that is a statement that might actually be true four or five years from now. Microsoft announced recently that it will continue to allow computer buyers to downgrade to XP for two years after the shipping of whatever program follows Windows 7. Technology experts says that means XP will be running through at least the first half of this decade - when it could be 13 years old.

To put that in perspective, quickly think about the cell phone you had 13 years ago and imagine if you were using it today. But XP is widely expected to hang on because the products introduced to replace it - primarily Vista - failed in their mission. In other words, Microsoft, one of the best companies on earth, messed up by bringing out an innovation that most consumers saw as worthless. (We have one computer in my house that runs Vista and worthless would be the kindest word to describe it. Somehow my wife knows how to run it. The rest of us run the other way.)

It’s another crystal clear lesson in value. Far too many new products or variety simply fail the test of bringing added value. And when that happens, the shopper isn’t happy.

Sadly, the examples clutter the aisles of many supermarkets. One of the most curious was reported by the Journal: Shopper outrage at new and improved razors. Apparently, many men are hoarding blades for older razors offered by Gillette or Schick because they don’t see the value in the innovations offered by replacement products. It’s a situation worth watching.

Truth be told, I like the innovation in razors almost as much as I hate shaving. I’ve been around long enough to move from safety razors to twin blades (and all their improvements), triple blades (and their improvements), four blades and now five blades. I can honestly say the shaving experience has improved and my uncooperative facial hair looks better.

But the question men are asking is whether the improvement justify the costs. In the midst of a tough economy, many are saying they aren’t so sure and are stocking up on currently available blades just to be sure.

XP and razors remind us that the consumer, while fickle and fashionable in so many ways, isn’t always ready to simply move on. The notion that newer is always better can run into the show-me mentality. And when that happens, what’s new isn’t always going to win. Value can trump price, convenience and more. Apparently, it can also beat innovation.


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 20, 2010

The Wall Street Journal reports this morning that Amazon.com said yesterday that over the past three months, it has sold more e-books for its Kindle than it has sold hardcover books.

“Amazon painted a picture of accelerating growth in sales of e-books, which can be read on the Kindle and through software on a host of other devices, including Apple's iPad and iPhone,” the Journal wrote, adding, “Over the past month, the Seattle retailer sold 180 Kindle books for every 100 hardcover books it sold, it said.”:

Now, Amazon is careful to say that this does not mean that e-books will soon replace hardcovers, or that e-books will cannibalize paperback sales, or that paper-and-ink are dead. It is just three months, after all.

However...the trend does suggest that while Amazon has had more competitors than ever in the e-book category, with both Apple’s iPad and Barnes & Noble’s Nook joining the fray, the competition does not mean that Amazon is going to be knocked off anytime soon. It may be that, to use the hackneyed phrase, a rising tide really does lift all boats ... and that the only format certain to sink is the traditional kind.

The trend also suggests that price does matter - both Amazon and Barnes & Noble have lowered the prices on their e-readers over the past few months, in part to undercut the more expensive and heavily hyped iPad.

But the lesson is this.

First, identify your company’s version of the hardcover book - the product or service that you thought would be there forever, that had some sort of unassailable advantage simple because it was so deeply entrenched in how people live their lives.

Then, imagine your business if that product or service went away. Not overnight, but slowly, gradually, inexorably. Imagine a world in which people did not need your unassailable product or service, or could simply access it another way.

Finally, are you preparing your business - in terms of people, facilities, infrastructure, expertise, and an innovation-driven environment - to embrace, not deny or forestall that moment? If not, are you missing the opportunity, ignoring the challenge, and denying your company a sustainable future?

That’s my Tuesday morning eye-opener.

- Kevin Coupe

Published on: July 20, 2010

The North American Olive Oil Association (NAOOA) is fighting back, questioning the validity of a study last week that questioned whether many olive oils advertised as extra virgin olive oils (EVOO).

Here’s how USA Today framed the original report:

“The study ... was conducted by the University of California, Davis Olive Oil Chemistry Laboratory and the Australian Oils Research Laboratory. They collected 14 brands of imported olive oil and five California brands in March, and shipped 62 samples to an Australian lab for analysis ... Sixty-nine percent of the imported oils and 10% of the California oils labeled as extra virgin did not meet the International Olive Council and U.S. Dept. of Agriculture taste, smell and chemical standards for extra virgin olive oil.”

Bob Bauer, president of NAOOA, said that “there are often rumors that products labeled as olive oil may not be 100 percent authentic,” and added, “Through our ongoing, rigorous testing of olive oils by internationally recognized labs, I assure you that the imported olive oils sold by our members are labeled correctly.”

“We sample more than 200 olive oils a year and conduct rigorous chemical analysis through independent labs,” Bauer said. “We’re finding that less than 10 percent of the oils tested have any problems and they, in total, typically represent less than 1 percent of the market. In fact, a condition of membership in the NAOOA is that members must meet the international standard. If our test results show they don’t, they will be removed from the association.

“The NAOOA is and has been a champion of quality olive oil for decades. We continue to take steps to protect consumers, including encouraging regulators at the federal and state level to follow the IOC standards to guarantee consumers a modern standard in identifying and labeling olive oil.”

Published on: July 20, 2010

Slate.com has a piece about the continuing debate over the health benefits of raw milk, which also, inevitably, turns into a debate about whether pasteurization is valuable process.

“Worshippers at the milk shrine - to indulge in yet more hyperbole - stand before only one image of that perfect food,” Slate writes. “It's golden, creamy, foamy, fresh from grass-fed, family-farm cows. It doesn't cause but cures illness. Raw milk, with its legion of followers, has become a poster child of the food rights movement, giving emotional power to the idea that all of us deserve access to untainted, unprocessed, healthy food.

“And it's in this incarnation - the one that draws a cult-like following - that the raw-milk ideal becomes dangerous. They're not alone, of course; pure-food advocates in general tend to cast a romanticized glow over their favored products. We hear that old-fashioned organic produce contains more nutrients than that grown by modern agriculture, despite the fact that most research suggests that, basically, a carrot is a carrot and one spinach leaf is pretty much another (and all lose nutrients as they sit on a shelf). We hear that we should return to old-fashioned farming methods, advice that ignores the key fact that such techniques are so inefficient that they can't sustain the world's current population. There's an element of wishful thinking to many food mythologies, but - unlike the haloed status of raw milk - most don't lead directly to risky behavior or public health concerns or physicians complaining that increased consumption of ‘nature's perfect food’ has led to a recent doubling in the number of milk-borne disease outbreaks.”

Slate goes on: “Today, just about 0.5 percent of all the milk consumed in this country is unpasteurized. Yet from 1998 to 2008, the U.S. Centers for Disease Control and Prevention received reports of 85 infectious disease outbreaks linked to raw milk. In the past few months, physicians have treated salmonella in Utah, brucellosis in Delaware, campylobacter in Colorado and Pennsylvania, and an ugly outbreak of E. coli O157-H7 in Minnesota, which sickened eight people in June. Epidemiologists not only identified a rare strain of the bacteria but matched its DNA to those stricken, the cows on the farm that supplied them with raw milk, and manure smearing the milking equipment and even the animals themselves. When regulators shut down the dairy farm, supporters promptly charged them with belonging to a government conspiracy to smear the reputation of a hallowed food ... Raw-milk and other pure food obsessives are in love with a past that never really existed. The golden, creamy milk of those 19th-century farms killed people, often enough that public health crusaders fought for years for the protection of pasteurization ... And the pure-food, raw-milk, farms-of-our-forefathers movement would be so much more impressive—and appear so much more concerned for others—if it would trade some of its inspirational rhetoric for something I like to call healthy reality.”

Published on: July 20, 2010

The Wall Street Journal reports that the US Food and Drug Administration (USDA) plans to set a “high bar” for the marketing of at-home DNA testing kits that would allow people to diagnose the likelihood of getting certain diseases.

According to the story, FDA officials say that they consider such tests to be high-risk because consumers could cut doctors out of the diagnose process and make medical decisions based on test results. to this point, FDA has not regulated the sale and use of such direct-to-consumer tests, but that could change.

The issue came to fore recently when Walgreen and CVS said they planned to carry a gene-testing kit created by Pathway Genomics, then backed away from the decision.

Published on: July 20, 2010

• The Food Marketing Institute (FMI) sent letters today to Senate Majority Leader Harry Reid and Senate Minority Leader Mitch McConnell about the Healthy, Hunger-Free Kids Act (S. 3307). FMI released the following statement from Jennifer Hatcher, senior vice president of government and public affairs on the behalf of supermarkets:
 
"Final passage of the Healthy Hunger-Free Kids Act (S. 3307) is a top priority for the Food Marketing Institute and our nation’s supermarkets this Congress. It is critical to lay the groundwork for a smooth transition for Women, Infants, and Children (WIC) customers to use an electronic benefit transfer (EBT) for their transactions. It will increase efficiency and reduce participant stigma associated with the use of paper coupons. Supermarkets are proud to provide access to healthy food choices and want to provide an efficient and modernized checkout experience for WIC mothers who shop in our stores. We encourage the Senate to begin consideration of the Healthy Hunger-Free Kids Act.

• The National Retail Federation told House Republican leaders today that Congress needs to pass legislation that encourages job creation through tax policy and greater availability of credit while avoiding mandates and regulation that discourage growth.

“One thing that’s really been lacking on this issue is leadership and a consistent message that eliminates the disincentives that exist,” NRF President and CEO Matt Shay said. “We know that there are trillions of dollars in assets in cash sitting on balance sheets at the Federal Reserve and on the books of many businesses, including a number of ours. But no one has the courage to invest that capital because of the uncertainty that exists about what’s going to happen next.”

“Our members’ No. 1 issue is job creation. We are willing to talk to anybody about how to create jobs and get the economy back on track. This is not a partisan issue. It’s an economic issue.”

Shay said he was particularly concerned by remarks made this week by Erskine Bowles, co-chairman of President Obama’s deficit reduction commission, supporting the idea of a Value Added Tax or similar consumption tax. NRF has long opposed consumption taxes because of the negative impact on consumer spending, and has commissioned a study on the impact of a VAT that will be submitted to the deficit commission later this year.

“Talk about sending the wrong message to consumers and investors and businesses,” Shay said. “That’s absolutely the wrong direction and that’s not the way in which we ought to be going.”

Shay was among executives from more than a dozen business associations who participated in a forum on job creation held at the U.S. Capitol by House Minority Leader John Boehner, R-Ohio, and the House GOP’s America Speaking Out program.

Published on: July 20, 2010

The Business Journal of Milwaukee reports that Roundy’s first Chicago-area store - an upscale, fresh foods-driven unit called Mariano’s Fresh Market, after the company’s chairman, Bob Mariano - is scheduled to open today in Arlington, Illinois.

According to the story, “Roundy’s has announced plans for a second Mariano’s Fresh Market in the Chicago East Loop to open in 2011. Chicago media also have reported the company is considering locations in Ravenswood, on the city’s north side, and Vernon Hills, Ill. The company hopes to build 12 to 15 Mariano’s Fresh Markets in the Chicago area over the next four years.”

Published on: July 20, 2010

• In Maryland, the Gazette reports that Giant Food has come to an agreement with Teamsters Local 730 that will guarantee that employees working at the chain’s Jessup distribution business will not lose their jobs - unless they choose the offered buyout - when the business is transferred to an affiliate of C&S Wholesale Grocers.

• Crain’s Chicago Business reports that “Sara Lee Corp. is seeking a buyer for its bread business, a move that could lead to the breakup or sale of the entire company.”

According to the story, “With $2 billion in sales, Sara Lee's third-largest business line could fetch between $1.1 billion and $1.6 billion, or up to $2.4 billion if the company improves the slow-growing unit's low profit margins, according to an analysis by New York-based Bernstein Research. The move to sell bread, a linchpin of CEO Brenda Barnes' turnaround strategy, marks a strategic shift. Ms. Barnes, who is on indefinite medical leave following a stroke in May, tried for five years to boost bread sales through product innovation and marketing. Hanging a sale sign on the unit now could put the rest of Sara Lee in play, as a whole or in parts.”

Among the possible buyers: Hostess Brands, Campbell Soup's Pepperidge Farm, and Grupo Bimbo S.A. de CV.

• Bloomberg reports that Nevin Shapiro, former owner of Capitol Investments, has been indicted for creating a Ponzi scheme that bilked investors out of more than $800 million, convincing them to invest in a wholesale grocery company that did not actually exist.

• The Newark Star Ledger reports that “New Jersey faces a potential shutdown of its $790 million oyster, clam and mussel harvest if federally-mandated health inspections and coastal patrols are not improved this summer, according to state and federal authorities ... The FDA contends the state Department of Health and Senior Services failed to conduct adequate inspections in 2008 and 2009 at plants that process the mollusks hauled in by small, commercial fishing operations.

“The financially strapped state Department of Environmental Protection also failed, the FDA said, to conduct mandated patrols of polluted coastal waters to guard against the poaching and illegal sale of contaminated mollusks.”

Published on: July 20, 2010

• GreenLine Foods, the Ohio-based fresh-cut green bean and vegetable processor, has named Steve Michaelson - the former chief marketing officer and senior vice president of brands for Supervalu as well as former executive with both FreshDirect and Wegmans - to be its new CEO.

Published on: July 20, 2010

Responding to yesterday’s “Eye Opener” piece, which concerned the importance of being open to the possibility that the future could look very different from the present, MNB user Paul Durrenberger wrote:

This is just an aside from one of “the little people.” Albert Einstein wrote; “Imagination is more important than knowledge.”

That’s like my mantra, since I’ve never been confident about the depth of my knowledge.

MNB user Bill Kesl wrote:

I know it is difficult to believe, but I have been to the future and back.  There is no Styrofoam, Starbucks or programmed/scheduled television programs in the future.  Oh, and wines are not sold in glass bottles (or boxes) but rather in coupes – you don’t know what that is yet.

I’d better register the name.

And another MNB user wrote:

Wow. From psychology to taxes you’ve eloquently linked two superficially unrelated stories to make very valid point.  You also commented on the need for and duties of a “thought leader” which, sad to say is a dying art in the presence of ”what have you done for me lately” investors.

The-chiefexecutive.com estimates that the average life expectancy of the average CEO is now somewhere between 30 and 40 months.  That’s not much time to formulate, much less carry out even a 5-year plan.  10-year plans must look like a pipe dreams to the average CEO who’s performance is most likely tied to wall street as much as anything.  I think the reality is that CEOs and even managers have a mindset of I gotta make my number.  My own company is like that, circumstances be damned we gotta make the number.  And at some point, usually a turning point, people start to manipulate to make the number and begin sacrifice the future to get there.  And I’m certain that they have all the justification in the world, namely if I don’t do it they hire someone else who will.  My fear is that thought leaders get thought of as day dreamers who don’t have their eye on the ball.

A legitimate fear, but you gotta have hope. We are not alone.

Or, to quote John Lennon:

You may say I’m a dreamer,
But I’m not the only one.
I hope someday you will join us.
And the world will be as one.




We had a piece yesterday about how the Great Lakes Brewing company in Cleveland has re-released a bitter beer that it makes under a new name - “Quitness,” to mark the decision by LeBron James to leave the Cleveland Cavaliers to play with the Miami Heat.

According to the original AP story, “30 gallons of ‘Quitness’ ale sold out in three hours Wednesday at the company’s downtown brewpub. The beer will return Saturday on a first-come, first-served basis.”

MNB user Jeff Folloder responded:

With regard to the bitter beer availability in Cleveland, I'm told that it is available in Miami... for less money.

MNB user Alan L. Perlman chimed in:

In your story about the “Bitter Beer”, AP would have been more appropriate in saying “30 gallons of ‘Quitness’ ale sold out in three hours Wednesday at the company’s downtown brewpub. The beer will return Saturday on a first-come, SELF-served basis!”

Good lines, both.

Wish I’d thought of them.