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    Published on: August 23, 2010

    The story is a reminder that no matter how definitive something seems, there always is a possibility that something else is true.

    That is at least one of the lessons when the news came last week that Lou Gehrig may not have actually have died of the disease that is named after him.

    Go figure.

    It goes like this. A group of neurologists is suggesting that Gehrig, the New York Yankee first baseman who died in 1941 from what was then thought to be amyotrophic lateral sclerosis (ALS), may actually have died of chronic traumatic encephalopathy (CTE), which is caused by repetitive concussions or other head injuries. The study does not name Gehrig specifically, nor does it draw conclusions about his fatal illness; the researchers say that at this point, it is something of an “intellectual game” to consider the possibility that something so firmly engraved on the public sensibility may not be true.

    To be fair, though, the research itself is far more than just a game. The issue of concussions - in sports like football, baseball, soccer and others - has been taken more or less seriously over the years, but now there are reports that Gehrig suffered a number of head injuries during a career in which he famously never took a day off. At the very least, this new study seems to be ramping up the level of attention, and perhaps will create new and more stringent protocols for dealing with concussions.

    And all because we’re suddenly finding out that something we assumed was true may not have been.

    We all have firm beliefs in our business lives. In the numbers, in logistics, in how we view consumer behavior or employee attitudes. Some refer to them as “the fundamentals.”

    But those firm beliefs may in fact not be entirely true.

    The lesson? Question every statement. Challenge every assumption. The truth is out there, as they used to say on The X Files, but it may not be where and what we think it is.

    Go figure.

    That’s my Eye-Opener for Monday morning.

    - Kevin Coupe
    KC's View:

    Published on: August 23, 2010

    Continuing the overhaul of its executive suite, the Great Atlantic & Pacific Tea Co. (A&P) announced that it has hired Frederic F. (“Jake”) Brace to the new position of Chief Administrative Officer (CAO), effective immediately. In this role, Mr. Brace will oversee A&P’s Finance and Accounting, Real Estate and Information Systems departments, reporting to President and Chief Executive Officer Sam Martin.

    Brace’s background is in the airline industry - during a 20-year career at United Airlines, A&P said, he held a variety of executive management positions, most recently as United’s Executive Vice President and Chief Financial Officer from 2002 until his retirement in 2008. Before that he held a number of financial management positions with American Airlines.

    In a prepared statement, CEO Sam Martin said, “Over the last year, Jake Brace has provided critical insight to the Company on a range of important issues as a member of our Board of Directors. I am pleased that he has agreed to join A&P’s executive management team and am confident that his strategic and financial expertise and successful turnaround experience will be extremely valuable as we take the steps necessary to position the Company for a strong future.”
    KC's View:
    My knee-jerk skepticism about almost everything that A&P does was about to kick in, especially because Brace has no retail experience.

    But then I took a deep breath, because that’s probably not fair. A&P is bringing in new blood, and some of these guys are going to look at its business with fresh and presumably unjaundiced eyes. So maybe that’s a good thing.

    Whether A&P has any sort of future is still highly problematic, and I’m not convinced that the board of directors will give these execs room to maneuver ... and I’m pretty sure that they were almost out of time even before they started.

    But I’m trying not to be knee-jerk about this.

    Published on: August 23, 2010

    The Indianapolis Business Journal reports that Sun Capital Partners has decided to pull Marsh Supermarkets off the sales block after months of being unable to find a buyer at a reported asking price of between $130 million and $150 million.

    According to the story, “Sun has cleaned up the chain’s balance sheet, spruced up dozens of stores, and tweaked the product mix since it paid $88 million in cash and assumed $237 million in debt to acquire Marsh in September 2006. But none of the moves has boosted Marsh’s market share in Indianapolis, where it still lags both Walmart and Kroger ... Since the private equity firm took over Marsh, it has slashed $70 million in overhead, sold $80 million in real estate, and spun off non-grocery businesses ... Marsh used the proceeds to pay down most of its debt and plow $60 million into the renovation of the majority of its stores.”

    In an email to the Journal, the company said that “Sun Capital Partners is not currently pursuing a sale of Marsh Supermarkets, nor do they expect to do so in the near future ... We are committed to growing the company by actively pursuing new store sites and add-on acquisitions while continuing with our remodel schedule for existing locations.”
    KC's View:
    No surprise that a sale did not work out. People simply aren’t spending money, and certainly not on businesses that seem to be at a competitive disadvantage.

    It is hard to be comfortable in your own house if you know that there is a “for sale” sign on the front lawn. Marsh still has competitive issues to deal with, but maybe taking the company off the market will be a good thing in the long term.

    Published on: August 23, 2010

    Fortune has a long piece about Trader Joe’s, in which it tries to quantify and qualify the things that made the notably secretive retailer so special and successful - especially since there is a gap between some perceptions about the company and actual reality. Some excerpts:

    • “Trader Joe's is no ordinary grocery chain. It's an offbeat, fun discovery zone that elevates food shopping from a chore to a cultural experience. It stocks its shelves with a winning combination of low-cost, yuppie-friendly staples (cage-free eggs and organic blue agave sweetener) and exotic, affordable luxuries -- Belgian butter waffle cookies or Thai lime-and-chili cashews -- that you simply can't find anyplace else. Employees dress in goofy trademark Hawaiian shirts, hand stickers out to your squirming kids, and cheerfully refund your money if you're unhappy with a purchase -- no questions asked. At the Chelsea store opening, workers greeted customers with high-fives and free cookies. Try getting that kind of love at the Piggly Wiggly.”

    • “Trader Joe's has a deliberately scaled-down strategy: It is opening just five more locations this year. The company selects relatively small stores with a carefully curated selection of items. (Typical grocery stores can carry 50,000 stock-keeping units, or SKUs; Trader Joe's sells about 4,000 SKUs, and about 80% of the stock bears the Trader Joe's brand ... The result: Its stores sell an estimated $1,750 in merchandise per square foot, more than double Whole Foods'. The company has no debt and funds all growth from its own coffers.”

    • “Trader Joe's business tactics are often very much at odds with its image as the funky shop around the corner that sources its wares from local farms and food artisans. Sometimes it does, but big, well-known companies also make many of Trader Joe's products. Those Trader Joe's pita chips? Made by Stacy's, a division of PepsiCo's Frito-Lay. On the East Coast much of its yogurt is supplied by Danone's Stonyfield Farm. And finicky foodies probably don't like to think about how Trader Joe's scale enables the chain to sell a pound of organic lemons for $2 ... Take Tasty Bite, which makes much of Trader Joe's Indian food. The Tasty Bite Punjab Eggplant ran $3.39 at a Whole Foods in Manhattan. The seemingly identical Punjab Eggplant that the Stamford, Conn., company makes for Trader Joe's is more than $1 cheaper.”

    • “Trader Joe's is a supplier's dream account: It pays on time and doesn't mess with extra charges for advertising, couponing, or slotting fees that traditional supermarkets charge suppliers to get their products onto the shelves ... In exchange, suppliers have to agree to operate under Trader Joe's cloak of secrecy. Fortune obtained a copy of a standard vendor agreement, which states, ‘Vendor shall not publicize its business relationship with TJ's in any manner’.”

    Re: Trader Joe’s limited assortment approach... “Take peanut butter. Trader Joe's sells 10 varieties. That might sound like a lot, but most supermarkets sell about 40 SKUs. For simplicity's sake, say both a typical supermarket and a Trader Joe's sell 40 jars a week. Trader Joe's would sell an average of four of each type, while the supermarket might sell only one. With the greater turnover on a smaller number of items, Trader Joe's can buy large quantities and secure deep discounts. And it makes the whole business -- from stocking shelves to checking out customers -- much simpler. ‘It takes them out of the purchasing process and puts them into a decision-making process,’ explains Stew Leonard Jr., CEO of grocer Stew Leonard's, which also subscribes to the ‘less is more’ mantra.”

    One of the story’s themes is the issue of whether Trader Joe’s, in getting so big - 344 stores in 25 states and an estimated $8 billion in sales - is forcing it to become so corporate that it could lose some of its entrepreneurial zeal. There seems to be divided opinion on this, with some folks believing that this has already happened, but others saying that good systems are not necessarily a bad thing, and that the company seems to have managed its growth well to this point.
    KC's View:

    Published on: August 23, 2010

    The Courthouse News Service reports that the profit-sharing agreement reached by Southern California’s major chains - Albertsons, Ralphs and Vons - in 2003, permitting them to share profits in the event that one of them was singled out for a strike by organized labor, was in fact a violation of federal antitrust laws.

    The finding was reached by the Ninth Circuit Court of Appeals, which said that “profit pooling or profit sharing arrangements eliminate incentives to compete for customers along every dimension: there is little purpose in attempting to attract another firm's customers by lowering prices, improving quality or taking any other measure if the profits earned from those new customers would be placed in a common pool in which the other firm is a participant, and the proceeds distributed in the same way no matter which participant in the profit pool generated the underlying sales.”

    The chains - which included Food 4 Less, which became part of the agreement later on - argued that reduced labor costs actually lowered consumer prices for everyone, and therefore was not anticompetitive. A lower court concurred with that assessment, but the appeals court disagreed.
    KC's View:

    Published on: August 23, 2010

    SymphonyIRI is out with its newest annual Back-to-School research report, concluding that the economy continues to play a role in the choices people make for their children’s lunches and snacks. Among the findings:

    • 39 percent of parents (that don’t allow children to purchase lunch at school) agree or strongly agree with the following statement – “I may compromise on the nutritional value of the lunch and/or snack in order to save money.”

    • 68 percent are strongly influenced by a low price point.

    However, that doesn’t mean that issues of health and nutrition are off the table:

    • 90 percent of shoppers are strongly influenced by packing lunch items that “taste good” for their children. While only 47 percent of shoppers are strongly influenced by packing lunch items that is “low calorie.”

    • 14 percent of shoppers said they’re likely to pack carbonated soft drinks much less often compared to last year, while 21 percent of shoppers said they’re likely to pack bottled water much more often compared to last year, and 16 percent of shoppers said they’re likely to pack juices much more often compared to last year.

    The economy also is affecting where people shop in general for back-to-school needs, with 53 percent of those earning $35-55,000 a year planning to shop more at mass merchandisers such as Wal-Mart and Kmart, and 50 percent of those earning more than $100,000 saying precisely the same thing.

    “The good news corporations are reporting in their Q2 earnings is not translating to consumer confidence,” said Susan Viamari, editor, Times & Trends, SymphonyIRI. “Even shoppers in higher-income brackets are channel shifting to save money. Typically, lower-income shoppers are most price sensitive and lead in economizing trends. This year, shoppers in households earning $55,000 and more are frequently as aggressive about saving money as other shoppers.”

    The report also notes that “it is easy to miss signs of recovery, but they are there. While 37 percent of consumers believe their financial situation will be better a year from now versus today, that is up from 31 percent in last December’s SymphonyIRI Economic Update Survey.  This more recent survey revealed 19 percent expect their situation to be worse off in a year, down from 23 percent in December’s survey.”

    Full disclosure: IRI is a regular MNB sponsor.
    KC's View:
    It’d be nice if we could get to the point where people would not feel that they have to make a choice between healthy and economical.

    Published on: August 23, 2010

    Marketing Daily reports that Whole Foods has launched a new iPhone/iPad/iPod application called “Mission App,” which “offers 70 challenges/missions that involve users engaging in a series of steps to earn ‘badges and bragging rights.’

    “Badges are earned for exploring a range of ‘delicious, nutrient-dense foods’ that can contribute to a healthier diet. Each user first creates a profile in order to track earned badges ... App users also have access to a database of more than 300 ‘simple, every-day’ tips on cooking, nutrition, green living, food storage and other healthy-living topics, and can share their own favorite tips via Facebook, Twitter and email. The new app also provides a Whole Foods store locator.”

    • The Boston Globe reports this morning on a company called AisleBuyer, who has a new application on the iTunes store that allows you to “scan items in the store as you put them into your shopping cart, using your iPhone, and pay with a credit card — without waiting in line ... The free AisleBuyer app also lets you read product descriptions and reviews on your iPhone.”

    To this point, the company has only one retail partner - a Brookline, Massachusetts, toy store. But it is hoping to expand far beyond this limited presence as it positions itself “as an ally of the real-world merchant.”
    KC's View:

    Published on: August 23, 2010

    In the UK, the Telegraph reports that Walmart-owned Asda Group is in the process of converting close to 200 small stores that it acquired from the Danish Netto chain into what is described as a “Son of Asda” format that is less than 10,000 square feet in size and with an edited grocery selection. Asda also says that the small store prices are identical to those in its supermarkets and supercenters - which it says will differentiate it from the competition.
    KC's View:

    Published on: August 23, 2010

    • In the UK, the Telegraph reports that Tesco is testing a new grocery pickup service.

    According to the story, “Under the scheme – which aims to appeal to busy mothers and shopaphobes alike – customers will order shopping online and then drive to a designated area in the store's car park to have their products loaded into their car at a pre-arranged time. Tesco said that the service has been designed for shoppers who want their goods picked and packed but who do not have the time to wait at home for delivery ... At the ‘drive-thru’ point, a car will be greeted by a Tesco staff member. The driver must provide a shopping reference number, and the shopping is then packed into the boot.

    “Any substitutions will be flagged up to the customer as with any home delivery. A Tesco spokesman said that the same policies and price guarantees will apply as normal online shopping, so if a substitution with a more expensive item is offered, the original, lower price will be charged.

    “Once the shopping is packed, the customer simply drives home.”

    After a test at a single store, Tesco hopes to roll the service out nationally.
    KC's View:
    I’m actually sort of surprised that this is the first time Tesco has offered a service like this. I expect that they will find the same thing that so many US retailers have discovered - that the online ordering/pick-up model can be extremely effective and a lot more profitable for retailers that invest in it.

    Published on: August 23, 2010

    • The Kroger Co. announced that Joe Grieshaber, the company’s Group Vice President of Perishables Merchandising and Procurement, has been named President of Kroger’s Dillon Food Stores Division, replacing John Bays, who is retiring after 42 years with the company.
    KC's View:

    Published on: August 23, 2010

    • The Wall Street Journal reports that if new rules covering egg production, giving more power to the US Food and Drug Administration (FDA) and taking it away from the US Department of Agriculture (USDA), had gone into effect before July 9, it is at least possible that the salmonella outbreak resulting in the recall of more than a half-billion eggs could have been avoided.

    • The Associated Press reports that Dollar General has begun selling beer and wine in some of its southeastern US stores, and plans to expand the service to places a) where beer and wine sales by it are legal, and b) where customers seem to want it.
    KC's View:

    Published on: August 23, 2010

    Got the following email from MNB user Philip Bradley:

    Just to let you know, I've been following the debate on this (food safety bill) and the comment you printed from Harry Hamil is largely correct--it is essential that the Tester-Hagan amendment be included to provide some reasonable exemptions from burdensome requirements which will quite likely stifle small growers and producers. 

    Yes, there is a food safety problem, but it comes primarily from the large producers who have an incredible huge volume of food items going through their systems (aka the "industrial food system"), not the small producers who know their own products intimately.

    Unfortunately, the bill as written is a "one size fits all."  Needless to say, the large food lobbyists are pleased with this approach as it will certainly help reduce competition from small players.





    We’ve had some discussion on the site recently about people using electronic items on airplanes and wondering why they have to turn them off, which led MNB user Jeff Folloder to write:

    Just a clarification for your readers and contributors... All electronic devices, regardless of whether they are wi-fi, 3G, GSM or whatever emit electro-magnetic signals when turned on.  They do this even when the "communication" functions are disabled.  Most aviation utilizes sophisticated radio and electronic instrumentation to control flight.  Just about any electronic device is capable of receiving electro-magnetic interference from another device.  This interference can cause problems with the correct function of electronic devices.  The most critical time of flight for an airplane is on take-off and landing.

    Now, while it may not be conclusively proven that this interference *will* cause trouble for the planes equipment, it is most certainly a fact that it *can*.  And having several dozen "cans" in operation might just inch me closer to one of them Gladwell point things.  So if 10 minutes of minor inconvenience has a chance, even a remote chance, of preventing a disaster... I'm for it.

    KC's View:

    Published on: August 23, 2010

    Lou Piniella, the Chicago Cubs manager who had announced that he would retire after five decades in the game at the end of the year, moved up the timetable, stepping down after yesterday’s game to return to Florida to take care of his sick mother.

    “Family is important, it comes first,” he said.
    KC's View:
    I hope his mom gets better. And then, I hope Piniella decides to return to the game, and becomes the manager of the New York Mets.