retail news in context, analysis with attitude

Published on: January 24, 2011

by Kevin Coupe

PHOENIX - Ten billion applications.

That’s how many “apps” have been downloaded from the Apple App Store in just two-and-a-half years.

That’s right. This is a business that did not even exist 36 months ago, and now 10 billion apps have been downloaded.

(BTW...the Associated Press reports that “Apple said it would give the 10 billionth person to download an app a $10,000 gift card to its iTunes store ... The prize went to Gail Davis of Orpington, Kent, in the U.K. She downloaded a free game app called Paper Glider.)

Compare this success to video and music downloads from the iTunes Store, and enormous success that nonetheless took eight years to reach the 10 billion mark.

This suggests, of course, that people and companies need to paying very close attention to the continuing evolution of this method of communicating with customers.

But it also suggests that what people and companies need to do is keep their eyes open for the next App Store. It may already be out there ... it will challenge conventional wisdom ... it will disrupt existing business models ... it will be relevant to certain consumer needs and wants that for some reason are not being served ... and it may even compete with the App Store.

One other note.

I am here in Phoenix for the FMI Midwinter Executive Conference, where I hope there will be moments of eye-opening clarity. On Tuesday, I’ll do my best to contribute such a moment - I’ll be moderating a panel of senior executives from outside the food industry - from the newspaper business, advertising, entertainment and sports - as they discuss the ways in which their businesses are being transformed by events, and the hard decisions they are making to keep their companies relevant in a fast-evolving competitive climate.

If you are attending the conference, I hope you’ll come by and say hello. If you’re not, I’ll try to give you a unique sense of what we learn here and what the opportunities are through the always irreverent MNB prism.

Eyes wide open, folks. It’s the only way to do business.

Published on: January 24, 2011

The Financial Times reports this morning that Amazon.com, in an effort to stay competitive with Walmart, “is developing a free weekly home delivery service in the US that could support its drive to increase online sales of low-priced goods, such as health and beauty, babycare and groceries.”

According to the story, “The retailer has been testing the service, AmazonTote, in Seattle, its home city, since last summer.” The company is said to be be staffing up now for expansion.

“The Seattle service offers customers free weekly home delivery regardless of order value on a specified day.,” FT writes. “The goods are delivered in reusable, weatherproof tote bags to the customer’s address.

“By offering free delivery with no minimum purchase price, the service is designed to encourage customers to use Amazon as their main retail destination for regular household purchases. Amazon is using the small truck fleet that operates its pilot AmazonFresh grocery delivery service. It declined to give details of any expansion plans, but its website says the service ‘will be expanding soon’.”

Published on: January 24, 2011

by Michael Sansolo

ST. HELENA, CA. -- It’s hardly surprising that a conference geared to helping Americans eat healthier would outline the raft of health problems that may face the entire nation unless progressive action is taken soon. But that doesn’t mean the World of Healthy Flavors conference didn’t pack some surprises.

For instance, consider the following fact: Among those attending the conference was McDonald’s executive chef, who happens to be a graduate of the Culinary Institute of America (CIA). Read that previous line again and consider the implications.

It means that the world’s largest fast food provider is taking food more seriously than ever. It means that a company known for burgers and fries has an executive chef looking for ways to build healthier and tastier recipes, which might explain the rollout in recent years of angus burgers, fruit smoothies and upgraded cups of coffee. And it means that competitors of all forms are clearly looking at healthy eating, menu formulation and more, which means that new challenges are coming to a strip mall near you soon.

By the way. McDonald's wasn’t alone in attending the conference. Burger King, Dunkin’ Donuts, Starbucks and many other restaurant chains were also represented, as well as a number of supermarket chains.

All of the conference attendees heard compelling scientific presentations linking a host of current eating habits to a wide range of health problems. So the simple reality is that all these competitors for share of stomach are hearing and possibly moving to educate and serve healthier options to American consumers.

The conversation is expanding ... as is the competition.

The World of Healthy Flavors conference was co-sponsored by the CIA and Harvard University’s School of Public Health. It attracted a diverse group of chefs, dietitians and food specialists from food retailers, restaurants, consumer packaged good suppliers, institutions and more to the CIA’s Greystone facility in California’s wine country.

Published on: January 24, 2011

Kraft Foods is arguing in court papers that market share doesn’t matter as it seeks to prevent Starbucks from unilaterally walking away from the two companies’ grocery distribution contract.

According to a Reuters story, Starbucks is arguing that negligence by Kraft reduced its market share in the premium grocery coffee segment from one-third in 2005 to one--quarter in 2010, a drop that cost the partnership $100 million in sales.

"Declining market share is clear evidence of Kraft's failure to perform its basic obligations under the agreement," Starbucks spokesman Alan Hilowitz said on Friday.

Reuters writes that “in its last court filing before that hearing, Kraft on Friday said market share is not a measure of performance in the contract governing Kraft's handling of Starbucks' bagged coffee sales in supermarkets and other stores in the United States, Canada, Britain and other countries. ‘We dispute its relevance. It's hypothetical. That has no bearing on the question of whether they have the right to terminate and walk away for nothing on their own time table,’ Marc Firestone, Kraft's general counsel, told Reuters.”

"It's disappointing but not surprising that Kraft would congratulate itself for ever-diminishing returns," Hilowitz responded.

Starbucks reportedly already has offered $750 million to Kraft as a consolation prize, but Kraft is holding out for what some analysts say could be a $1.5 billion payday; for the moment, Kraft is hoping that the courts prevent Starbucks from ending the partnership while an arbitrator examines the two arguments.

Published on: January 24, 2011

Interesting piece in the Washington Post about the travails being suffered by Borders, which is struggling to survive in a digital world where its brick-and-mortar approach to retailing. Here are the cautionary passages that every retailer needs to take to heart:

“How Borders arrived at this once-unthinkable moment is, like many stories of troubled companies, a tale of strategic errors, missed opportunities and revolving-door management (the chain is now in the hands of a former tobacco executive). But the company's collapse, though perhaps hastened by missteps, seems to many industry insiders to have been inevitable, brought on by cultural changes too swift and sweeping to fend off, even for a huge player in the nation's cultural life.

“Borders was a major force in redefining Americans' reading habits, selling millions of books in places where they had once been scarce and helping scores of novels to become movies and subjects of national conversation. Now, Borders faces a pool of potential customers who quickly spread culture themselves, one viral video or status update at a time.

“Once, Borders was, with rival Barnes & Noble, the long tail of reading, with supermarket-size stores offering thousands of obscure titles alongside bestsellers. Now, Borders confronts the limitless, more efficient supply chain of Amazon's online emporium. Borders, which helped a generation of readers learn the pleasure of diving into a book for hours at a stretch, now competes for the attention of readers who dip into a few pages on an iPad, open Facebook, read some more, then tweet random thoughts. Printed books don't need a power outlet or a data plan, yet for some people, their utility seems to be fading.”

Published on: January 24, 2011

• The Associated Press reports that Walmart and historical preservationists are headed to court this week to get a decision on whether a Supercenter can be built near a Civil War battlefield in northern Virginia where Robert E. Lee and Ulysses S. Grant first met in 1864.

According to the story, “The Battle of the Wilderness is viewed by historians as a critical turning point in the war, which ended 11 months later. An estimated 185,000 Union and Confederate troops fought over three days, and 30,000 were killed, injured or went missing.”

Local officials approved the building of a store there, but preservationists have been up in arms ever since.

Published on: January 24, 2011

• The Wall Street Journal reports that some analysts are saying that Tesco “is close to ‘maxing out’ in the U.K., where it has an industry-leading 30.5% share of grocery sales. Investors, too, are growing concerned that earnings growth and returns could slip, which contributed to a 6% slide in its shares this month.”

Tesco, on the other hand, isn’t buying. According to the story, “Tesco argues it is far from reaching a saturation point in its home market. Retail space per capita in the U.K. is still two-thirds that of Germany's. Non-food retail and financial services offer Tesco scope for market share gains.”

Published on: January 24, 2011

Tyson Foods said last week that “it is the first major food company to become a full member of the ICE Mutual Agreement between Government and Employers (IMAGE) program with U.S. Immigration and Customs Enforcement (ICE).

“The IMAGE program enables businesses, if they meet rigorous standards, to voluntarily partner with the federal government to ensure they are employing people who are legally authorized to work in the United States.”

According to the story, “Tyson employs almost 100,000 people at locations throughout the United States.  To become certified, the company made all of its Form I-9 employment eligibility documents available for ICE review, cooperated with government field audits of selected plant locations and also allowed ICE to check the Social Security numbers of all company employees ... In addition to government tools, Tyson has also taken its own measures, which include: Training all of its employment managers on the hiring process, proper completion of the Form I-9 and on document examination and fraud detection.”

Published on: January 24, 2011

USA Today reports this morning that “twenty-one reusable bags sold as alternatives to disposable plastic or paper bags had dangerous levels of lead ... The non-woven-polypropylene bags bags, sold by chains including Safeway, Walgreen's and Bloom, all had lead content above 100 parts per million — the highest level that many states allow in consumer packaging. The tests were conducted by Frontier Global Sciences for the Center for Consumer Freedom (CCF), which plans to release the results.

According to the story, “often it was the bags' inserts that contained the high
lead levels. “

Even as the report came out, chains were saying that they were responding to the criticisms:

“Safeway said Friday night it was pulling the O by Organics reusable bags from sale while it awaits information from the bag maker ... Bloom says it stopped offering the bag tested in November and will refund anyone concerned about the bag. Walgreen's says it now tests for lead and other toxins, and all current bags pass. It sells several bags and wasn't sure exactly which bag CCF tested.”

Published on: January 24, 2011

The Wall Street Journal this morning reports that the US Postal Service (USPS) “hoping to ramp up a cost-cutting program that is already eliciting yelps of pain around the country. Beginning in March, the agency will start the process of closing as many as 2,000 post offices, on top of the 491 it said it would close starting at the end of last year. In addition, it is reviewing another 16,000 - half of the nation's existing post offices - that are operating at a deficit, and lobbying Congress to allow it to change the law so it can close the most unprofitable among them. The law currently allows the postal service to close post offices only for maintenance problems, lease expirations or other reasons that don't include profitability ... A disproportionate number of the thousands of post offices under review are in rural or smaller suburban areas, though the postal service declined to provide any estimate on how many beyond those slated to begin closure in March might ultimately close or which ones are being targeted.”

According to the story, “The news is crushing in many remote communities where the post office is often the heart of the town and the closest link to the rest of the country. Shuttering them, critics say, also puts an enormous burden on people, particularly on the elderly, who find it difficult to travel out of town.

“The postal service argues that its network of some 32,000 brick-and-mortar post offices, many built in the horse-and-buggy days, is outmoded in an era when people are more mobile, often pay bills online and text or email rather than put pen to paper. It also wants post offices to be profitable to help it overcome record $8.5 billion in losses in fiscal year 2010.”

Published on: January 24, 2011

• Family Dollar announced last week that it will spend $70 million build an 815,000 square foot distribution center in Ashley, Indiana, that will serve its midwestern stores. The facility is scheduled to open next year.

• National Public Radio reports that bison ranchers in the US are trying to figure out how to increase supply - “last year, 92,000 head were processed in North America. That's less than one day's beef production in the United States.” But bison proponents and enthusiasts see that prices are near an all-time high, and that consumers seem to be willing to pay because they perceive bison as being healthier than many traditional beef cuts.

• The UK’s Advertising Standards Authority has ordered the Coca-Cola Co. to stop claiming that its Vitaminwater brand is nutritious, saying that the product has too much sugar to be accurately described that way.

Coke has said that it is “disappointed” in the ruling.

Published on: January 24, 2011

Thanks to all of you who pointed out last Friday that the “Friday Morning Eye-Opener” was mistakenly headlined “Monday Morning Eye-Opener.” Not quite sure where my head was at when I wrote that, but I quite obviously was not thinking clearly. (It may have had something to do with the fact that it was a four-day work week punctuated by two snow days that kept the schools closed and my wife and daughter at home. It completely threw off my rhythms.)

A couple of you also pointed out that in the same piece, I wrote that “the dog-eat-dog world keeps spinning on its access,” when what I obviously meant to write was that “the dog-eat-dog world keeps spinning on its axis.”

Not a good day last Friday. (I promise you, I wasn’t drinking Bloody Marys instead of coffee. Really.) Thanks for your understanding and patience.

Published on: January 24, 2011

Jack LaLanne, the “Godfather of Fitness,” who advocated daily physical exercise and a vegetarian diet, and followed his own advice, passed away yesterday at age 96 of respiratory failure due to complications from pneumonia.

Published on: January 24, 2011

I drew a metaphor last week between current ineffective attempts to wipe out the bedbug population and the business of marketing. Bedbugs, it seems, have evolved to the point where they are resistant to traditional methods of killing them because they developed a resistance; there is, I suggested, a great business lesson:

If you compete today using tried and true and traditional strategies and tactics, there is a very strong possibility that at some point the situation will begin resisting them. The competition adjusts, the customer begins to ignore them or become inured to their charms, and the dog-eat-dog world keeps spinning on its access. Suddenly, you’re playing catch up ... which is never a good competitive situation to be in.

One MNB user wrote:

I couldn’t agree more on your view of the bedbug situation.  This highlights the importance of sales & marketing role leading companies into the future. Unfortunately, many companies are too short-term, financially driven to see the future unless it impacts this year’s bottom line. These companies continue to lose site of the “why” they are in business, using financial return as the sole business objective.




Responding to our story last week about people’s poor eating habits while watching football games, MNB user Dave Ahrens wrote:

I've noticed that people are not starting diets after the first of the year but will wait till after the Super Bowl, myself included. Take the Biggest Loser Challenge, I believe it starts after the Super Bowl.




We reported last week on a labor-management battle ongoing at Acme, which led one MNB user to write:

There are many reasons for Acme and Supervalu’s challenges across the country.  However, Local 1776 is one of the primary reasons that Acme is quickly losing market share in the Philadelphia area.  Rather than joining forces with Acme to find mutually beneficial ways to improve the company’s competitive position, they are fighting them at every turn.  The Local 1776 contract puts Acme at a significant disadvantage to the non-unionized competitors that are growing in the market, specifically Giant and Wegmans.  If Local 1776 looks to the long term, they have to realize that if they don’t work with Acme, all of those jobs are at risk.




On another subject, MNB user David Vincent Dec wrote:

In response to your headline regarding Duane Reade offering beer on tap. I have always thought a great opportunity in retail, specifically, ladies clothing stores, is to offer beer on tap. That way, men would go with their ladies and make a real date out of it. The ladies would spend more time in the stores shopping meaning more dollars and the guys would go along for the beer - more money for the retailers - and help the ladies spend more money. I am reminded of an old Bud Beer commercial wear a guy goes shopping with his gal and he hears a group of guys under a clothing round - see, I know what that is because I go shopping with my girl. When the guy hears the sound he sees in the clothes round a group of guys watching sports and drinking Bud. They weren't far off and I want this!

Me, too. We are so on the same page.




And MNB user Tom Murphy wrote:

I agreed 100% with your commentary pertaining to this article with the exception of your last sentence which read, “Companies and unions end up at loggerheads when they don’t realize that they are all in it together...”.
 
Let’s stop kidding ourselves, they know they are in it together.  This is all about posturing.  Neither side will budge until there is a crisis of some sort…and then, it may be too late.  Sounds like the free-for-all down in Washington, doesn’t it!!

Funny you say that.

I was listening to the Monica Crowley radio show over the weekend, and she was interviewing Rep. Steve King (R-Iowa), who was expressing his views on various issues. At the end of the interview, King made the following statement:

“My father used to tell me that when you think you are right, all compromise is an immoral act”

I almost drove off the road.

Think about the statement for a moment.

I have no problem with the notion that most people - even elected officials - know the difference between right and wrong, and try, when possible, to do the right thing. I would not be so arrogant as to suggest that one side or the other has a monopoly on being right, nor that only one side actually believes that what it is doing is right and that the other side is simply craven and self-serving in its behavior; if you start from that premise, regardless of which side you are on, the effect is to end conversation and discussion. Which is a lousy way to legislate.

The problem with King’s statement is that it has nothing to do with governing or legislating. It simply brings the process to a halt, if everybody adopts the same attitude, because all compromise is an immoral act.

It may in fact be that the real problem in Washington is not that too many people are posturing and don’t have sincere beliefs. The real problem may be that too many people are so busy talking, so caught up in their own sense of righteousness, that they make intelligent, centrist governance impossible.

Forgive the rant ... but you brought it up.




We got a number of emails responding to Michael Sansolo’s coverage of the World of Healthy Flavors conference. One went like this:

Hey, saw on Dr. Oz the other day where a researcher said that we should all consume raw milk from pasture fed cows so that we got all the nutrients, etc that pasteurizing destroys.   But what do I know, I am 70 and was raised on raw milk, home churned butter and ate eggs from an egg farm that were all cracked, duh?   Methinks that the Nanny State is going too far!!!!

Except that this isn’t the nanny state. This is a private industry initiative, prompted by a public policy initiative that is tied to what many people feel is a significant health, economic and national security threat to the nation.

One other thing. When the hell did pasteurization become such a horrible thing? I thought it was a significant scientific breakthrough that changed the face of food safety...

Louis Pasteur must be rolling over in his grave.

Another MNB user wrote:

In regard to the World of Healthy Flavors conference and all of the well-meaning folks trying to figure out how best to educate shoppers... This dialogue and practice has been going on for more than a decade with few results. There is little question that shoppers simply do not care.

They aren’t interested in being educated. Furthermore, they all know that the stuff in the box isn’t as good as fruit or a salad. They generally understand the messages out there (more or less). They’re not sheep. And most data from studies of calories counts on menu boards show similar patterns. We just don’t care!

That's why I found it ironic that (at least some) cafeterias struggle with declining use after a switch to healthier food. When I was in high school they tried a similar program and a majority of those that could leave campus would. And those not permitted to leave would wait for others to bring them fast food.

I don’t buy that shoppers don’t care. I think they often don’t know the facts, which is not the same thing, or that sometimes other issues - price, convenience, time, the whiny cry of a implacable child - take precedence. I get that.

I know one thing. When I go into fast food restaurants that post calorie counts, that information definitely has an impact on what I order ... and at least when I order something that has the potential to turn my blood into a solid, immovable, heart-stopping mass by the third bite, I’ve done it with my eyes open.

The most facile argument against transparency is “customers don’t care.” But it is not, in my view, a legitimate defense of obfuscation.

And another MNB user wrote:

The last line of Michael’s article made me cringe. Link in parents so they don’t undo what the school did during the day??? Are you kidding me. I am one parent who knows about the information you’re putting out and quite frankly, STAY OUT OF MY BUSINESS!!!!!!

I am going home tonight with a box of candy bars and a case of soda and let my boys have a fun time. Now tell me I am stupid and do not know anything about nutrition, when the real truth is I don’t need to be educated. Keep it to yourself.

Well, we can debate whether or not you need to be educated. It has been my experience that only the truly ignorant say that they don’t need to be educated ... we all need to learn, and if we’re lucky, we learn something new every day.

But putting that aside for a moment ... what you don’t understand - and, based on previous emails that have been posted here, seem totally unwilling to understand - is that the educational information is out there for you to use or not use. Some parents will access it, some won’t. It is up to you, as it should be.

But for you to suggest that because you don’t want to use it the information should not be available seems completely arrogant - in the way that some people seem to believe that their way of viewing the world is the only way to view the world.

Do what you want. Feed your kids what you want. Use - or don’t use - the information available to you.

But be good enough to grant the rest of us the same privilege.

Published on: January 24, 2011

In the NFC Championship game yesterday, the Green Bay Packers held on to defeat the Chicago Bears 21-14.

And, in the AFC Championship game, the Pittsburgh Steelers defeated the NY Jets 24-19.

The Packers and Steelers will meet in the Super Bowl on Sunday, February 6.