retail news in context, analysis with attitude

Published on: January 25, 2011

by Kevin Coupe

PHOENIX -- The Food Marketing Institute (FMI) and Grocery Manufacturers Association (GMA) yesterday revealed details of their voluntary front-of-packaging labeling initiative, called “Nutrition Keys,” that they said was designed to help consumers make more informed decisions while shopping the supermarket. The organizations said that while it is impossible to know the extent to which the industry would adopt the Nutrition Keys program, early reactions indicate a broad likelihood of acceptance, with expectations that consumers will start to see them on CPG products within a few months, and some sort of critical mass reached within a year.

However, some news reports suggested that while the food industry was portraying the move as consumer-friendly and in synch with where the federal government is going, some critics say “the industry is trying a pre-emptive strike so it doesn't have to use a plan being developed by the Food and Drug Administration,” according to USA Today.

The Nutrition Keys program will feature four icons - one each for calories per serving, saturated fat, sodium and sugar, and, according to the industry leaders making the announcement, will be science based and “not interpretive.” In addition, there will be the opportunity for adopters to include “nutrients to encourage” on their labels, or “nutrients needed to build a ‘nutrient-dense’ diet.” These can include potassium, fiber, vitamin A, vitamin C, vitamin D, calcium, iron and protein, but can only be included if they represent more than 10 percent of the minimum daily value per serving, and meet Food and Drug Administration (FDA) standards for being a “good source” of that nutrient.

Pamela Bailey, president/CEO of GMA, said that Nutrition Keys has been developed in concert with both the US Department of Agriculture (USDA) and the Food and Drug Administration (FDA), and reflects the current science espoused by both governmental entities.

According to the New York Times story, “The executives who made the announcement repeatedly invoked the campaign against obesity initiated by Michelle Obama, the first lady, saying they had developed the voluntary labeling plan after she challenged them to help consumers make more healthful food choices.

“But in fact, the industry went its own way after months of talks with the White House and the Food and Drug Administration broke down.

“The Obama administration wanted the package-front labels to emphasize nutrients that consumers might want to avoid, like sodium, calories and fat. But manufacturers insisted that they should also be able to use the labels to highlight beneficial nutrients, including vitamins, minerals and protein.

“The administration concluded that ‘in the end, the label was going to be confusing, because those things would be included out of context, and it could make unhealthy foods appear like they had some redeeming quality,’ said an official who was not authorized to discuss the talks and spoke on condition of anonymity. For example, the official said, ‘ice cream would be deemed healthy because it would have calcium in it.’

“As a result, the industry’s plan received only tepid approval from Mrs. Obama — a stark contrast to her enthusiastic support last week of a healthful eating initiative from Wal-Mart, which pledged to reformulate its store-brand foods and devise an easy-to-understand label showing which foods were more healthful.

“The industry move was widely seen as an attempt to influence the F.D.A.’s continuing effort to establish voluntary guidelines for front-of-package labeling. Once those guidelines are issued, perhaps this year, the industry could come under pressure to change its packaging again. In a statement, the White House said the labeling initiative was ‘a significant first step’ but added that it would ‘look forward to future improvement’ in the system. It said the F.D.A. would closely monitor the effort ‘to evaluate whether the new label is meeting the needs of American consumers’.”

USA Today also reports this morning on brewing controversy about the new labels.

"’Just putting those numbers on the front of packages could be confusing rather than helpful,’ says Kelly Brownell, director of the Rudd Center for Food Policy and Obesity at Yale University. ‘People may not know how to use these numbers in the context of a day's diet.’

“The program has not been tested or approved by an impartial group and doesn't contain a simple color-coding system that would help consumers make sense of the numbers, he says.

“Marion Nestle, professor of nutrition at New York University and author of ‘Food Politics,’ says, ‘It's hard not to be outraged at industry pre-emption of what FDA is trying so hard to do’.”

Gary Rodkin, CEO of ConAgra Foods, said that Nutrition Keys represented a “monumental effort,” and that manufacturers would be investing “substantial resources” to change the face of food labels. He committed his company to putting the new icons on 100 percent of its products.

Ric Jurgens, CEO of Hy-Vee, said that he expected the system also to be embraced by private brand manufacturers, and he said that Nutrition Keys would be seen on Hy-Vee’s own label products “as quickly as we can possibly do it.” In addition, Jurgens said, he believed that the initiative will actually work in a complementary fashion with existing nutrition labeling systems such as NuVal and Guiding Stars, providing greater amounts of specific information that shopper scan use to make decisions.

And Leslie Sarasin, president/CEO of FMI, said that it was her understanding that Walmart - which announced its own healthy eating initiative last week - intends to utilize the Nutrition Keys program as part of its broader effort.

All the parties involved offered credit to First Lady Michelle Obama, who has made a high priority of promoting healthy eating and anti-obesity efforts; the general consensus was that the First Lady’s advocacy pushed GMA and FMI to be aggressive in their development of Nutrition Keys. (Despite the Times story, the engagement with the White House was illustrated when Jurgens was interrupted on the podium by a call on his mobile phone from Sam Kass, a White House chef and policy advisor on nutrition issues.)

“Helping consumers make good decision isn’t just good business,” said Jurgens. “It also is the right thing to do. And when you can do the right thing, you ought to.”

The industry has committed to a $50 million advertising/public relations program supporting Nutrition Keys once it reaches critical mass.

The announcement was made at the Food Marketing Institute (FMI) Midwinter Executive Conference here.

Other notes from the conference...

• In a panel discussion on the subject of “Changing the Thinking on Center Store,” participants agreed that while center store represents 73 percent of total sales and 77 percent of profit, it also has shown slower growth than perimeter fresh food departments because of less attention and innovation. John Lewis, president/CEO, Nielsen Consumer North America, suggested that this represents $23 billion of “lost opportunity” because of consumers going elsewhere to buy products available in the center store of American supermarkets.

Lewis said that in order to regain these sales, retailers need to convert convenience from being an optional approach to standard operating procedure, and do a better job of delivery fully integrated solutions-oriented experiences in the center store.

However, Fred Morganthall, president/CEO of Harris Teeter, underlined the problem with making major changes to the center store, noting that even resets can create customer complaints, and that “scares the tar out of you.” Still, he agreed that the industry needs to be more aggressive about experimentation in this area.

On interesting point of agreement - the sense that understanding “shopper demand” has to be more important than “category management.”

• Author and executive coach Marshall Goldsmith spoke about employee engagement, and noted that getting employees to ask questions and take responsibility is key to making any enterprise work. Senior executives, or “highly intelligent people performing complex tasks need to be questioned more, not less,” he said, urging people to create work environments that thrived on this kind of participation.

• Mark Halperin, senor political analyst at MSNBC as well as an editor and political analyst for Time, underscored the problems that President Obama has in the business community when he asked for a show of hands from people believe that the president “has little or no understanding of how markets work.” Almost every hand in the room went up.

• FMI announced that Fred Morganthall, president of Harris Teeter, will succeed Jurgens as the new chairman in May.

• Fred Ball, chairman of of Ball’s Food Stores, received the Sidney R. Rabb Award, the highest award given by FMI, for his “exceptional service to the community, and strong advocacy on behalf of the supermarket industry.”

• Dean Janeway, president/COO of Wakefern Food Corp.received the Herbert Hoover Award, for “professional excellence in serving the food retail and wholesale industry.”

• Susan Mayo, formerly of Farm Fresh, received the Esther Peterson Consumer Service Award.

Published on: January 25, 2011

by Michael Sansolo


When a business has the audacity to call itself the happiest place on earth it has some serious standards to uphold. So when reports are that Disney World is studying how to better manage customer flow—especially lines—it probably means that it’s a story worth listening to.

If by some chance you have managed to avoid Disney World all these years there is simply no way to easily describe the massive theme park in Orlando. It is a mix of business, recreation, entertainment and spending unlike any other place on earth. Apparently it is also a marvel of how to use technology to improve the customer experience.

The challenge Disney found is that on busy days the lines get out of hand, forcing park attendees to spend most of the day waiting. According to a recent story in The New York Times, the average Magic Kingdom visitor gets on nine rides during the course of a visit. That’s out of 40 total rides in that park alone.

The Disney folks see a couple of problems in that, but two stand out. First, the lines diminish the experience that is the core of the Disney brand. And secondly, people standing in lines aren’t in restaurants or shops buying all the goods featured at the park. Neither is good for business.

Now you could look at this as unique problems for a theme park that hosts nearly 30 million visitors each year or you could look at it for the relevance to your stores and shoppers who are the very same people, albeit in a worse mood than while on vacation in Florida.

As the Times reported: “Disney World long ago turned the art of crowd control into a science. But the putative Happiest Place on Earth has decided it must figure out how to quicken the pace even more.

“A cultural shift toward impatience — fed by video games and smartphones — is demanding it, park managers say. To stay relevant to the entertain-me-right-this-second generation, Disney must evolve.”

Suddenly it all sounds more relevant. Because those same impatient shoppers cursed with what seems to be societal attention deficit disorder are also in your stores. So just like Disney, you need a strategy.

The Disney story offers some interesting ideas. For some rides, Disney has the ability to pick up the pace of customer movement. (At Pirates of the Caribbean, for example, more boats are put in use.) In other cases Disney runs “Move it, Shake it! parades to pull shoppers toward less crowded parts of the park. Some line areas now feature video games to distract the waiting masses, while in other areas costumed characters are dispatched to entertain the crowds.

And there’s more. Disney is developing a mobile app to help visitors locate anything from the location of a costumed Cinderella or the hamburger stand with the shortest line. Other technological experiments to improve the customer experience are also in the pipeline.

The bottom line is that Disney understands the value equation of its visitors and is using technology to better manage even the most difficult situations and the ideas provide interesting discussion for any retailer. How can we better manage lines; how can we improve the experience in a way that is both enjoyable and profitable; and what can we do about better using our data?

After all it’s a small world and those same customers who get delighted at Disney World would love the same attention when they leave Fantasy Land and return to reality. And that’s where you live.


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

Published on: January 25, 2011

by Kevin Coupe

The San Francisco Chronicle reports on current thinking when it comes to government-mandated mileage standards for cars manufactured in the US.

Existing policy says that fleets must average 35.5 miles per gallon by 2016, up from 27.3 right now.

But by 2025, some say, it is likely that the government will mandate that fleets get an average 62 miles per gallon.

According to the story, the Alliance for Automobile Manufacturers says that for these numbers to be achieved, two-thirds of US autos would have to be electric of gas-electric hybrids, and that “it would cost consumers more than $3,000 per new vehicle, at least twice as much as it would for a standard of 47 mpg, according to one analysis. The good news: Net savings over a lifetime could be $5,700 to $7,380.”

No word on what people think a gallon of gas will cost by 2025, or if people will have any money left over to feed their families.

And that’s our Tuesday Eye-Opener.

Published on: January 25, 2011

The Richmond Times-Dispatch reports on the continuing problem of food deserts, writing that “according to the U.S. Census Bureau, nearly 11 percent of all U.S. households have trouble accessing groceries from established grocers - who traditionally have higher quality control systems, more fresh fruits, vegetables and meats, and lower prices because of their buying power ... The long-term adverse effects of not having access to grocery stores include poor nutrition, obesity and impaired psychological development, according to The Reinvestment Fund, a Philadelphia-based economic revitalization group.”

The story notes that “opening stores in urban areas can be more expensive than opening in suburban markets for grocers. Also, larger grocers - which operate on a thin 2.53 percent profit margin according to N.C.-based Sageworks Inc. - tend to build stores in heavily populated areas with higher income levels that can better sustain the stores.”

According to the piece, “A Reinvestment Fund study that examined the costs of opening a grocery store in an urban area compared with opening in suburban areas found that it was significantly more expensive to open an urban store because it costs more to train staff, maintenance costs are higher, and in most cases, real estate taxes are higher.

“The study showed that it cost seven times more to train employees in urban stores than in suburban stores, and security costs were five times higher per year. According to the study, it costs a grocer $16 per square foot to open an urban store and $30.68 per square foot to operate it. That's compared with $10 per square foot to open a comparable suburban store and $28.60 per square foot to operate it.”

The Times-Dispatch writes that there are a number of government initiatives taking place - at the city, state and federal levels - designed to encourage building stores in such deprived areas. And there is at least one major retailer also looking to address the issue:

“Wal-Mart, which announced a campaign last week to get healthier foods and more affordable foods into its stores, has said it wants to add store in areas that are lacking grocery stores. Bill Wertz, a spokesman for the retailer, said the company has plans to open stores in Chicago, Washington and New York,” and tells the paper, "Our intention is to open stores in food deserts."

Published on: January 25, 2011

The Chicago Tribune reports that Taco Bell is being sued by a California woman who claims that the fast feeder is lying when it calls its taco filling “seasoned ground beef,” when in fact “Taco Bell’s ground beef is made of such components as water, isolated oat product, wheat oats, soy lecithin, maltodextrin, anti-dusting agent, autolyzed yeast extract, modified corn starch, sodium phosphate, as well as some beef and seasonings.”

“Taco Bell’s definition of ‘seasoned beef’ does not conform to consumers’ reasonable expectation or ordinary meaning of seasoned beef, which is beef and seasonings,” the suit says.

According to the story, “Taco Bell did not immediately return a request for comment but it told Alabama television station, WSFA, in a prepared statement: ‘Taco Bell prides itself on serving high quality Mexican inspired food with great value. We’re happy that the millions of customers we serve every week agree. We deny our advertising is misleading in any way and we intend to vigorously defend the suit.’”

Published on: January 25, 2011

It has been well reported, here and elsewhere, how chain bookstores such as Barnes & Noble and Borders are trying to figure out how to survive in a world dominated by Amazon.com, and one in which e-books are gaining increased popularity. But small, independent bookstores are facing the same issues, usually without the same resources.

The New York Times writes, “More independent booksellers, whose stores account for about 10 percent of the industry’s retail market overall, are trying to move their own transformation along by imagining ways to supplement their printed-book business with online sales and more lucrative side businesses ... Many stores have recently begun selling e-books on their Web sites through Google, frequently at the same prices Amazon charges, but they have struggled to get the word out to their customers ... Other stores are experimenting with adding more nonbook products, as Barnes & Noble has done with its in-store cafes and sales of toys and games. John Hugo of HugoBookstores, which runs three bookstores in Massachusetts, has begun including Spanish and knitting classes with his stores’ traditional offerings. Mollie Loughlin, the owner of The Book Vine in the rural farming community of Cherokee, Iowa...operates a business that sells both books and bottles of fine wine.”

Published on: January 25, 2011

USA Today reports on the growing popularity of limited assortment stores, which is taking place as companies like Aldi and Save-A-Lot have expanded and consumers continued to look for ways to save money as the recession took its toll; the trend also have dovetailed with growing consumer acceptance of private brands.

According to the story, Aldi plans to open as many as 100 stores to add to the more than 1,135 units that it has in 30 states, while Supervalu-owned Save-A-Lot wants to double the more than 1,200 stores it has in 39 states over the next five years.

Combined with the expanding presence that companies like Walmart and Target have in the grocery sector, the paper writes, the long-term prognosis could be troubled for the supermarket industry, which may not be perceived as being as relevant to consumers.

Published on: January 25, 2011

• Arizona-based Sprouts Farmers Market announced that it will open its first Fort Worth, Texas, store tomorrow, saying that it will offer “a bright, cheery shopping experience that has been its cornerstone since the founders, the Boney family, opened their first produce stand in 1943.  Our stores feature natural, organic and favorite indulgence foods at a great value, including mountains of fresh produce, all natural meats, seafood delivered up to six days a week and over 200 bins of bulk rices, spices, nuts and grains. “

This is Sprouts’ 14th Texas store; another one is scheduled to open in Carrollton later this year.  

• The Courier Journal reports that Trader Joe’s is eyeing Louisville, Kentucky, for expansion, though no official announcement has been made.

• Sunflower Farmers Market, the natural and organic grocer, announced that it will bring its “serious food at silly prices” to Salt Lake City with a new store opening on March 16. The new Salt Lake City store marks the third Sunflower location in Utah and the 33rd store overall for Sunflower Farmers Market.

• The Associated Press reports that “J.C. Penney Co. is getting rid of its catalog business and closing some stores, outlets and call center locations in an effort to streamline operations and boost profit ... The retailer's exit of its legacy catalog business including shuttering 19 outlet stores that carry a large amount of catalog merchandise. It will also close one furniture outlet store in Rancho Cucamonga, Calif.; it will have two remaining such stores.

“The company did not disclose how many job cuts would be involved in the actions, which will take place during the course of the year.”

Published on: January 25, 2011

• Weis Markets today announced Wayne Bailey and Joe Harris as the Company’s newest Regional Vice Presidents.

As Regional Vice President, Mr. Bailey will oversee the Company’s stores in and around Harrisburg, Reading, State College and Lancaster. Mr. Harris will oversee the Company’s stores in Maryland, West Virginia and Southern Pennsylvania.

During this 35 year career with Weis Markets, Mr. Bailey has worked in various store supervision and merchandising positions. Prior to assuming his new role, he was the Company’s Vice President for Operational Administration.

Prior to becoming Regional Vice President, Mr. Harris was a District Manager, overseeing 15 Weis Markets stores in the Harrisburg region. During his 25 year career, Mr. Harris has worked in a number of regional and store management positions.

• Bloomberg reports that “Larry Merlo, president and chief operating officer of CVS Caremark, will assume the role of chief executive officer effective March 1. Thomas M. Ryan will remain non-executive chairman until his retirement at the company’s annual meeting in May.”

Published on: January 25, 2011

Got a number of emails yesterday responding to our story about the US Postal Service (USPS) considering the closure of thousands of post offices around the country as it looks to stem the tide of red ink that is swamping it.

One MNB user wrote:

The USPS needs to make drastic changes we all agree. If closing post offices in rural areas, the government and postal service will need to look at what opportunities exists to service the areas. 

The government must make it a priority to improve the technical infrastructure (DSL/WIFI) in those communities where facilities are likely to close.  These communities need reliable technology.

The post office provides many services to businesses and citizens at their mailbox - pickup of mail/packages from your door during normal deliveries, free shipping supplies delivered to your mailbox.  Communicate to and train the communities on how to use these services.

And another opportunity - USPS kiosks, services offered in the local businesses that service those communities already - and isn't Walmart in many rural communities already?

MNB user Donna Osburn wrote:

I grew up in a very small town of about 300 families in South Louisiana.  We didn’t even have a PO Box.  Our address was General Delivery.  The postmaster knew everything about everybody and it was my job to walk to the PO every day and get our families mail and my grandparents mail. That was back in the 60’s and 70‘s.

It was only in the mid 90’s that my family got a PO Box # and they have a physical box they put a key in to get mail.  But my dad (at age 75) still walks to the PO every day to get the mail.  And the postmaster still knows everything about everybody.

My parents finally got a physical road address only 10 years ago when E911 came in and assigned them one.  (You couldn’t fed ex anything to them…. )

From the point of view of my parents, I would hate to see that PO closed.  But I don’t see any way it could be economically feasible to keep it open.  However, that one PO serves 300 addresses.  Those people cannot get mail at their home.  That is why they have the PO!  So what will the cost comparison be for one person working 6 days per week to keep that PO open (along with insurance, etc) versus the labor, fuel  and vehicle cost to deliver to 300 additional residences that are very spread out 6 days a week….  Or will my parents never be able to get mail again?

Another MNB user wrote:

On Saturday, I stood in line with approximately 40 others at the post office branch at 5th Street and Arizona in Santa Monica.  It cost me $10.75 to send a small parcel to Finland.  If I had used UPS or Fedex that same package would have cost $35 or more.  While the corporations may be able to budget for the more expensive services, the average person will have a much tougher time adapting to the loss.

MNB user Glenn Cantor wrote:

I am not quite sure what it means, but the Federal Express drop box nearest to my home is directly in front of the post office.  That’s kind of like Walmart allowing a mobile Target kiosk to park next to their front doors.  Who makes these decisions?

And MNB user Jeff Folloder wrote:

Addressing the issue of rural service is going to be the big elephant in the room.  It takes more resource and infrastructure to support the rural customers than it does to support customers in more densely populated areas. That equates to expense.  And expenses are scrutinized when the business model is failing.  In my opinion there are several things that are going to have to happen to keep post offices in general, and rural ones in particular, open for business.  The first item is that the post office is going to have to start pricing things appropriately.  The subsidized model has been proven to be a failure.  That means that bulk mailers are going to have to start paying a *much* larger postage fee.  This will likely hit traditional grocers in the wallet.  It also means that rural customers are going to have to pay a premium for outbound service along with a likely reduction in the number of deliveries.  No more subsidies on either side of the equation.  Another component is spreading the operating costs of post offices among several entities.  I've mentioned this before, but government at all levels should look at sharing the resource of the post office for providing a myriad of services from Social Security, to DMV, to postal, and on.  And do it by electronic kiosk.

Regular ground shipping for a 5 pound box via UPS from my home to Dallas takes just one day and costs less than $10 if I fill out the shipping "ticket" online.  If I want UPS to come pick it up from my house there is an additional charge.  If I take it to a UPS store to have them process the whole deal, there is an additional charge.  If I ship the same package to a rural address just 75 miles outside of Dallas I can choose between the package taking an extra day to be delivered at the same price or pay extra for next day.  UPS doesn't subsidize more expensive activities. It prices them accordingly.  It's a good lesson to be learned.

And MNB user David Vincent Dec wrote:

I live in rural Vermont. The biggest issue I see with the USPS is services. They lack any regard for customer service because, I believe, they still think they are the only game in town. As if they didn't know that UPS, FedEx, and email exist. Tow examples that happened to me recently; My mailbox was knocked to the ground while I was out of town. I went to the post office when I saw this to ask if they knew what happened. They told me the letter carrier saw the box on the ground so they left it there and returned my mail. I don't expect them to fix it but how about a phone call? Oh, I was more aggravated because the carrier said it was on the ground and when I got home the mailbox was gone. So, off to buy a new mailbox.

Then, here in Vermont we get some snow. My daughter sent a package from San Francisco for Christmas. On Christmas Eve morning when I noticed we had not received mail for a few days I went to the post office. They said that the mailboxes - I live on a private road so all of our neighbor's mailboxes sit inline together - were not shoveled out enough so they just stop delivering mail. The burn for me was when the woman behind the counter said, "Well, you folks need to clean that up because you don't pay for mail service." What? No you did not just say that. Again, a phone call or a note in any of our mailboxes would have been nice. Not delivering mail prior to Christmas is wrong. Now my critics would say that they got my attention. Yes, but not for long if they keep this up.




On another subject, MNB user Steven Ritchey wrote:

I want nothing to do with raw milk.  The pasteurization process kills unhealthy bacteria in milk, some of this bacteria is deadly.  Homogenization means each gallon of milk will taste the same.  Otherwise, your milk will taste like what the milk cow ate, be it clover, grass, onions, other stuff we won’t mention here.  If you are drinking raw,  unpasteurized milk, you are playing with your own life.  There is a “health” food store near me that sells raw milk, for $8.00 per gallon, 4 times what I pay for pasteurized milk at the grocery store.  No thanks, I do enough things that aren’t good for me, I’m not going to deliberately ingest something that I know may be tainted.




And, regarding the Kraft-Starbucks contretemps over lost market share for Starbucks’ grocery products, MNB user John Franklin wrote:

Having been at a much smaller, yet still Premium Coffee, competitor of Starbucks for two years during the period of contention (2008-2009), I believe that the loss of market share rests on Starbucks shoulders alone. The bigger impact was not Kraft’s lack of effort nor success with the Trade, but Dunkin’ Donuts introduction. This didn’t just sneak up on Starbucks: it was announced that P&G would be bringing the brand to market several months earlier, and Starbucks has always owned the brand marketing, not Kraft.

Starbucks could have increased their own marketing activity to maintain, or grow, market share ahead of the Dunkin launch or accessed media spending and retail sales data and once the product was in-market and made further marketing decisions with those tools. I think Starbucks got caught with their pants down and are pointing fingers at Kraft to try to redeem themselves amid a broader Marketing shortfall.