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    Published on: February 15, 2011

    by Michael Sansolo

    On the sheer chance you didn’t have enough to worry about these days, take a deep breath and think about the never-ending battle for mealtime. And understand this important reality: it’s only getting harder.

    That might sound contradictory to some good news we had on this site last week, about a recent study showing supermarkets are making in-roads at mealtime. That’s a scenario that makes sense given the heightened concerns shoppers have with both their budgets and waistlines. Supermarkets are doing a better job with prepared or step-saver meals and shoppers seem to be noticing.

    But there was a different angle on this battle that also merits attention. Advertising Age reported last week that Burger King and Subway combined have spent more than $100 million over the last year advertising their breakfast menus and basically have come up empty. In short, McDonald’s, which continually unveils new menu options, absorbed the blows and kept on selling.

    Simply put, the battle for share of stomach at breakfast, lunch or dinner won’t be won easily because Americans eating habits are what they are and change is difficult.

    Yet, there is more to this. Last week I spoke to the American Wholesale Marketers Association, a group largely made up of wholesalers for the convenience store industry. The unmistakable lesson from this corner of the industry is that the battle for mealtime is getting more crowded.

    A few of the operators at the meeting talked about the challenging reality facing c-stores as tobacco products, a cornerstone of their sales and profits, become ever more challenged by government regulations and shifting consumer habits. As these operators look for new growth, foodservice offerings move to the head of the line.

    The operators have a good point. By their current count, there are nearly 150,000 convenience stores in the country and a large percentage offer gasoline, which means most consumers stop by regularly. There are a number of fabulous convenience operators (Wawa and Sheetz come immediately to mind) that are finding ways to build food sales from these shoppers. The reality is that if 150,000 conveniently located, quick stop stores can figure out how to attack mealtime, the level of competition is heading through the roof. Well, at least it could happen that way.

    The other side of the story is how these convenience operators will attack. If they follow the path that seems to have caught Subway and Burger King at the moment, they will find themselves offering just another version of what’s already out there. As we all know, more of the same can make the competitive field crowded, but it isn’t likely to create a major disruption.

    But what if convenience stores manage a quantum leap and change the foodservice paradigm. What if even a small fraction of those 150,000 stores find a way to serve America’s mealtime needs in creative ways that alter the landscape. Suddenly, the problem grows significantly more complex.

    Sonja Hubbard, CEO of E-Z Mart Stores, made this point clear in her keynote speech. Quantum leaps, she explained, didn’t come from continuous improvement in the status quo, but by thinking way outside the box. Hubbard doesn’t have the prescription for the future, but questioned when convenience stores will get beyond the sandwich business and into the elements of more elaborate meals.

    Her challenge was dead on, especially to an industry that in some corners features foodservice ideas (melted cheese nachos and revolving hot dogs) that supermarkets abandoned years ago. The challenge for supermarkets is to remember how McDonald’s keeps fighting off Burger King and Subway, with new menu items, emphasis on changing tastes and a clear focus on how to retain customers.

    In other words, the battle for mealtime is always moving forward. Those who stand still, stand no chance…especially as the field gets more crowded.

    Michael Sansolo can be reached via email at . His book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available by clicking here .
    KC's View:
    Michael’s column reminded me of something that a friend of mine told me yesterday, that he has a sign in his office that says the following:

    “Without promotion, something terrible happens. Nothing.” - P.T. Barnum

    The same could be said of real innovation, as opposed to copycat initiatives that do not really move the needle.

    Published on: February 15, 2011

    by Kevin Coupe

    Here’s a stat that may come as a surprise to some people.

    Mobile Commerce Daily reports on a new survey saying that six out of 10 people with smart phones say that they have used those phones to buy physical goods during the past six months.

    The story notes that “compared to their peers, iPhone users, men and consumers ages 30-49 makes purchases more frequently, buy goods in more categories and generally spend more time shopping via mobile devices than their peers.” In addition, the story says, “When it comes to dollars spent, proportionally more iPhone users – 66 percent – report spending $250 or more on mobile purchases in the last 12 months compared to their peers, followed by BlackBerry users at 58 percent.”

    There are some other interesting behavioral snapshots in the story; for example, more people seemed to like using mobile browsers than “apps” for shopping experiences. And women like visual features that heighten the experience, giving them more information about things like color, size, and distinctive features of the products they are buying.

    But the ultimate message of the survey, which was conducted by Adobe, is that mobile commerce is a current reality, not a future trend ... and so retailers need to begin optimizing their mobile shopping offerings now.

    Because six out of 10 smart phone users are already doing it.

    That’s our Tuesday Eye-Opener.
    KC's View:

    Published on: February 15, 2011

    The American Customer Satisfaction Index (ACSI) is out with its ratings for the fourth quarter of 2010, and it concludes that customer satisfaction “has not improved since the middle of 2009, and now registers its biggest drop in two years. For the fourth quarter of 2010 the Index falls 0.5% to 75.3 on the ACSI’s 0-100 scale.”

    However, the report goes on, “While the slide in customer satisfaction is not encouraging for consumer demand or for employment, the overall numbers don’t tell the whole story and things may not be quite as serious as the aggregate suggests. Most of the ACSI decline was due to a plunge in satisfaction with government services, as reported in the January 2011 ACSI release, and a sharp decline for gasoline. The latter was caused by rising oil prices, which do have a dampening effect on consumer demand and economic growth, but slumping satisfaction with government has much less of an impact on the economy.”

    According to the report, “Customer satisfaction with the retail sector falls 1.6% to 75.0, mostly due to a big drop for gasoline service stations, which plummet 7.9% to 70 in the wake of a 20% rise in gas prices over the past year. Results for other retail industries are mixed - higher prices on food and other items dampen satisfaction with supermarkets (–1.3% to 75) and health & personal care stores (–1.3% to 77), while continued aggressive discounting keeps department & discount stores and specialty retailers trending upward for a third straight year. Both industries improve by 1.3% to 76 and 78, respectively.

    “Publix maintains its lead among supermarket chains despite a 2% drop to an ACSI score of 84. Publix has led the category every year since 1994. Whole Foods is next, well behind Publix but coming on strong, gaining 4% to 79, followed closely by Kroger, unchanged at 78. Supervalu slips below the industry average, falling 4% to 74, tied with Safeway, which improves 3%. Wal-Mart is at bottom of the industry, unchanged at 71 for the grocery portion of its business.”

    In other segments rated by the survey:

    • “Smaller drugstore chains lead the health & personal care store category, up 3% to an ACSI score of 81. Among the three largest retailers, Walgreen remains in front, unchanged at 77, followed by Rite Aid (-1% to 75). CVS Caremark retreats 4% to 74, falling out of a first place tie with Walgreen a year ago and hitting the bottom of the category. Problems with customer service appear to be at the center of the decline. CVS Caremark has cut costs in response to lower revenues throughout 2010, and that too might have had an adverse effect on customer service.”

    • “The ACSI score for e-commerce falls 2.6% to an ACSI score of 79.3, the lowest level since 2004. A 3.6% drop to 80 for Internet retail drives the overall decline, but the decline is mostly concentrated in smaller companies. Customer satisfaction improves 1.3% to 78 for travel sites and is unchanged at 78 for online brokerage. Amazon and Netflix swap places for the lead in retail, with Amazon rising 1% to 87 and Netflix dropping 1% to 86. Amazon’s score is the highest for any retailer, whether online or brick-and-mortar. Newegg (–2% to 84) and Overstock (+1% to 83) are next in line. eBay makes a significant improvement, up 3% to 81, but not enough to move ahead of any of the larger competitors.”
    KC's View:

    Published on: February 15, 2011

    Interesting piece in the Chicago Tribune about how and why a number of Asian grocery stores in the city’s suburbs are attracting shoppers from as far as hundreds of miles away.

    “Every weekend, Asian immigrants ... wake up early to drive from Indiana, Wisconsin, Michigan, Iowa — even Nebraska — to spend hundreds of dollars in the large, flourishing Asian grocery stores in Naperville, Arlington Heights and Niles,” the Tribune writes. “These super shoppers push two carts at once in stores some locals don't even know exist. And they have been in full force recently, stocking up on mooncakes, Moutai liquor and other delicacies for Lunar New Year celebrations that began earlier this month.”

    According to the story, “Twenty years ago, Asian shoppers visiting from other states headed straight to Chinatown, Koreatown, Argyle Street and other ethnic Chicago neighborhoods for the authentic tofu salads, frozen dumplings and bok choy they craved.

    “Since then, the Asian population has grown significantly in Chicago's suburbs. In Naperville, for example, the number of Asian residents has grown an estimated 50 percent during the last decade — to almost 19,000 — according to demographer Rob Paral, citing U.S. Census Bureau figures.” This growth has led to the emergence of Asian supermarkets that are vast in their selections, and that serve as a magnet for Asian shoppers interested in foods from their home countries.

    At the same time, retailers are working to make sure they nurture their customers and don’t lose their advantage.

    “At Mitsuwa Marketplace, manager Masato Takai has negotiated deals with area hotels so guests receive a discounted room rate if they show their grocery receipt,” the reports. “Takai tries to direct new out-of-town shoppers to the store's special features, like its selection of 100 kinds of sake.

    “Paige Yun, a customer service representative at the Super H Mart in Naperville, helps to organize calendar giveaways, gift promotions and Asian Food Fairs to make long-distance drives worthwhile.”
    KC's View:
    It should not be a surprise that a differentiated approach to marketing - a targeted, unique selection with a kind of primal appeal to shoppers - can get people to go out of their way to shop at a specific store.

    What is always more of a surprise to me is that more stores - especially food stores - don’t try to heighten and exploit differential advantages in terms of product and services, as opposed to selling the same stuff as everyone else and just fighting over price.

    BTW...the New York Times this morning has a story about how retailers ranging from Walmart to Target, Bloomingdale’s to Kohl’s, are all looking for form relationships with celebrities that allow them to create proprietary brands - also known as private labels - that they think can give them a differential advantage in the marketplace.

    Sometimes it works and sometimes it doesn’t. It usually is hard. But it almost always is worth doing.

    Published on: February 15, 2011

    The Wall Street Journal reports that “a major freeze in Mexico earlier this month has resulted in a shortage across the U.S. of tomatoes, cucumbers, bell peppers and other produce that could last until April and lead to higher prices at the grocery store.

    “Supermarkets, distributors and restaurant chains are scrambling to find other sources for the items and to offer replacements,” the story says. “But the problem has been compounded by the fact that inclement weather has also hit other growing regions, like Florida and Texas, that would normally be able to make up for a supply interruption from Mexico.”
    KC's View:
    Just add this to the list of products that are likely to see price increases in coming months, for a variety of reasons. It is all going to mean sticker shock for consumers and potential sales and profit problems for retailers and suppliers.

    Marketers are going to have to get a lot better at explaining themselves to shoppers, of telling the story that goes along with their products and services, because they are going to have to find a rationale for higher prices.

    Published on: February 15, 2011

    The New York Times reports that the US Department of Agriculture (USDA) has approved for commercial growing “a type of corn that is genetically engineered to make it easier to convert into ethanol,” a decision that “came in the face of objections from corn millers and others in the food industry, who warned that if the industrial corn cross-pollinated with or were mixed with corn used for food, it could lead to crumbly corn chips, soggy cereal, loaves of bread with soupy centers and corn dogs with inadequate coatings.”

    Some interesting notes from the story:

    • “The corn, developed by Syngenta, contains a microbial gene that causes it to produce an enzyme that breaks down corn starch into sugar, the first step toward making ethanol. Ethanol manufacturers now buy this enzyme, called alpha amylase, in liquid form and add it to the corn at the start of their production process.”

    • “Syngenta says that having the crop make the enzyme for its own breakdown — self-processing corn, as it were — will increase ethanol output while reducing the use of water, energy and chemicals in the production process. The company, a seed and pesticide manufacturer based in Switzerland, said it would take various measures to prevent the corn from getting into the food supply.”

    • “The corn, which is called Enogen, is one of the first crops genetically engineered to contain a trait that influences use of the plant after harvest. Virtually all past biotech crops have had traits like insect resistance, aimed at helping farmers more than manufacturers or consumers. Enogen is also one of the first to be engineered solely for industrial purposes.”

    The Times suggests that a lawsuit aimed at stopping growth of the new corn is likely.
    KC's View:

    Published on: February 15, 2011

    • Cargill is out with an announcement saying that it “has evolved and perfected an existing food processing technology to create Fressure fresh ground beef patties, which have double the shelf life of traditional fresh burgers, benefit from enhanced food safety while also providing optimal flavor and a consistent high-quality eating experience for consumers.” Cargill says that it currently is employing this technology to produce fresh ground beef patties for the foodservice market.

    According to the company, the inspiration for the new technology came from that used by the avocado industry to make fresh guacamole.
    KC's View:

    Published on: February 15, 2011

    • Walmart has named Cindy Davis, the executive vice president of membership, marketing and e-commerce at the Sam's Club warehouse store division, to be its new executive vice president in charge of a “Global Insights Team” charged with studying ongoing consumer trends.
    KC's View:

    Published on: February 15, 2011

    MNB reported yesterday that Mike Gilliland, 52, who co-founded Wild Oats and recently has been making a comeback as CEO of Sunflower Farmers Market, was arrested last week and accused of soliciting sex online from a girl who identified herself as a minor. The official charge is felony child prostitution, according to Phoenix police, who said that Gilliland is charged with arranging to meet the underage female, drive her to a hotel, and pay to have sex with her.

    My comment:

    Sad story, and not just because it sullies the reputation of a previously respected businessman. If he did it, of course, he deserves to have his reputation sullied...and it will be a shame that the tarnish also will end up rubbing off, in some measure, on the company he ran.

    This story also reminds us all of the dark side of the internet. As if we needed to be reminded.

    MNB user Greg Smith responded:

    I was horrified by your "KC's View" regarding the charges against Mike Gilliland.  The fact that your only stated concerns are the "sullied reputation" either deserved or undeserved of a business man and the company he ran rather than the welfare of the purposed child prostitute in question is offensive.  There are children being neglected, abused and their souls literally being sold over the internet and your concern is to a prostitution soliciting CEO and the company he ran.  Of course he is innocent until proven guilty, but your comments went far beyond that, suggesting that the victims in this issue were reputations of CEO's corporations and that we all need to be careful of the "dark-side" of the internet.  

    KC, you should rethink your own values and what you and your "morning newsbeat" stands for.  I suggest you pull your head out of your "retail"-end and quit pandering to the sentiments of corporations and CEO's.  If you are going to report and comment on issues such as CEO's and child prostitution, either have the courage to talk about the real problems or don't deal with real social issues.  Stick to new store openings, zip-code cases in California and "ah-ha" stories about Apple topping the list of "most respected" companies.  

    The problem is NOT the "dark side" of the internet.  The problem is perverts and deviants scouring the world for underage, abused, neglected and forgotten children they can buy to satisfy their devilish appetites.  And that KC is the "sad story".  Hook, line and sinker.

    You, sir, either understand the difference or you don't.

    Point taken.

    I certainly did not mean to suggest that the only victim in this case was a CEO’s reputation, or that of the company he used to run. And if that is the impression I left, that was my mistake.

    Lots of reaction to yesterday’s Eye-Opener, which took note of a New York Times report that some hospitals and medical businesses “are adopting strict policies that make smoking a reason to turn away job applicants, saying they want to increase worker productivity, reduce health care costs and encourage healthier living.”

    My comment, in part:

    I can argue this both ways ... and I happen to be someone who is about as anti-smoking as one could be. There is something a little troubling about penalizing people for doing something that is, while incredibly stupid and self-destructive, still legal.

    On the other hand, I cannot blame companies for wanting to purge this habit - and its associated costs, which can have enormous impact on a business.

    And here’s the simple truth. If I were hiring someone, I would not hire a smoker. Could not do it. Would not do it.

    I wonder how many other people and companies are going to start thinking the same way.

    One MNB user wrote:

    Boy, is this a tricky one with a potentially very slippery slope. I absolutely hate smoking. I’ve seen relatives die very painful and ugly deaths from smoking driven complications. And I have a strong leaning towards letting company’s make a lot of their hiring decisions based upon their own criteria and not forcing my personal views on them, as long as they are following the law. But as you point out, where do you draw the line. I know several people who are technically still smokers, but smoke on average 1 cigarette a day. They are either a ‘one a morning’ habit, or only smoke maybe 2-3 on the weekend when they go out. While not recommended, is that really enough to give them health problems? If not, then what is the daily average limit? Does someone who smokes the occasional cigar show up as a smoker on these tests? And what about second hand smoke, as some blood tests can be VERY sensitive; a college kid applying for a job who has never smoked a cigarette in their life gets rejected because her parents smoke?

    And of course what is the limit to what is tested. Smoking is not the number one cause of health issues in this country, so do you start to also filter applicants by BMI, or high blood pressure tests? Or taking it to the extreme do you start doing genetic tests looking for markers of possible future health issues?

    From a purely accounting perspective there may be cost benefits to hiring only ‘healthier’ people, but when you start excluding large percentages of the applicant pool (people of ideal health are a minority of the population) that smaller pool is going to know it and negotiate their pay and benefits accordingly. Get enough companies doing this type of screening and your cost benefits may quickly get cancelled out or even made worse. Very complicated stuff, but one that most companies need to give a lot of thought to as this issue continues to evolve.

    Another MNB user wrote:

    If it's all about the bottom-line then I assume you would not hire an obese person as well?

    It is not all about the bottom line. It is also about the fact that I find smoking to be disgusting and cannot stand to be in the same room with it.

    I also wrote yesterday:

    I’ve always thought it both ironic and troubling when you see doctors and nurses outside a hospital grabbing a smoke; why would one trust any health-related advice that such people would give?

    Which led one MNB user to write:

    I suppose you have difficulty with the old adage:  "Do what I say, not what I do."

    Only in the sense that hypocrisy annoys me.

    Another MNB user, keeping in mind that there was another story yesterday about Walmart firing a man with cancer who was using legal medical marijuana, wrote:

    Curious, in one day we have one story where a company is evil for firing a person for legal drug use and one story where a company is doing good by not hiring a person for legal drug use. (a smoker).

    Interesting times indeed.

    And, from another MNB user:

    Again, we have an example of Government policies and the unintended consequences of their overreaching authority.  When we are all led to believe that for the public good someone else is to be held responsible for what should be our individual responsibility to our own health. 

    If you force companies to bare the financial responsibility for our wellbeing and healthcare costs, then obviously they will.  After all, you forced them to do so.  If they are going to be responsible for all of those costs of your health care, then as a responsible company, they will control those costs in any way that they can.  Trust me when I tell you, this is just the beginning if Obama Care is no repealed in its entirety.  To be fair, you cannot blame the hospitals as they are bearing more than they can handle as it is.

    And finally, another MNB user wrote:

    I agree with your smoking comments Kevin.

    I lost my son 3 years ago as a result of lung cancer, and I believe smoking.

    Problem is it seems, everybody feels they are invincible and smoking might kill that other person, but not me.

    I talked to my son I can't tell you how many times about kicking the habit and he finally did, but, too late.

    All one needs to do is spend morning until evening for 28 days in a hospital then at home with a loved one watching them die to understand. Even then some are not convinced.

    Too bad.....sad but true....I know as you do.

    My heart breaks for you.

    I lost my mom to lung cancer, which was awful. But I cannot even imagine the pain that is associated with losing a child, especially to a disease that could have been avoided.

    As I said, I hope there’s a special circle of hell reserved for tobacco company executives.

    I hope that, like me when I think about my mom, you don’t remember his illness, but instead are able to focus on the good times, the shared and happy moments.
    KC's View: