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    Published on: March 18, 2011

    by Kevin Coupe

    The events in Japan over the past week have been enormously eye-opening, though it was probably inevitable that there would already be political jousting in the United States over the future of nuclear power here; at this point in the process, maybe it makes more sense to simply agree that we don’t really know anything yet and reserve judgements - one way or the other - for down the road, when we know more about both the causes of the disaster and the reasons the nuclear plants were vulnerable.

    But two things stand out from our perspective.

    One is the importance of transparency. There has been a sense throughout the process that the Japanese government has been downplaying the problems and not being upfront with the citizens there about the dangers they are facing. On the one hand, it is kind of understandable - they don’t want to create broad panic in the streets. But the problem has been that with each successive announcement that things are worse than they thought, the government seems to lose a little credibility ... which is the one thing it needs right now.

    That’s a business lesson. Sure, you have to balance “need to know” with “ought to know,” especially in times of crisis. But especially today, when everybody is talking to each other via various forms of technology, institutions cannot afford to be in the position of being anti-transparent, because they then out their own credibility and sustainability in jeopardy.

    The second lesson comes from the always extraordinary outpouring of support - financial and otherwise - that has come from this side of the ocean, and can be seen in the various charitable efforts established by a wide range of supermarket chains - from the biggest to the smallest independents - that are both giving money and enabling their customers to donate.

    I often make the point on MNB that “American exceptionalism” is not a divine right, but rather something that needs to be earned every day through our actions and our core values. There are few greater indicators of American exceptionalism, I think, than the astonishing generosity of the American people.

    And those are our Eye-Openers for today.
    KC's View:

    Published on: March 18, 2011

    Inside sources tell MNB that Supervalu employees received a letter this week from upper management saying that effective next Wednesday, employees will no longer be able to purchase shares in the company through the payroll investment plan “due to low participation and high administration costs.”
    KC's View:
    The question raised by sources - and it is a legitimate one - is whether this suggests a certain lack of faith in the company not just in the rank and file, but also among those in upper management. After all, if they had faith in the future of the company, wouldn’t they be urging - rather than discouraging - investment?

    Published on: March 18, 2011

    Inc. has an interesting piece about the role of honesty in management...

    “Today a growing number of managers are aligning their organizations around honest self-reappraisal, while earning the trust of customers as their company evolves.”

    One example:

    “In his company's effective ‘Pizza Turnaround’ YouTube video, Domino's Pizza CEO Patrick Doyle admitted their pizza tasted like ‘cardboard’ with ‘processed cheese’ ... Doyle told the AP, “The old days of trying to spin things simply doesn't work anymore. Great brands going forward are going to have a level of honesty and transparency that hasn't been seen before.’ Domino's reputational score has risen by an impressive 21 percent in differentiation, by 24 percent in leadership, and by 28 percent in perceived quality...”

    The story goes on, “Whether the confessional will become commercial remains to be seen. But the lessons are instructional to innovators and small business owners, who too will face crisis, valleys, and periods of denial. Too often, organizations allow an elephant to wander around the room. Candor can be a catalyst. Honesty can galvanize an organization and free up people to take risks. And by admitting to a company's struggles, a leader becomes authentic and expedient at once. The truth always gets out eventually, so why waste more time on obfuscation?

    “And this is where values come into play. In our data, 72 percent of American consumers are searching for companies whose values match their own, so embracing the values of transparency and accountability constitute a smart strategy for really any brand.”
    KC's View:
    Here are the somewhat cynical questions that I would ask.

    Does this mean that transparency, honesty and candor are marketing tools and tactics, rather than real core values that are cultural in nature? (Sure sounds like that.)

    And when - and why - did obfuscation and dishonesty become accepted management tools to begin with?

    Just asking.

    What bothers me at some level is the notion that “honesty in business management” is even considered to be newsworthy. That alone speaks volumes.

    Published on: March 18, 2011

    USA Today reports that while energy drink sales are “soaring” - up more than 13 percent last year - so are concerns about their potential health impact, especially on young people who consume frequently with gusto.

    The story says that “the Food and Drug Administration limits the amount of caffeine in soft drinks to 71 mg for 12 ounces but doesn't regulate the caffeine in energy drinks, coffee or tea;” the paper writes that “American Beverage Association science chief Maureen Storey says energy drinks are no worse than coffee. A 16-ounce cup of Starbucks' Pike Place coffee has 330 mg of caffeine. That size of latte has 160 mg — the same as a 16-ounce can of the energy drink Monster Energy, which bills itself as ‘a killer energy brew’ that ‘you can really pound down’.”

    It is the “pound down” part that worries some folks.

    “Barbara Crouch, head of Utah's poison control center, says people typically don't ‘gulp’ coffee like they do energy drinks and shots,” USA Today writes. “This leads them to accumulate higher concentrations of caffeine more quickly, which can cause anxiousness, palpitations and ‘more significant heart-rhythm disturbances.’ She also worries about young athletes drinking them because they are dehydrating.

    “The American Association of Poison Control Centers, which started tracking energy-drink incidents this year, received 340 such reports from January through March 3. Most were minor. A recent report in Pediatrics warned about links between caffeine in energy drinks, high blood pressure, increased alcohol consumption and even addiction among young people.

    “Reports of people, including teens, with serious medical problems after consuming energy drinks are on the rise.”
    KC's View:
    It has been the long-held, oft-stated position here on MNB that these energy drinks are a disaster waiting to happen. Retailers who sell them and manufacturers who make them ought to be prepared for a potential backlash when some high-profile incident occurs that throws the long-term future of this category into serious doubt.

    Published on: March 18, 2011

    • Walmart reported that it “has eliminated more than 80 percent of the waste that would go to landfills from its operations in California. The company's comprehensive waste reduction program that produced these results is now being implemented across Walmart's 4,400 stores, Sam's Club locations and distribution centers in the U.S., moving it closer to its global goal of creating zero waste.”

    According to the announcement, “Achieving a similar 80 percent reduction in its landfill waste across the country would help Walmart prevent more than 11.8 million metric tons of carbon dioxide emissions annually. This is equal to taking more than 2 million cars off the road for a year.”

    • Walmart also announced that it plans to "accelerate" its efforts on sustainable agriculture. The company said that it “plans to triple the amount of food sourced from small and medium farmers by 2015 and provide training to 1 million farmers in its food-supply chain. In the U.S., Wal-Mart plans to double the amount of local produce bought in the U.S. to 10% of the produce it sells in the country. It also plans to invest more than $1 billion in perishable food supply chain around the world. The company said it also aims to cut food waste by 15% in its emerging market stores and clubs and by 10% in the U.S. and other developed markets."
    KC's View:

    Published on: March 18, 2011

    CNBC has a piece that asks the following question: “What will happen to Amazon if it’s forced to collect taxes on all of its sales?” The answers are inconclusive but interesting:

    The story says that in the five states where Amazon already collects sales taxes on the products it sells, there has been “no indication” that business has slowed as a result.

    The story also notes that Amazon has consumer loyalty in its corner, as illustrated by people who use Amazon Prime”

    “ConsumerEdge Research has created an ‘Amazon Tracker’ to determine the number of Amazon Prime members, who pay $79 a year for fast and free shopping across all categories. These are the true Amazon diehards, and ConsumerEdge estimates there are 14 million to 16 million in the U.S., ‘a substantial number by any measure,’ says ConsumerEdge analyst Faye Landes.

    “Her firm found that Amazon Prime members ‘buy many more categories on Amazon than non members, with an astonishing 21 percent of Prime members having purchased eight or more categories on the site in the last 30 days’.

    “Bottom line, she says, ‘Prime is greatly assisting Amazon in achieving its endgame of being a one-stop shop’.”

    And so convenience and habit may be more important than taxes.
    KC's View:
    Read those numbers again...

    Amazon Prime members ‘buy many more categories on Amazon than non members, with an astonishing 21 percent of Prime members having purchased eight or more categories on the site in the last 30 days’.

    That’s extraordinary loyalty to an online retailer.

    Published on: March 18, 2011

    “Just when some positive economic reports and improving consumer confidence news are picking up, rising gas prices in North America could take a toll on consumer spending power, shifting consumers back to staying at home and shopping for value until prices subside.,” write Todd Hale and Carman Allison of The Nielsen Company in a new report.

    “With ongoing political unrest in the oil-rich Middle East region, gas prices are edging back up to 2008 levels when they topped over $4.00 a gallon in the U.S. and $1.40 per litre in Canada. While there are some similarities between 2008 and 2011, much is different.

    “In 2008, increased demand drove gas prices up during the heavy travel summer months of July and August, topping out in the U.S. at $4.11 during the week of July 7. Today, with summer still months away and with prices in the U.S. already nearing the $4.00 mark at some locations, it is possible that gas prices may surpass 2008 levels. In Canada, these prices translate to about a 30 percent increase over the U.S. prices. The difference between now and 2008 is that gas prices are not rising from demand, but rather from political instability abroad.”

    They go on: “Consider this: in 2010, there were 2.1 cars per household in the U.S. Assuming that each car is driven 1,000 miles per month and achieves 20 miles per gallon of gas, a price increase of 10 cents per gallon translates to an increase of $10.50 per month in household expenditures. As prices increase, households could be paying an extra $52.50 with a 50 cent increase, $105 with a $1.00 rise and $210 if prices jump by $2.00. In Canada, similar assumptions can be made: a 10 cent increase per litre translates to a $30 additional monthly outlay; $65 with a 25 cent rise and $124 with a 50 cent increase.”

    Hale and Allison point out that these increases hardly are happening in a vacuum - prices on a lot of things are going up, putting ever-greater financial pressure on people who now will be forced to make hard choices about how to spend their money.

    “The impact to consumers is real and wallets will continue to be squeezed,” they write. “Household wages are not keeping pace with inflation, so in the end, consumers will need to dig deeper into their pockets to pay for ‘everyday’ things. The coping mechanisms consumers applied during the recession will be their back-up plan as we head into the summer. Trip capture will once again be paramount and there are opportunities for retailers and manufacturers to convert a likely decline in out-of-home eating and entertainment into spending for at-home options. We would urge manufacturers and retailers alike to actively engage their consumers and shoppers on this front and not simply sit on the sidelines. Value messaging will be important, but also think about the emotional connection with messaging that reflects the fun and enjoyment to be had with family members and friends.”
    KC's View:

    Published on: March 18, 2011

    • Western New York-based Tops Friendly Markets announced that it adopting the NuVal Nutritional Scoring System in all of its locations. The NuVal system assigns a number, 1-100, based on an assessment of overall nutrition value, to virtually every item in the store; the higher the score, the higher the nutrition value.

    NuVal reportedly is now being used in more than 1,000 supermarkets in 23 states.

    • Kraft Foods announced yesterday that it will raise its prices for Maxwell House and Yuban ground coffees by 22 percent. Instant coffee prices are slated to go up 10 percent. The hikes mark the fourth time this year that Kraft has raised coffee prices; the company says that the hikes reflect the increased cost of coffee supplies.

    • Bankrupt Borders Inc., which announced last month that it is closing 200 stores as it tries to get its fiscal house in order, said yesterday that it has identified another 28 stores that will be closed.
    KC's View:

    Published on: March 18, 2011

    ...will return next week.
    KC's View:

    Published on: March 18, 2011

    In addition to doing MNB this week, I’ve been in Southern California with my 16-year-old daughter looking at colleges. Having spent her entire life in New England, she’s resolved to move someplace sunny and warm for her four years of college; after just a few days in Los Angeles, it may be tough to get her back on the plane so she can finish her last year-and-a-half of high school.

    Parents who have taken their kids on college tours may recognize the following sensation. I’m walking around these campuses with her, listening to the person giving the tour, hearing about all the offerings that were not available when I went to school, and my first reaction is the heck with my daughter, I want to go to college. Why not? It’d be fun - I’d learn a lot, and there’d be nothing to prove - I already have a degree and a career, and I could just do it for the education, and maybe study abroad for a year, and get a couple of internships...

    One of the colleges that my daughter is considering is Loyola Marymount University, which happens to be where I went to school. (No pressure from dad on this, though it does give me immense pleasure.) Walking around the LMU campus - which is in one of the most beautiful settings I know of, overlooking Marina del Rey and much of Los Angeles, with the Hollywood sign visible in the distance on a clear day - I had this strange feeling of deja vu. I can vividly remember walking many of those same paths 35 years ago, but the thing is, I don’t really feel any different now than I did then ... I feel like the same person, capable of the all the same things, with a limitless future in front of me...

    And then I look around, and I see the students moving from class to class, engaged in easy conversations, with actual limitless futures in front of them. And I realize that I’m old.

    When did this happen?

    We’ve been staying with my brother and his wife in Redondo Beach, which has gone a long way toward convincing my daughter that California is the home she’s been looking for all her life; who wouldn’t want to move to a place where one can go for daily walks along the beach or along the Strand to Hermosa Beach? (I’m trying to remember why I left...)

    Unlike me, my brother actually worked in a supermarket when he was in high school. (I worked in retail - clothing stores and a winery tasting room - but never in a supermarket.) While we were visiting him, he was doing some garage cleanup, and I noticed that he had a ton of stuff in old supermarket milk cartons that were labeled “Dellwood” and “Daitch” - talk about a blast from the past! And talk about sustainability - you don’t have to worry about what is going to happen to things when they are thrown out if they are so strong and durable that they never get thrown out.

    My daughter has a passion for hamburgers, which combined with a less than adventuresome palate, means that there are only certain kinds of places that we visit for meals. It also means that we’ve been visiting joints that we don;t have access to back home in Connecticut, which has led to a highly subjective series of rankings:

    1. In ‘N Out. Simply her favorite hamburger place, bar none - though we agree that their fries are not the chain’s best feature.

    2. The Counter. Excellent hamburger - a little pricier than the fast food places, but she thought it was delicious ... and she loved the parmesan-coated french fries.

    3. Brewco. The former Manhattan Beach Brewing Company has a new name and no longer makes its own beer, but it has the same ownership and the front wall has been replaced by a large garage door that rolls up and gives diners a full view of the ocean and pier. It also makes a great, great burger.

    4. Original Tommy’s. There seem to be a bunch of them around now, but I took her to the real original, on the corner of Rampart and Beverly, downtown. I used to hit this place at 2 in the morning when I had a craving during late night study sessions, and I enjoyed reliving the memory with her. I loved the chili cheeseburger with everything, though I cannot imagine how I used to eat double chili cheeseburgers when I was young; I also recognize that as delicious as it is, I probably should only eat one a year. (I probably rank Tommy’s higher than my daughter does, for sentimental reasons.)

    5. Fatburger. A good burger, made fresh, but not quite on par with the others ... and too expensive for what you get. However, Fatburger gets extra points for great fries and for having one of those fantastic Coca-Cola vending machines that allow you to customize your soda with a wild variety of flavors - one of the best vending ideas I’ve ever seen.

    6. Barney’s Beanery. I remember going to the original in West Hollywood when I was young, though we visited a new outpost on the Santa Monica Third Street Promenade. The burger was disappointing, and the rest of the food was lackluster.

    As you read this, we have about 24 hours left - and a trip to San Diego - so I have no ideas what new burgers we may end up trying. But I’ll keep you informed.

    This being filed from California, I cannot help but comment on one story out of Hollywood - that Kevin Costner and Diane Lane will be playing Ma and Pa Kent in the new Superman movie.

    Kevin Costner and Diane Lane?

    I’m sure they’ll be terrific ... but aren’t they too young to be playing Kal-El’s adoptive parents? I mean....they’re my age.


    When did this happen?

    One of the real pleasures of this week was spending one morning speaking to the Food Industry Executives Program at USC that is run out of the Marshall School of Business by Bob Hermanns and Mike Prouix - a great bunch of folks from a group of retailers and suppliers that understand the critical role of continuing education in organizations that want to enjoy a high level of thought leadership and sustainable growth. My congratulations to all of them .... and to all of you, a recommendation. If you get the opportunity to take one of these kinds of sessions, or to speak to one of these kinds of on-campus groups, take it. There is nothing so reviving as being in a classroom, and you end up getting far more than you give.

    BTW...the newly renovated Santa Monica Place mall is a sight to behold, and worth a visit. They’ve converted to former indoor mall to a gorgeous outdoor facility that opens up onto the Promenade and becomes part of it - the architecture is gorgeous, the layout inviting, and my daughter loved the stores. A great example of how to turn a shopping trip into something exciting through the use of fabulous design.

    I keep making my daughter crazy by putting Randy Newman on the iPod as we’ve been driving around. But I can’t help myself - this place and the song make me happy:

    Rollin' down the Imperial Highway
    With a big nasty redhead at my side
    Santa Ana winds blowin' hot from the north
    And we was born to ride

    Roll down the window put down the top
    Crank up the Beach Boys baby
    Don't let the music stop
    We're gonna ride it till we just can't ride it no more

    From the South Bay to the Valley
    From the West Side to the East Side
    Everybody's very happy
    'Cause the sun is shining all the time
    Looks like another perfect day

    I love L.A.

    My wine of the week - the 2007 Chateau Ste. Michelle Syrah, which is smooth and ripe and oh so good.

    That’s it for this week. Have a great weekend, and I’ll see you Monday.

    KC's View: