Published on: March 30, 2011
We got a lot of emails about ... my commentary the other day regarding a story about how bankrupt Borders Group is asking the court overseeing its finances to approve $8.3 million in bonuses - including almost $1.7 million to Mike Edwards, president of the company - to be paid to the company’s top executives. (You thought I was going to refer to that other
story, didn’t you?)
According to the original piece in the Wall Street Journal
, “For Borders' five highest-level executives, the bonuses would mean extra pay of between 90% and 150% of their base salaries, depending on how quickly the company exits bankruptcy or is sold as a going concern ... Seventeen top executives are covered by the largest program, which could add as much as $7.1 million to the pay packets of leaders who stick with the company in bankruptcy.” The bonuses would only be paid if Borders is able to emerge from bankruptcy protection in a timely fashion, and would not be paid if the company is liquidated.
The story also said that the employees in question have not seen a raise in four years, and that no bonuses were handed out in 2010 ... the year in which Borders’ fortunes really went south.
My reaction, in part:What a crock.
These things keep popping up, almost always at bankrupt and/or troubled companies, and I don’t get it.
Do your damn job, cash your ample paycheck, and create a bonus program that is tied to turning the company into a viable, productive, 21st century retailing entity. You get the bonus when the job gets finished. And maybe, if you’re really smart, you figure out a way to incentivize the front lines personnel who are going to actually make things happen, who are going to make the stores work, who are going to interact with your shoppers, and who will be the backbone of any revival.
Perhaps the real problem with these companies, in addition to the fact that could not see the 21st century coming and were tone deaf to the competitive threats that made them obsolete, is that they have management that believes they are more important than the people on the front lines. When, in fact, they are only as good as the people on the front lines
MNB user Michael Phelan wrote:Right on. As in many industries, executives come in with little or no loyalty to the organization, directly or indirectly blame the existing staff for the situation while bringing no creativity or solutions to the table. BUT, they want to cash in their chips at just the right time. Exactly what's wrong with business today.
Another MNB user wrote:I like the way you think….you’re allowed to say things I’m not. LOL
Even when it occasionally gets me intro trouble.
From another MNB user:You nailed that one. Never ceases to amaze me how greedy execs are able to manipulate the planet, even search and destroy, all to line their wallets. Why? Because they can. We all let them.
And another MNB user chimed in:Glad to see you’ve had a couple of cups of coffee this morning. You hit the nail on the head with passion!!! This type of stuff has to stop if we as a country ever want to compete on a level playing field. We hold no one fiscally responsible anymore – wait a minute, yes we do, the front line associates. It’s just a shame.
And still another MNB user wrote:AMEN! I don’t know what it is with executives but I swear they have formed a secret club where they have all found a way to demand obscene amounts of money either before they do their jobs or even after they have done a crappy job. I get so angry reading these articles about these companies such as Borders or the A&P articles from a few weeks ago where they say they need millions of dollars to keep their “top talent” around. Hate to break it to you guys, but your “top talent” isn’t that talented considering they have already run your company into the ground.
I kind of relate it to the payment of professional athletes which simply makes no sense to me. Players get paid millions upon millions of dollars on a simple hope that they will play well and be worth it. How about implementing some sort of performance based salary system for both athletes and execs? They can still have a very healthy base salary but if they want the real bonuses they need to earn them; just like the majority of us normal people all over the world have to. A company’s gross profit increases a certain percent and stock value increases = bonus for the execs. A player hits over .300 for a season = bonus. It seems like such a simple, logical idea but somehow we have got to a point where most people don’t even blink an eye when Borders execs as for million dollar bonuses for doing what they should have done in the first place or athletes such as Albert Pujols (who I love dearly) demand $30 mil a year based solely on what he has done in the past. People need to wake up and smell the insanity of what is happening.
After the emails I’ve been getting since Monday, these made me feel a little like Sally Field. You like me. You Really like me.
Yesterday, MNB took note of a New York Times
report on how major CPG companies “in recent months have tried to camouflage price increases by selling their products in tiny and tinier packages. So far, the changes are most visible at the grocery store, where shoppers are paying the same amount, but getting less.”
MNB user Tom DeMott commented:The only reason CPG Companies do this and the retail trade cooperate is to hit specific price points. If something normally sells for $4.99 and the commodity costs are rising, the CPG Company wants to keep this price point and avoid higher retails which will happen if they raise their costs. Higher retails will significantly impact sales. By downsizing, the retailer can keep the same price point. I would argue this activity has nothing to do with “the economy or marketing ploys”, but more to do with rising commodity costs.
I agree that it is largely about commodity costs, which is why I’m sympathetic to the CPG companies’ dilemma.
Another MNB user wrote:My opinion is that manufacturers fear price increases and retailers glory in pushing back on them rather than just being honest with consumers. Auto manufacturers and gasoline dealers among others don't suffer the same affliction. Downsizing may be the single most wasteful practice of the food industry. How many millions of pounds of obsolete labels and packages are in landfills and how many schematic dept and factory retooling labor hours are wasted for zero improvement to the economy? If CPG invested in innovation or new markets, we might actually progress.
And, from another MNB user:I guess the thing I find amazing; even as commodity costs are rising, what are the costs involved to retro fit the plants to make the smaller packages? What happens to the leftover larger packaging, the excess labels, the boxes they were shipped in? The costs from manufacturing to the retailer; new sku's, shelf tags, discontinuation, ad pictures, etc, etc, etc? Recipes are also changed? Who ultimately bears the costs of all this? Which is cheaper long or short term? And what if commodity costs go down; a cyclical dilemma!
Another MNB user wrote:Got to watch this one as some of these smaller sizes in fact have not save much if anything and saving have never hit the consumer. In the case of one big box chain who is pushing this, in taking with their suppliers many have said the only one who gains anything is them. Both for a profit and public relations stand point.
Yet another MNB user wrote:I’m compelled to chime in here - as a former product manager for our company.
We've instituted a couple of these moves in the past years, driven by commodity increases. The last thing a brand wants to do is raise prices (either directly or via pack reductions).
First thing - changing a UPC code is about the most transparent thing you can do (at least in terms of the supply chain). New item forms are completed, rationale given, P/E studies undertaken and results presented, tags change on shelf, etc etc. Its not like we swoop in in the dark of night, pulling product out of our trenchcoats and replacing on shelf. We give our retailers at least 90 days notice.
Second - there is such a thing as a price ceiling in CPG. Consumers will only pay so much for a package of x, before they shift away to something else. In order to stay on shelf, brands need to continue to deliver revenue to the retailer - and maintaining, or even growing unit velocity is critical, especially in a challenging economic environment.
Indeed - consumers will write to us saying - 'just raise the price instead of sneaking this past me, I’m not stupid'. And I’m sure that particular consumer will keep buying - and we are forever grateful for that level of loyalty. But many more won’t - and presto - the product is off the shelf. It’s a tough spot for sure - but given the choice between a discontinuation due to poor sales and continued acceptance due to modifying pricing strategy - the brand has to choose the latter.
Got the following email from MNB user David Zahn:Just wanted to follow up on a previous MNB you had posted on the Fairway Stores in Stamford. I stopped by there this weekend (primarily on your taking about it and raving). I was very impressed by the produce as I first walked in. There were clerks stocking and stacking the very large section that was filled with organic choices, some uncommonly found products, and all of it was clean, nicely presented, and very inviting.
From there, my experience went downhill. The deli counter personnel were surly (in a queue of 6 people, 3 of them had issues with the way they were handled by the counter personnel and commented directly to the clerks about their behavior). One told a customer that if she did not like how she was spoken to, she could go elsewhere. When it was my turn to order, the clerk took my order, started slicing the smoked salmon by hand, and then walked away for a 5 minute discussion with someone who came in to order a party platter in mid-order.
As I walked up and down the aisles, the prices were higher than the surrounding retailers and while many of the choices or options available were unique – there were few sales to be found that would be worth a return visit. In speaking with other shoppers, they were complaining about how the prices had steadily increased since the opening. While it is a real interesting and compelling environment – it is not likely to get me to drive past Stew Leonard’s, Costco, or any other retailer to get there to shop if I feel I am being abused, and have to pay additionally for the treatment..
I was real eager to see it and experience it. Now that I have done that – I will not be likely to return. The produce is great, the fresh foods around the perimeter (meat, fish, deli, prepared foods, bakery, etc.) were real inviting, well merchandised and marketed, but I just don’t see it as being strong enough to put up with poor customer service, high prices, and an off the beaten path location that is not the easiest to get to if you are not from the neighborhood.
If the Stew’s customer service protocol was transplanted to the store, it would go a long way (then, I don’t wince as much at paying the higher costs). However, the current shopping experience at Fairway leaves far too much to be desired to get me to go back. If my experience resembles others at the store – they won’t last too much longer. Sad, because the variety, presentation, and merchandising of the store was superb.
Just thought I would let you know – they seem to have had a great opening few weeks, but have either slid way back or I had an anomaly of an experience.
Just FYI ... this is not the first time I’ve heard these criticisms of Fairway’s operation.
It reminds me of the comment that a legitimately legendary retailer once made - that it is very nice to be considered by others to be legendary, but it is a description that one has to re-earn each day.
Perhaps the folks at Fairway have forgotten that. Or perhaps in the hurry to expand, some fundamental operating principles have been forgotten.
Got the following email responding both to the product size story, and to Michael Sansolo’s column about Martha Stewart Makes Cookies
, a $5 app for the iPad that takes cookbooks to the interactive next level.I love a moment when more than one article is relevant to a recent experience…
I am the only baker in a particular group of friends and when there’s a birthday party, I always get assigned desserts. I planned meticulously since I work a lot, only shop on Sunday mornings and the party is Thursday night. The recipe called for 12oz of bittersweet chocolate chips. I am a regular baker and I know (or at least knew) that a standard bag of chocolate chips is 12oz. I bought the bag along with all the other ingredients to make this recipe. I want to point out that I have made this particular cake the exact same way 3 times in the past year. Last night I begin the recipe…step one is chocolate and peanut butter ganache filling. I heat the cream, add the brown sugar and pull out the bag of chocolate chips…which is now only 11.5oz!!
The good news is that I am an experienced baker with a full pantry so I quickly whip out some block bittersweet baking chocolate chop the extra 1/2oz and add it to the ganache. My problem is solved (after which my husband listened to a tirade from me about CPG companies downsizing product). But if it had been a more sensitive part of the recipe (or if I had been a novice with no pantry) my whole recipe could have been ruined by a secret package downsizing! The majority of recipes out there are created based on standard package sizes and the secret downsizing could spell disaster. Just imagine the frustration a novice would feel at a recipe failure with no known cause!
I hope Martha’s recipes are updated and re-tested when the package changes from 8oz of cream cheese to 7.5oz…
And MNB user Loren Wood wrote:Great article.
Being a chef and recipe developer for a large media company, I hesitate to agree. With all the newfangled digital applications, the internet and free information at our fingertips, we have become….dumb!
Relying so much on one medium has us forgetting to use our minds. What about books from a library? Will we begin to stop thinking on our own? I got my education the old fashioned way, hours of studying and following chefs in real, not virtual restaurants. I’m not sure if the internet is threatening our creativity or if it’s the constant use of it. Maybe I’m living in the dark ages, but, I still don’t have a computer at home. I insist on reading and listening to NPR. I have a library card, and I use it.
As far as shopping goes, I’m sure there is an enormous market for opportunity. We have collectively become more fast paced and busier than ever. But, who is really benefiting from all of this fingertip knowledge…us or the folks over at Apple? As a mother of two, I plan on teaching my children how to keep house, cook, and be self-taught home economists. Just as long as that self teaching comes from a book, and not a phone, for heaven’s sake. The harsh reality is our fast paced lives are making us more reliant on “quick and easy” methods. If we neglect farmers’ markets and local grocers, we unfortunately neglect the financial future of slow food and it’s fine movement. I tend to agree with the great mind of Michael Pollan, “when the world wearies and society ceases to satisfy, there is always the garden.”
Thank you again for an amazing glimpse into our future, sad, but true.
And MNB user John Parkin wrote:Oh Michael Sansolo, where do I start?
Ms Stewart is a convicted felon who showed no remorse for the effects of her actions on her employees, or others, in pursuit of fulfilling her own greed for money that she did not need.
Secondly, every day, my son, or one of his college dorm friends cooks dinner, from scratch for the rest of the dorm; not one of them has had one minute of “home economics.”
Cooking is not difficult, and the sooner journalists stop frightening people out of the kitchen the better. The internet is awash with recipes for every dish known to mankind (should you really need a recipe), and on-line classes in techniques abound. It does not, Mr. Sansolo, “all begin with Martha Stewart”, it begins with making people want to cook their own dinner, and knowing that cooking is not the preserve of a privileged few but rather a fun activity that is even more fun when you throw out the recipe book and cook with what you have.
I for one, have no intention of buying Ms. Stewart’s app.