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    Published on: May 11, 2011

    by Michael Sansolo

    DALLAS -- Billed as focusing on leadership for tomorrow, the Food Marketing Institute (FMI) Future Connect conference began yesterday with a heavy dose of education in management skills and a look at the challenges that will face the supermarket industry and its leaders in the very near future.

    FMI CEO Leslie Sarasin highlighted the opening session with the presentation of the association’s main research reports examining the state of consumer trends and industry performance. Sarasin focused on a couple of key areas of challenge and change:

    • Food safety, where consumer confidence is growing, but remains fragile. While confidence is at its highest point in seven years, consumers remain suspicious of foods imported from many parts of the globe. Sarasin talked about the need for the industry to stay on top of this issue by using technology like social networking to improve communications with shoppers, who admit they may be the main cause of food safety problems.

    • Economic issues continue to dominate industry worries even while consumers seemed to be easing on slightly bargain hunting. Industry executives, however, aren’t so optimistic with almost equal percentages predicting improved and reduced conditions in the year to come, especially as concerns on inflation grow. It’s clear from some statistics how price conscious shoppers have become. Some 60% of shoppers say their primary store is not the one located closest to their home and 74% says price remains the main driver of their shopping decisions. What’s more the number of shopping trips made each week has dropped to 1.7, down nearly 0.5 from past years, with some shoppers now making only one trip each week. And when they make those trips, 46% of shoppers now use debit cards and another 30% use credit, highlighting industry concerns about interchange fees charged for those transactions.
    • Economic pressures are dampening concerns on health and wellness, but as Sarasin pointed out, this is only due to the sky-high concerns about the economy. She urged the entire industry to keep up education efforts on nutritional information to serve consumers who believe meals made at home are both more nutritious and more economical.

    • Societal issues provide both challenges and opportunities, she said. Retailers are finding increased interest among shoppers for locally sourced products and for a growing percentage of “green-minded” shoppers environmental attributes can tip the balance in favor of a store or product. In addition, the growing use of social media provides new opportunities for linking to shoppers and creating community centers on line. One social issue that remains a big concern is health care, with vast majorities of retailers reporting higher costs in 2010 and predicting more of the same in 2011.

    Sarasin’s challenges were amplified by Dan O’Connor of RetailNet Group, who provided an industry outlook for the next decade. O’Connor highlighted key challenges facing retailers including demographic shifts such as the aging of the population, increased urbanization and the growing use of Internet-based commerce. All these forces, he said, promise to heighten current levels of competition and force retailers to examine new formats, new strategies and new market solutions to remain successful and relevant. O’Connor said many of the changes facing retailers in the US are found in industrialized countries around the world and emerging urban formats in areas like Germany and Latin America are worth studying for clues to the future.

    O’Connor said continuing economic pressures weigh heavily on the vast majority of US shoppers, which will lead to greater pressure on value shopping and pressure on profits and sales growth.

    Industry outlook didn’t dominate the entire day at Future Connect however. The pre conference program began with a range of sessions examining supermarket financials, hiring practices and highlights from the previous edition of the conference in 2009. And the general session kicked off with an upbeat and emotional presentation by conductor Roger Nierenberg, that featured members of a symphony orchestra seated within the crowd. Nierenberg used the metaphor of a conductor to talk about the importance of leadership, the need for communication among teams and even the challenge of tying together disparate talents to create beautiful results.

    In other news from Future Connect...

    FMI has launched an online petition in support of debit  swipe fee reforms enacted by Congress last year, and is “strongly” encouraging members to sign the petition and also share this initiative with any associates, members or contacts who support FMI’s debit card fee reform efforts.

    According to FDMI, the petition will eventually be shared with members of the U.S. House and Senate. Given the ongoing potential for Senator Jon Tester (D-Montana) to push for a vote on his amendment to delay the debit card fee reforms, FMI want to gather signatures as quickly as possible.

    The petition can be found here .

    FMI Future Connect runs through Thursday.

    Michael’s View: In the interest of editorial transparency, let me get a few things out of the way. In my past role as a senior vice president with FMI, I worked with the committee that created the original Future Connect in 2009. In addition, in my work with the Coca-Cola Retailing Research Council, I was part of one pre-conference presentation and I’ll be serving as a moderator for one of the education tracks.

    Beyond that, one optimistic observation must be made about this year’s conference. If Future Connect is truly about future leaders, the demographics of the group deserve some comment. While there are no statistics on this, it is apparent that the percentage of women and people of color in the audience are both up sharply from 2009. In many ways, that’s promising for the relevance of the industry.

    As O’Connor pointed out in his presentation, the US is becoming increasingly diverse and the rise of a more diverse generation of leaders seems perfectly in line with that.

    Apparently, things do change.
    KC's View:

    Published on: May 11, 2011

    by Michael Sansolo
     
    Animal Kingdom wasn’t the only winner at the Kentucky Derby this weekend.  While the horse may have won on the track, Kroger was the winner in many other ways.

    As profiled during the NBC national coverage of the race, the famed blanket of roses that is given to the winner was prepared at Kroger for the 25th consecutive year.  Dave Dillon, Kroger’s CEO, says the blanket of roses is a cherished honor for the company.

    Kroger’s Mid-South division floral attendants start working on the blanket at 3 p.m. the day before the race at a local store.  Throughout the process, which usually ends around 4 a.m., the public is invited to visit the store. As NBC showed, many people do just that.

    The garland is made of fine fabric and each rose is placed into its only water “pic” and sewn in.  Here’s one secret: the bottom side of the blanket bears a likeness of the twin spires of Churchill Downs racetrack and the great seal of Kentucky.

    Kroger explains that the Friday before the Derby is the running of the Oaks, for the top fillies. Kroger also was commissioned to make a garland for that winning horse and the company came up with a special blanket called “lilies for the fillies.”
     
    That’s a winning combination and a special Triple Crown of an Eye Opener for today.
    KC's View:

    Published on: May 11, 2011

    The Sydney Morning Herald offers a look at one possible future for the supermarket industry, as Coles there has begun enabling shoppers to go online to buy their groceries and then pick them up at a number of Shell gas stations there.

    The program, called “Click & Collect,” is now available to shoppers at 23 Coles stores, and the company says that it currently is making a decision about rolling it out based on strong consumer response.

    Indeed, the story notes that “allowing customers to pick up their purchases at a nationwide network of petrol stations may fast-track Australians' embrace of online shopping, while presenting a new challenge to rival Woolworths, which is planning similar services.”

    The story also says that while online grocery sales are growing slowly, it is anticipated by analysts that it will continue to gain momentum.
    KC's View:
    Love this. It is the future of online shopping, and it will be interesting to see who decides to dominate this part of the landscape.

    Not sure where I would put my money, but I would not bet against Walmart.

    Published on: May 11, 2011

    Reuters reports that “fast-food companies are asking U.S. state legislators to remove restaurant marketing from local governments' regulatory menu, in the latest industry bid to stay a step ahead of anti-obesity laws.

    “The lobbying push, which has succeeded in Arizona and gained traction in Florida, aims to stop marketing restrictions before they start. The efforts come as food companies face increasing scrutiny from the U.S. government over how they pitch their products to youngsters as obesity rates rise.

    “Last year San Francisco became the first major city to require that McDonald's Happy Meals and other restaurants' meals for children meet certain nutritional standards before they can be sold with toys.”

    There are two philosophical imperatives at work here.

    One says that government - as an instrument of the electorate - has a perfect right and maybe even a duty to make sure that big companies do not target small children with less than nutritious food sold by offering them cheap toys.

    The other says that bills such as the one passed in San Francisco represent an inappropriate government intrusion into how people live their lives and corporations conduct their business.
    KC's View:
    I’m not one of those people who believes that all government regulation is bad; I think there is such a thing as appropriate action for government to take, and that businesses cannot be allowed to operate unfettered. Swipe fees is one example - it seems sensible to me for the government to prevent credit card companies from gauging retailers and, by extension, consumers, with fees that are usurious. Nutrition information is another - it strikes me as appropriate for the government to say that fast feeders need to be transparent about how much fat, sodium and other stuff is in the food they sell.

    But this Happy Meal stuff strikes me as a bridge too far. I’m a parent, I’ve raised three kids, and I cannot remember a single time when we took our kids to McDonald’s because they whined about a Happy Meal toy. (If they did whine about such thing, that would have resulted in an immediate “no.”) Parents can make these decisions, and we have to hope that responsible parents will made good and contextual decisions. If they don’t, or won’t, all the legislation in the world won’t help.

    Published on: May 11, 2011

    The Associated Press reports that Roland Smith, CEO of Wendy’s/Arby’s Group, said in an analysts conference call this week that the company’s Wendy’s chain plans to redouble its efforts to focus on higher quality food as a differentiator in its battle with McDonald’s.

    In the call, Smith said that the chain will follow the reformulation of its french fries with a total revamp of its hamburger offerings: “Later on this year,” he said, “we are revamping the entire hamburger line. Not just one new product with a different type of cheese or some new flavor, but a brand-new line that will replace our current line: Juicier, thicker patty, better condiments, melted cheese, and probably the most significant improvement along with the hamburger is a butter-toasted bun, which really puts it not only on par but directionally better than both Five Guys and In-N-Out.”
    KC's View:
    Good to set your sights high.

    Published on: May 11, 2011

    Bloomberg reports that Walmart is responding to concerns that its $2.4 billion (US)acquisition of 51 percent of South African discount retailer Massmart will lead to job cuts by saying that its goal is to expand the company’s operations.

    “The whole point of entering South Africa is that we want to grow the business and expand it to people who don’t have the opportunity right now,” Andy Bond, Walmart’s executive vice- president responsible for the U.K. and Africa, said at government hearings in South Africa.
    KC's View:

    Published on: May 11, 2011

    The International Business Times reports that some analysts are saying that the Kindle e-reader - proprietary technology developed by Amazon.com that has allowed it to create an entire e-book store on its website - likely is a multi-billion dollar profit opportunity as the device’s eco-system expands.

    One snapshot of the Kindle eco-system: “Book titles reached 945,026 in May 2011, increasing by 47,000 over April 2011 (5 percent month-over-month increase) and by more than 740,000 since Kindle’s first anniversary. eBooks with embedded audio and video clips increased by 290 in May 2011 (their 11th month in Kindle Store) and their number reached 600. Magazine titles increased by 8 to 94 while newspaper titles increased by 3 and reached 167. U.S. newspapers’ count was at 81 and international at 86.”
    KC's View:
    The lesson here is that Amazon essentially created this out of whole cloth - there were e-readers around before, but it basically reinvented the business in the way that Starbucks reinvented the coffee shop - disrupting the way traditional companies came to market and interacted with consumers.

    Which leads me to pose the question that I think all marketers need to be asking themselves on a daily basis:

    What am I doing to disrupt the way my competition does business, the way we do business, and the way we connect to and interact with our customers?

    Published on: May 11, 2011

    • The New York Times reports this morning that Visa is announcing “plans to introduce a one-click payment system that will allow Visa customers to sign up for a set of credentials that will allow them to pay for items online with a single click.”

    According to the story, the company said it is “trying to simplify the process of buying items online or on a mobile site, which can be cumbersome for people who have to re-enter their card numbers and personal information each time they want to make a purchase online.” Amazon offers a similar kind of one-click technology, but the Visa system would cut across a variety of web sites and make them more competitive - at least in terms of ease of payment - with the online behemoth.

    Internet Retailer reports that “Connecticut this week became the sixth state with an ‘Amazon tax’ law that requires Internet retailers to collect and remit sales tax if they generate sales through in-state web site affiliates.”

    According to one expert, the law is more stringent than those in other states - it requires “sales tax collection by all retailers who receive more than $2,000 per year in sales from affiliate web sites based in the state.”
    KC's View:

    Published on: May 11, 2011

    Bloomberg reports that “prices of goods imported into the U.S. rose more than forecast in April as a slumping dollar and growing economies overseas pushed up the cost of fuel and food.

    “The 2.2 percent increase in the import-price index followed a revised 2.6 percent gain in March, according to figures from the Labor Department today in Washington. Other reports showed distributors boosted inventories and small businesses lost confidence.”

    • The St. Louis Post-Dispatch reports that “Schnuck Markets is rolling out television ads this week to promote the next phase of its ‘Peace of Mind’ campaign in an effort to differentiate the grocery chain from its competitors.

    “The ads will point consumers to its website, where they can go to ‘Schnucks QualityVille,’ an interactive site where players can watch short videos that highlight the quality of Schnucks products. By watching the videos, or by ‘liking’ the company's Facebook page, they will then be entered into a contest to win up to $25,000.”

    • The Orlando Sentinel reports that Publix Super Markets is selling Crispers, the 36-unit restaurant chain it bought about four years ago, to Healthy Food Concepts, a division of a Miami investment group. Terms of the deal were not disclosed.
    KC's View:

    Published on: May 11, 2011

    • Weis Markets announced that it has hired Robert Cline, a former Senior HR Business Partner at Staples, to be its new Director of Training and Organizational Development.

    • The Wall Street Journal reports that Anheuser Busch InBev has hired Paul D. Chibe, “a former vice president at Mars Inc.'s Wm. Wrigley Jr. Co., to lead its U.S. marketing division. He replaces Keith Levy, who left the company earlier this year.”

    The story notes that the hiring “follows a global search by the maker of Budweiser and Stella Artois, which has posted eight consecutive quarters of declining U.S. sales to retailers, a key measure of industry performance. Anheuser, the world's largest brewer by sales, has faced weaker demand in the U.S. amid high unemployment among its core customers. The brewer also faces rising competition from small-batch ‘craft beers,’ wine and spirits.”

    Advertising Age reports that MillerCoors has promoted Rick Gomez, a former PepsiCo executive who has been overseeing its Coors Light and Coors Banquet brands, to be its “VP-brand marketing, a newly created job that will report directly to Chief Marketing Officer Andy England, according to a company memo sent to distributors.”
    KC's View:

    Published on: May 11, 2011

    Responding to my comments yesterday about how moves by publishers to set up their own bookstores amounted to the kind of disintermediation that could affect a lot of other retail venues, MNB fave Glen Terbeek wrote:

    Kevin,  There is no doubt in my mind that disintermediation will happen in the the food industry if we stay with the out of date industry economic model we have today.  I predicted it in 1999 and it is starting to happen.  The macro trends of flat population growth, saturation of stores and products, technology, etc together point to a failed system for the shopper.  The reason is that the current revenues earned are not aligned anymore with true value created and the shoppers' needs.  Slotting allowances, as you mentioned,  come first to mind.  We have a system built around buying and reselling an item without adding value to it.  A model that is built around the possession of an item (finish goods product cost at best 20% of retail price) vs the marketing value of an item (much larger). A model where money is made by controlling the access of a nationally branded item.  Just doesn't make sense.

    Let's face it, the value of a national branded item in the shoppers' mind is 100% the responsibility of the manufacturer until the item hits the store.  Coke or Tide are the same in the shoppers' mind until that time.    When a retailer displays an item in a store (or doesn't), prices it, promotes it, etc, is when they take partial responsibility for its performance.  That is when the item should change ownership. Yet we have a system that changes ownership when the item enters the warehouse, way before the marketing ownership actually changes. 

    History has shown us that the manufacturers have always followed the least resistance to the shopper.  They left the corner store for the self service chains, then to the "alternate formats" (net net cost isn't all bad), and now to Amazon, Alice, and others.  The next step will be working together to go direct via a common agent.  This will be the perfect world; control 100% of the retail price, with much better marketing information. Yes even competing manufacturers will be working together to eliminate the friction in reaching the targeted shopper.

    If we change the model to align revenues with real shopper value created, both retailers and manufacturers could be happy.  Stores will exist in a smaller size that compete by creating convenience, solutions, information, and even social values. They could offer all items that the manufacturer wants to market, via the retailers web site, for pick up or delivery by the agent mentioned above. Why wouldn't they want to? The manufacturer sets the price, and the retailer gets a percentage of the retail value for creating the demand.  Great return on space and the retailer's local market potential.  And the manufacturer has frictionless access to the shoppers they target.

    The industry has two choices in the future.  Continue the current out of date economic model with retailers and manufacturers competing with each other until the manufacturers go off on their own; or change the model and coexist for the maximum value of the shoppers.

    KC's View:

    Published on: May 11, 2011

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    KC's View: