business news in context, analysis with attitude

Published on: May 31, 2011

by Kevin Coupe

Google has introduced a new mobile application called Google Wallet, which is designed to let people pay for purchases at bricks-and-mortar stores using their smart phones. At the same time, the company also is introducing Google Offers, which provides, according to USA Today, “mobile discounts you can redeem by tapping your phone at participating merchants, or by showing the bar code as you check out ... Consumers will be able to store credit cards, loyalty cards, gift cards and mobile offers on their phones.”

Other notes from the story:

• “Google is partnering with Citi, MasterCard, First Data and Sprint and merchants including Subway, Macy's, Walgreens and American Eagle Outfitters. Google says it is building an open solution to other financial companies and retailers.”

• “For mobile payments to take off, consumer behavior will have to change. But Google points out that while a decade ago 70% of consumers were reluctant to pay for stuff online, today 70% access their credit card information over the Internet.”

• “Google will begin initial field testing of Google Wallet in New York and San Francisco this summer. To start, Google Wallet will be compatible with Nexus S 4G, available on Sprint. The Wallet app will connect only to MasterCard PayPass terminals at first, of which there are more than 135,000 in stores and restaurants.”

One discordant note: CNN reports that “PayPal is suing Google for allegedly stealing its employees and trade secrets that may have led to the launch of Google's mobile payment service. The 28-page lawsuit, filed in a superior court in San Jose, Calif., late Thursday, accuses Google and two former PayPal employees who now work at Google of implementing PayPal's confidential trade secrets related to mobile payment technology.”

The part of this that should open retailers’ eyes is the notion of using a smart phone to both pay for one’s purchases as well as immediately integrate various kinds of discounts - whether they come from coupons, gift cards, loyalty promotions or whatever. This will further empower the shopper to be in control of the purchase, and require the retailer to develop programs that are shopper-centric.

It will present challenges. If coupons are automatically stored on smart phones, and automatically applied to purchases, it likely will mean that two percent redemption rates will no longer exist. More coupons will be redeemed, which means that marketers will have to be a lot more careful about the coupons they put out there and a lot more targeted about the people to whom they send them.

From my POV, that’s all a good thing. There’s a lot less waste, and a lot more efficiency and effectiveness. Eyes-open marketing, let’s call it.

Published on: May 31, 2011

The New York Times reports that the US government is preparing to get rid of the “food pyramid” that has served as the “symbol of healthy eating for the last two decades. In its place officials are dishing up a simple, plate-shaped symbol, sliced into wedges for the basic food groups and half-filled with fruits and vegetables.

“The circular plate, which will be unveiled Thursday, is meant to give consumers a fast, easily grasped reminder of the basics of a healthy diet. It consists of four colored sections, for fruits, vegetables, grains and protein, according to several people who have been briefed on the change. Beside the plate is a smaller circle for dairy, suggesting a glass of low-fat milk or perhaps a yogurt cup.

“Few nutritionists will mourn the passing of the pyramid, which, while instantly recognized by millions of American school kids, parents and consumers, was derided by nutritionists as too confusing and deeply flawed because it did not distinguish clearly between healthy foods like whole grains and fish and less healthy choices like white bread and bacon. A version of the pyramid currently appearing on cereal boxes, frozen dinners and other foods has been so streamlined and stripped of information that many people have no idea what it represents ... The new symbol was designed to underscore a central mantra of the federal government’s healthy eating push: make half your plate fruits and vegetables. And it is expected to be a crucial element of the administration’s crusade against obesity, which is being led by the first lady, Michelle Obama.”

Published on: May 31, 2011

Oceana, the nonprofit group, is out with a report saying that there is “rampant labeling fraud in supermarket coolers and restaurant tables: cheap fish is often substituted for expensive fillets, and overfished species are passed off as fish whose numbers are plentiful.”

According to the coverage, “Yellowtail stands in for mahi-mahi. Nile perch is labeled as shark, and tilapia may be the Meryl Streep of seafood, capable of playing almost any role. Recent studies by researchers in North America and Europe harnessing the new techniques have consistently found that 20 to 25 percent of the seafood products they check are fraudulently identified, fish geneticists say.”

Oceana is calling for increased vigilance and scrutiny by the US Food and Drug Administration (FDA).

Published on: May 31, 2011

Consumers Union, publisher of Consumer Reports, is out with a statement saying that recent studies into the use of Bisphenol-A (BPA) in canned foods only serve to reinforce its opinion that the US Food and Drug Administration (FDA) should immediately ban the use of BPA in all food and beverage containers.

The newest study, by the FDA, found that “the highest levels of BPA found ... were almost four times higher than the highest levels detected in a similar but smaller study published in Consumer Reports in 2009 ... The FDA study of frequently consumed canned foods confirms Consumer Reports' findings that BPA levels can vary widely from can to can including among different lots of the same type of canned food.

BPA is believed by an growing number of scientists to create a number of medical problems in people exposed to the chemical, though there are some in the scientific community who say that there is no evidence that BPA is harmful, and that such bans are unnecessary.

Just a couple of weeks ago, Kroger announced that it was getting rid of BPA from its private brand cans as well as from the paper on which its receipts are printed. And, as Consumers Union points out, “Nine states and several municipalities have already taken steps to phase out BPA from children's products. BPA-ban legislation is also pending in 12 states. The California Assembly passed a bill this week that would ban BPA in children's food contact products, baby bottles, sippy cups, infant formula and baby food containers. CU urges the California Senate to pass the bill expeditiously, so that California can begin to protect its most vulnerable consumers.”

Published on: May 31, 2011

Reuters reports that “the World Trade Organization has ruled against some U.S. labeling regulations for meat sold in supermarkets, saying they discriminate against foreign suppliers, people close to the case said on Thursday.

“The confidential interim ruling, if approved later this year, would deal a partial victory to Mexican and Canadian breeders frustrated in their attempts to export to the United States, and opens the way to scores of similar legal challenges, the sources said.”

The story goes on: “Canada and Mexico sued the United States at the WTO in 2009, saying U.S. Country of Origin Labeling (COOL) rules requiring meat sold in U.S. stores to show which country it comes from damaged their North American trade ... The U.S. rule obliges suppliers to label certain foods, including beef and pork, according to the country in which they are sourced. A U.S. label is permitted only on meat from animals born, raised and slaughtered in the United States.”

The National Cattlemen's Beef Association, the biggest U.S. cattle industry group, agrees with the WTO conclusion, saying that “COOL was a bad idea from the start.”

However, Reuters writes, “a rival cattle group warned the decision would hurt U.S. producers by denying consumers the ability to make an informed choice. 'We want consumers to be able to support our U.S. cattle industry by differentiating and selecting U.S.-grown beef from the growing volumes of imported beef sourced from over a dozen foreign countries,' Mike Schultz, of the Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America, said in a statement.”

Published on: May 31, 2011

• Bloomberg Business Week has a piece about Tesco’s continuing issues in the western US with its Fresh & Easy Neighborhood Market concept, writing that new CEO Philip Clarke is “modifying” its strategy there.

“On top of the estimated $2.4 billion the company has already sunk into the unit, Clark is opening more U.S. stores,” Bloomberg Business Week writes. “He's also launching Fresh & Easy's first TV ad campaign and testing in-store bakeries at some of the 175 outlets. Clarke has pledged to stop the losses by 2013 - three years later than the company initially hoped.”

The story notes that “Tesco didn't fully understand the preference for frozen food in the U.S. and is now adding more. It also doesn't accept manufacturers' coupons, a staple of U.S. retailing. For the last 18 months it's been adding coupons of its own for, say, $3 off a $30 bill, to its weekly flyer to attract shoppers. Some consumers were also confused by the predominance of the chain's own house brands rather than widely advertised national labels ... Tesco has expanded Fresh & Easy's offerings to 5,000 products, from 3,500, says Simon Uwins, the chain's chief marketing officer. He added low-sodium and low-fat Eatwell prepared meals to compete with Nestlé's Lean Cuisine dinners. Stores have been repainted to include brighter colors. ‘We're very confident that we've got Fresh & Easy in a place that customers like it. We've just got to get more customers into it,’ Uwins says.”

Bloomberg Business Week suggests that “there are signs of life: Same-store sales in the U.S. rose 9.4 percent in 2010, the fastest pace of any Tesco division. To keep it up, Uwins has to lure customers from rivals including Aldi Group's Trader Joe's, which also specializes in selling its own products, and larger supermarkets such as Wal-Mart Stores and Safeway, which offer a wider array of brands.”

Published on: May 31, 2011

The San Jose Mercury News reports that the city of Long Beach, California, will ban the handing out by retailers of “certain plastic bags.”

According to the story, “Under the ban, which is based on one that is going into effect this summer in unincorporated parts of Los Angeles County, the distribution of plastic bags would be prohibited at most grocery stores, pharmacies, convenience stores, supermarkets, farmers markets and other retail stores that sell food and similar items. Heavier bags, such as those used by Target, wouldn't be prohibited under the law.

“Stores that want to offer recyclable paper bags would be required to charge 10 cents per bag to cover their costs of complying with the law and to discourage shoppers from using paper bags.

“The ordinance would go into effect Aug. 1 for large stores, which is one month after the county's law goes into effect. Smaller stores and farmers markets will have until Jan. 1 to do away with plastic bags.”

Published on: May 31, 2011

• The New York Times reports that Walmart is facing increased “pressure to monitor and disclose how its international suppliers treat their workers.”

According to the story, “At its annual shareholder meeting on Friday, the New York City pension funds, which own a small percentage of shares in Wal-Mart, plan to ask the company to require vendors to publish annual reports detailing working conditions in their factories ... Wal-Mart opposes the request, citing the difficulty of persuading suppliers to issue reports. The company contends that even if it could enforce such a plan, to do so might threaten the availability of certain products from those who did not comply.”

• The Washington Post reports that Vincent Gray, the mayor of Washington, DC, has given Walmart an ultimatum - if it does not agree to build a fifth store in the Skyland complex in southeast Washington, he will do his best to make sure that the retailer is unable to build any of the four stores in the District to which it already has committed.

According to the story, two of the proposed Walmart sites are on city land over which Gray has control, and Gray also could affect its ability to get building permits for the other two locations.

• The Salt Lake Tribune reports that “six former Wal-Mart Stores employees have filed a lawsuit against the large retailer claiming they were fired for acting in their own self defense.”

The report says that the incident in question involved a man caught stealing a laptop from a Walmart store, and was taken to the unit’s security office - where he reportedly pulled a gun. The employees took the gun away from him ... and were fired a week later.

The employees maintain that they never were trained by the company in how to deal with armed customers in such situations.

Published on: May 31, 2011

The Huffington Post reports that Subway is testing a new retail concept - a “Subway Cafe” that is “a cross between a sandwich shop and a coffee bar.” The company is testing the concept in 15 locations, and the story says that “Subway is hoping to add 10 more locations by the end of the year.”

The coffee bar part of the format is being supplied by Seattle’s Best Coffee ... which is, of course, owned by Starbucks.

Published on: May 31, 2011

The Washington Post reports that the federal National Heart, Lung and Blood Institute has funded a new study concluding that “boosting ‘good’ HDL cholesterol did not protect against heart attacks and strokes,” and in fact could “increase the risk for one type of stroke.”

However, the scientists apparently are not ready to abandon their efforts. They seem to think that the drug used to raise HDL cholesterol - niacin - may be the problem, and they are looking to try another drug and another study.

The piece notes that “the risk for heart attacks and strokes can be reduced by cutting ‘bad’ LDL cholesterol, which can clog arteries. Researchers hoped that a new generation of drugs that boost HDL cholesterol, which is thought to clear LDL, would provide an important new tool. A large body of research had found that people with low HDL levels were more likely to have heart attacks and strokes.”

Published on: May 31, 2011

Dollar General Corp. announced that it plans to open its first stores in California in 2012 following what it called its “successful expansions in other western states such as Arizona and Colorado in recent years.”

The California announcement comes on the heels of the company’s planned expansions into three new states in 2011 – Connecticut, Nevada and New Hampshire. California would be Dollar General’s 39th state.

Published on: May 31, 2011

• The Wall Street Journal reports that Deloitte Touche Tohmatsu is predicting that “flush corporate balance sheets and stable credit markets” will drive “a surge in consumer products merger and acquisition activity.” In 2010, such deals were up 70 percent from the year before, and Deloitte projects that there could be significant activity in the “dairy, healthy snacks, energy drinks and chocolates” segments, as well as in ethnic product groups.

• The Chicago Sun Times reports that Roundy’s-owned Mariano’s Fresh Markets plans to hire 450 employees for each of its two planned Chicago stores, which are scheduled to open in late summer and in autumn.

CEO Robert Mariano says he plans to open 20 stores in Chicago over the next five years.

• Wakefern-owned ShopRite Supermarkets announced that it will open a new 55,000 square foot store in Niskayuna, New York - the company’s first in Schenectady County.

• Advertising Age reports that Procter & Gamble plans to put “its high-profile launch of Tide Pods liquid laundry tablets, originally set for September, on hold until early next year, saying it needs extra time to meet strong projected demand for what it bills as the biggest new thing in laundry in a generation.”

• Advertising Age reports that Piggly Wiggly - following in the footsteps of Walgreen, Supervalu, 7-Eleven, Kroger and Costco - plans to begin selling a private brand beer - a craft style beer marketed under the brand name Pig Swig with products called things like Pig Tail Ale and Pig Pen Pilsner.

• The Star reports that Target has signed leases for 105 locations in Canada, approximately one-third of the total of 150 stores that it wants to open beginning in September 2013.

According to the story, “Target’s first stores in Canada will be located in all 10 provinces across the country ... The locations include 45 stores in Ontario, with six in Toronto.”

Published on: May 31, 2011

• The Wall Street Journal reports that Walmart has named Mario-José Medina to be CFO for its China business, and promoted Del Sloneker, a former senior vice president there, to become chief operating officer in China.

Medina has served as CFO of Wal-Mart Puerto Rico and, most recently, of Wal-Mart Chile.

The appointments come on the heels of the resignations earlier this month of the company’s China-based CFO and COO.

• The Food Marketing Institute (FMI) announced the appointment of Patrick Davis as vice president, state government relations. Prior to rejoining FMI, where he worked for 20 years, Davis served as president of Alliance Consulting, LLC. He also previously worked in government relations positions at the National Restaurant Association (NRA) and Safeway Stores, Inc.

FMI also announced the retirement of Jill Hollingsworth, D.V.M., Senior Vice President of Food Safety Programs.

“Jill has been an extraordinary advocate on behalf of supermarkets. She has spent her entire career dedicated to ensuring food safety for consumers,” said FMI President and Chief Executive Officer Leslie G. Sarasin. “Under Jill’s 15 years of leadership, the Food Marketing Institute has developed a complete spectrum of food safety resources for retailers and wholesalers, including the Safe Quality Food Institute and SafeMark training programs. She will be greatly missed but we wish her a wonderful retirement.”

Published on: May 31, 2011

Responding to last week’s piece about the North Dakota supermarket taken over by the community when the owner could not make a go of it, MNB user Mike Jundt wrote:

Your article on North Dakota doesn’t surprise me. I’ve lived a good portion of my life in North Dakota, I grew up there and spent my life there until my mid thirties, I’m now 49 and live in the Minneapolis area. I spent 15 years with Supervalu before deciding this year was time to leave, but I still enjoy your newsletter and read it every day.

The people of North Dakota take care of themselves because the people who populated that state were immigrants from Europe that had nothing when they started but knew how to take care of themselves. Seeing stories like this doesn’t surprise me in the least. Whether its floods, blizzards, drought or economic meltdown, North Dakotans just take care of themselves, they don’t ask for help (but will take it if it’s offered).

And everyone in this country has a little North Dakota in them. If they’ve ever had a piece of bread or a beer, chances are at some point that product was made with North Dakota wheat or barley.




On the subject of GMO labeling, MNB user Elizabeth Archerd wrote:

The problem with transparency is that the companies know that consumers do not want these products and will choose otherwise if they know about them.

Old research, done in India for a very brief period on animals, the research that purported to show GMO consumption is safe, has recently been reevaluated by independent researchers. They found it not up to rigorous scientific standards and, in fact, that the conclusions about safety were not supported by the actual findings.

Nothing in the mainstream press about this. Curious, isn't it.

Another MNB user wrote:

You’ve heard from me before on this topic so you know the passion I have on the subject.  You are being too damn polite.  Label the foods and raw materials that are sourced from GMO or have GMO traces in them. Case closed. 

I was shocked to find out that even certified organic products – which by definition, should be GMO free – contain traces.  An honest manufacturer at Expo West shared at a GMO lecture panel that the corn they buy for their products – certified organic – when they tested it, had 6% GMO traces in it.  Corn and soy and their derivatives are the worst GMO offenders.  That includes high fructose corn syrup.  GMO contamination is a Pandora’s Box that we’ve opened and we are already having the health issues related to them.  Food allergies, autism, even celiac disease, are all linked to genetic modification.  I suspect cancer as well, but we won’t have that information till you and I are long gone from this planet, because it will be withheld.  Chemotherapy is a huge money maker.

Just label the damn things and let the market decide.  The entire reason they are holding back here in the USA is because they know full well that the consumers will not buy them and they will be forced economically to stop offering them.  The old lie of “feeding the world” and higher yield crops have been proven completely false –in fact, GMO crops are requiring MORE pesticides to survive and grow   -  but hey, that sells more Monsanto chemicals, good for the economy right????




Responding to my rant about the pilot who showed lousy customer service skills by complaining how a delay inconvenienced him, and how this reminded me of clerks who complain about their own jobs to customers, MNB user Richard Thorpe wrote:

Kevin-I agree that a clerk should not vent with a customer. However, when I ask a clerk how they are I am willing to listen to their answer, no matter what they say. I do not get upset because they do not like their job. I do not ask every clerk how they are doing only those that I am willing to listen to and those are the ones that I usually know due to frequency.  I think you are incredibly wrong with the "cut the crap at least you're working". Maybe retailers should treat their employees as Costco does - then they might not respond in a manner that you disapprove of so much. Kudos to you for the wonderful situation you have created for yourself Everyone isn't as talented, educated and LUCKY as you. Still love MNB!

MNB user Mark Boyer wrote:

As for retailers, when you go into Wegman’s and read what they stand for you will see that employees rank higher up the food chain than customers. Wegmans figured out a long time ago that happy employees make for happy customers. And we can all agree it appears to be working for them.

MNB user Anna Stewart wrote:

Thanks Kevin, I will be posting this for our employees to read. I think that sometimes we get a little too comfortable and forget we are not at home or in our best friends living room so we say things that are inappropriate for the workplace. We all need to be reminded that our customers deserve better just for choosing us and that we need them to continue making that choice or we are going to be complaining about the place we where used to work.

MNB user Ed Martin wrote:

You have hit on a pet peeve of mine.  I have always felt that you could learn a lot about the management of any retail operation by spending 5 minutes in the checkout area.  The attitude of the employees towards the customer is a direct reflection of their management, both immediate and the next levels above.  When clerks are friendly and engage the customer (even those that do not appear to want to be engaged) it shows a level of respect and thanks for the customer’s patronage.  When clerks are slow to respond to the call for additional help, more emphasis has been placed on re-stocking and other activities.  When clerks complain, it is generally because they don’t feel that management cares about them and they want to vent.

When I was in management, I used to explain the simple economics of the business to every employee:  The amount of money we have to pay employees comes directly from our sales. When sales go down so do the available hours.  If hours fall too much, people get laid off.  As the manager, I would be the last to lose my job, and if the store closed, I would probably be the one to turn off the lights.  I would then ask if they didn’t have more to lose from unhappy customers than I do?  I assured them that making customers happy was my number one goal because without the customer, none of my secondary goals would be realized.

It may sound idealistic, but people should value the fact that they have jobs and be able to focus on the big picture when it comes to dealing with the public.

I agree.

For the record, I’ve never actually told a clerk to “cut the crap and be happy you have a job.” I just think it. Sometimes.

And I realize that if I ask someone how they are, I should be willing to listen to an honest answer.

But you are right. When an employee speaks ill of their job, it sends a terrible message about the company as a whole. And retailers need to plug that hole in their marketing the best that they can. Because the front lines are where retail reputations are born, and where they die.




On another subject, one MNB user wrote:

Kevin, you were on an amazing run, it seemed, the last few years keeping tabs on Starbucks. Your love affair with their approach to business appeared over-the-top at times, and your poetic waxings were annoying after awhile, but in fairness you were also making some good points that were relevant for all businesses.

Starbucks then stumbled and fell off the pedestal, upon which you offered what sounded like back-tracking commentary.

Now, you seem strangely quiet on Starbucks as a whole. I'm not saddened by this, just curious.

And more curious in the wake of the news that Tim Hortons' CEO abruptly left the company this week. Given that Tim's is the fourth largest restaurant chain in North America, I would have thought you'd comment on it.

This has prompted me to think: How does Kevin pick and choose what he's going to offer commentary on? Surely, if you comment on McDonald's and Starbucks, you'd have something to say about Tim Horton's.

(Full disclosure: I am Buffalo born-and-bred, living in Massachusetts now. Tim Horton's rules in Buffalo. I know you live in Dunkin'-ville. There is no contest -- Tim's coffee is better, hands down).

Simple answer. I write about the stuff that interests me, and that I think will interest my readers. I try to catch everything, but recognize that some stuff slips through the cracks. And I try to throw some spice in every day - whether via a story choice or a commentary - that will stir the pot a bit.

As for Starbucks ... I’m not sure I backtracked. I think they did a lot of things right, and remain a strong role model for retail entrepreneurialism. But I also think that they’ve made mistakes along the way and I’ve tried to point them out. And I tend to think that Howard Schultz has a bit of a messiah complex, which I’ve also written. (Though to be fair, I was so put off by Schultz’s treatment of former CEO Jim Donald that it almost certainly has colored my opinion of the company.)

Okay?

Published on: May 31, 2011

...will be posted on Wednesday this week.