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    Published on: October 25, 2011

    by Michael Sansolo


    Supermarkets are special.

    Supermarkets are an essential part of every community in a way that few other businesses can claim. Supermarkets interact with shoppers more than any other business. The industry is the front line of all kinds trends, dealing with the most basic products people buy weekly.

    And that’s during calm times. Think about the discussion of urban food deserts or the grief that strikes rural communities when the lone supermarket in town closes. It hurts a community when any business leaves, but losing a supermarket is worse.

    That special position is a gift, but also a challenge because whatever happens in the community matters to the supermarket and, by extension, the entire industry. That’s why the supermarket industry has to keep an eye on all the trends around us in society.

    Take one prime time television show last week. There’s a modestly successful comedy on ABC called “The Middle” that centers on the Hecks, a working class family living in Indiana. The family is quirky in the way that television families always are and yet they are also quite normal. The Hecks and their neighbors are coping with the economy and frequently are doing it badly.

    On last week’s show the family noticed that some of their neighbors have disappeared. The talk on the street is these folks have ‘moved in with family,” which is code for having lost their house due to foreclosure. Then we see how the Hecks scrape by with a leaky roof, broken appliances and mounting bills. It’s a reminder of the economic anxiety that faces so many shoppers these days. What’s more, it’s a reminder to other shoppers of how precarious life things are. And that’s from a comedy!

    Then watch the news. I can’t pretend to explain exactly what the Occupy Wall Street protesters want, but I’m pretty sure it’s not anything simple. This group, much like the Tea Party protesters who first exploded into town hall meetings more than a year ago, seems angry and convinced that something—maybe a lot of things—are going wrong.

    Supermarkets cannot ignore these messages precisely because they occupy a special place in the community. The anxiety and anger in the street and in homes matters because it matters to our shoppers.

    This summer the Economist, a wonderful magazine covering Europe, wrote about how Spanish supermarket operator Mercadona is growing despite the tough economic times in that country. The final two lines of the story summed it up perfectly:

    “The protesters in the plazas complain that Spain’s politicians have lost touch with how ordinary people live. That is not a mistake a supermarket can afford to make.”

    And that’s why the messages of anxiety from primetime television, Occupy Wall Street or the Tea Party matter. People are worried and that’s a situation the supermarket industry can ill afford to ignore. Those worries show up in the rising use of coupons, private label products and even the general attitude of shoppers.

    Unlike Kevin, I rarely use space in MNB for recommendations, but on this topic, I want to make an exception. While there is no perfect summation of the global economic climate, Michael Lewis’ new book, “Boomerang,” will get you thinking and is totally worth the read.

    Lewis - the author of “Moneyball,” “The Big Short” and “The Blind Side” - travels around the world to dig into the economic calamities that have so shaken Iceland, Greece, Ireland, Germany and California. As you read about his travels and interviews you come to learn just how many absurdly bad decisions it took for different countries and communities to so badly mismanage their financial futures. The lessons are stunning and at times even horrifying.

    I rarely write about politics in MNB because the polarization of opinions frequently limits our ability to have logical or meaningful debate. Lewis’ book cuts through that. As you read you grow angry with bankers and regulators, management and unions, and both governments and every day citizens who seem to want it all without regard to cost or consequence. And you come to realize just how large a problem we face because it’s what our shoppers face.

    Remember: The protesters in the street complain that politicians have lost touch with how ordinary people live. That is not a mistake a supermarket can afford to make.


    Michael Sansolo can be reached via email at msansolo@morningnewsbeat.com . His book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available by clicking here .
    KC's View:

    Published on: October 25, 2011

    by Kevin Coupe

    For many people, an event occurred 25 years ago tonight that proved that anything can happen.

    Anything.

    It was the sixth game of the World Series, with the New York Mets facing off against the Boston Red Sox. The Sox had a 3-2 game lead in the best-of-seven series, and as the extended game went into the bottom of the 10th inning, the Sox had a 5-3 lead. The Mets tied up the game, and then Mookie Wilson came to the plate ... and won the game with a little squib that went through the legs of first baseman Bill Buckner, scoring Ray Knight.

    Here’s what Vin Scully said on television:

    “If one picture is worth a thousand words, you have seen about a million words, but more than that, you have seen an absolutely bizarre finish to Game 6 of the 1986 World Series. The Mets are not only alive, they are well, and they will play the Red Sox in Game 7 tomorrow!”

    The Mets won Game 7, and the World Series. (Though it took an extra day, since Game 7 was rained out and had to be postponed.)

    It was, in a word, unbelievable.

    It convinced many people that anything could happen. Mets fans, though we knew in our hearts that our team had its troubles and serious personality issues, really began to believe that it was a team of destiny. Red Sox fans, on the other hand, were more convinced than ever that the Curse of the Bambino really existed, that the Sox would never win the World Series.

    Of course, the Mets have not won a World Series since. And the Red Sox have won it twice. (Maybe anything can happen.) And in the intervening years, the NY Yankees have won five world championships (including three in a row), and the Minnesota Twins, Toronto Blue Jays, and even the Florida Marlins have each won two World Series. (And, go figure, the Atlanta Braves have only won one.)

    Life goes on. Buckner and Wilson have been known to make public appearances together at autograph shows. And Buckner played himself this season on “Curb Your Enthusiasm,” poking fun at his own mistake.

    Anything can happen.

    The business lessons are simple.

    First, to quote Tug McGraw, whom pitched for the 1973 Mets pennant-winning team, “You Gotta Believe.” If you don’t believe in the rightness of what you are doing, the strategies and tactics that you are using, and are willing to invest your heart and soul and body to the effort, then what’s the point?

    And second, you have to play every out of every inning. Every pitch, every swing counts. You have to run the bases and play the field as if every moment, every play, will determine the outcome of the game. As Yogi Berra, who managed that 1973 Mets team, once said, “It ain’t over ‘til it’s over.”

    It was 25 years ago today that many of us learned that anything can happen. And often does.

    Play ball.
    KC's View:

    Published on: October 25, 2011

    The Wall Street Journal this morning reports that Walmart has reopened the 13 stores in the Chinese city of Chongqing that it was forced to close when the government there accused it of mislabeling ordinary pork as being organic.

    According to the story, Walmart says it has “overhauled retail operations there, as the world's largest retailer by sales looks to put an embarrassing setback in one of its largest growth markets behind it.”

    The Journal writes that “Wal-Mart said it has trained its employees to comply with Chongqing's laws and regulations and has created food inspection labs at Chongqing outlets to improve food management. It is also packing all organic meat with food certificates verifying a pollution-free organic product.” And, the company is said to be “placing in its Chongqing stores a customer complaint counter” and holding and "Customer Afternoon Tea Sessions" to solicit customer feedback.

    "The recent rectification actions and the measures we are taking will help us serve our customers with improved products and services," Scott Price, president and chief executive of Wal-Mart Asia, said in a prepared statement.

    While the stores may be open, Walmart still has to deal with the fact that two of its employees have been arrested and 35 others have been “detained.” It also has written a check for more than a half-million dollars (US) to pay off a fine assessed by the government.
    KC's View:
    From all reports, there seems to be a lot of stuff going on here - Walmart may have screwed up, but there also seems to be a fair amount of political posturing going on as part of a local power play.

    If nothing else, Walmart has received a rather public reminder that it isn’t just in Kansas - or Arkansas - anymore.

    That is driven home in a quote from local officials, who say that Wal-Mart has benefited from the "principle of punishment and education,” and Chongqing Mayor Huang Qingfan, who says that "if not for our fight, we wouldn't have grown closer."

    Sounds an awful lot like the Japanese POW camp commander who keeps asking his prisoner, “Are you happy in your work?”

    This doesn’t sound like business. It sounds more like political re-education.

    Published on: October 25, 2011

    The Financial Times reports that Netflix has revealed that its US subscription levels have dropped more than expected, from 24.6million to 23.8 million, after the company engaged in an ill-advised plan to separate its online streaming business from its DVD rental business, which was going to be renamed Quikster. Netflix also raised prices by about 60 percent, and the combination not only lost it customers, but also sent its stock price into a tailspin - it reached $300 in July, but now is trading in the $118 range.

    FT notes that as Netflix expands into the UK later this year, it is expected to operate in the red for a period of time.
    KC's View:
    I love this passage from the New York Times story about Netflix’s travails:

    Mr. Hastings said in an interview last week, his most detailed discussion yet of the bruising period, that he had been guilty of overconfidence and of “moving too quickly.” But he said he still believed — as do nearly all investors and analysts — that Netflix’s future lay not in DVDs but in streaming over the Internet. “We still need to move quickly in streaming,” he said.

    Twice in the interview, Mr. Hastings linked the hostility toward Netflix’s price change and proposed breakup to the angry mood of the country, even citing the Tea Party and the Occupy Wall Street movement by name.

    He said — and repeated it on a conference call for investors on Monday evening — that subscribers had been bothered more by the summer price shock than by the breakup plan.


    Hastings - who I always have admired - is delusional.

    I’m sure that streaming is the future, but if he thinks that people are getting mad at him because they are mad at everybody, he’s really kidding himself.

    Here’s the irony. Netflix offers a great service. Even at 60 percent more money, it is a great service. I love the integration of entertainment forms, being able to stream some movies and TV shows and watch other on disk. (This latter is important when you spend as much time on planes as I do.)

    I hope the company will weather the storm. I think it will. But regaining trust is going to take some time.

    Published on: October 25, 2011

    Soap.com - which is owned by Quidsi.com, which itself is owned by Amazon.com - announced yesterday that it is adding 10,000 non-perishable grocery SKUs to its selection, including “coffee and tea, snacks, cereal, pasta, baking ingredients and canned items.” The company guarantees that all orders will arrive in 1-2 days, with free shipping for orders over $39.

    According to the announcement, “Soap.com's food selection is similar to that of a non perishable selection of a large supermarket, but with the added convenience of home delivery and large selection of both mass and specialty brands. Brands on the site include Cheerios, Kettle Chips, Senseo, and Celestial Seasonings Tea, as well as hard-to find items from The Gluten-Free Pantry, Eden Foods Organic and Energ-G Foods. As with all orders from Soap.com, boxes are packed using a proprietary software system that insures all items arrive intact, in an optimally packaged box.”

    Soap.com, which has been focused on health, beauty, and personal care items, has been operating since July 2010. Quidsi, which also operates sites that include Diapers.com and BeautyBar.com, was acquired by Amazon late last year for about $500 million.
    KC's View:

    Published on: October 25, 2011

    The National Retail Federation has asked the US Commerce Department to delay implementation of what it calls “a controversial plan to vastly expand Internet domain names, saying retailers and other businesses need more information before moving forward.”

    The Internet Corporation for Assigned Names and Numbers, a non-profit that administers Internet names for the Commerce Department, plans to launch a program in January that would go beyond traditional three-character "top level" domain names such as ".com" and ".org" to include word-length domains such as ".retail" or ".shop" and also allow business names such as ".NationalRetailFederation" to be used.

    "The single comment we are hearing most often from retailers is that they wish they had more time," NRF Senior Vice President and General Counsel Mallory Duncan said. "Whether they're for it or against it, everybody agrees that there has been too much uncertainty around this process. Right now, uncertainty reigns."
    KC's View:

    Published on: October 25, 2011

    NBC News reports that a new study from the Mari Gallagher Research & Consulting Group suggests that in Chicago, “lack of access to healthy food has declined nearly 40 percent over the past five years ... Although the decline shows  improvement of awareness, the Gallagher group warns in a statement that ‘serious health and retail challenges persist’.”

    The study says that close to 384,000 Chicago residents are still living in so-called “food deserts” including more than 124,000 children.

    The reports comes as First Lady Michelle Obama travels to Chicago today as part of her nationwide effort to promote healthy eating and fight childhood obesity. Included in her itinerary will be a meeting with a number of urban mayors dealing with urban food policy issues and looking to solve the problem of “food deserts.”
    KC's View:

    Published on: October 25, 2011

    • Sara Lee Corp. reportedly has sold the majority of its US foodservice coffee and tea business to JM Smucker for $350 million.

    According to the Wall Street Journal, “The move underscores Sara Lee's continuing efforts to slim down the packaged-foods company, while it is in the process of splitting apart, into an international coffee and tea business and a North American business that includes the Jimmy Dean and Hillshire Farms brands ... In addition to the sale, Sara Lee and Smucker have struck a licensing agreement to together develop liquid coffee technologies. As a result of the agreement, Sara Lee said it will receive a 10-year income stream of about $50 million, plus growth-related royalties, which will help cover its research and development and other support expenses.”

    USA Today reports that a new study published in Pediatrics suggests that “girls exposed before birth to high levels of the estrogen-like chemical BPA are more likely to be anxious, depressed and hyperactive at age 3.” Boys, on the other hand, seem unaffected.

    The story notes that “scientists in recent years have linked BPA, or bisphenol A, to a wide variety of health problems, from breast cancer to diabetes. BPA is found in countless consumer products — from plastic bottles to dental sealants, medical equipment, receipt paper and the linings of metal food and drink cans.

    “Virtually everyone is exposed to BPA. Authors of the new study found BPA in the urine of more than 97% of the 240 pregnant women studied, as well as 97% of their children.”
    KC's View:

    Published on: October 25, 2011

    Got a number of responses to yesterday’s piece about a Fast Company story focusing on the big four in the technology world - Amazon, Apple, Facebook and Google.

    One MNB user wrote:

    What’s most amazing to me about your “Fab Four” recap is that it doesn’t include any mention of Microsoft.  I read recently they finished 1Q selling over $17 Billion, an increase of around 7% or so versus prior year.  I haven’t seen Microsoft re-state revenues as we have with some of the others in the tech space.  While they have their challenges (e.g. Microsoft Stores), I think Microsoft are just as “mis-understood”  - for the value they bring to not only shoppers, but to the Fab Four as well.

    MNB user Greg Braatz wrote:

    One of your constant themes is the need to stay relevant.  When I think this way, what is surprising is who is not on the list.  I remember a time in the not too distant past (for those of us over 50) when the names that ruled technology were Microsoft, IBM and Intel with Dell having the outsider/upstart role.  Now those companies are fading into the background.  10 years ago who would have bet (certainly not my stockbroker) that a book seller, the company that brought us Newton and a search engine (there was no social networking at the time) would play the role they are playing today.

    MNB user Bill White added:

    Who would have guessed, 10-15 years ago that Microsoft would be left at the altar, not even so much as getting a mention as one of the "Fab Four?"

    Also got the following email about our Microsoft Store piece:

    One of the things which isn’t obvious as having been strongly considered by Microsoft Stores was their differentiation strategy.  Since you compared them to Apple: Apple’s differentiation consists of deep capabilities in easy-to-write software, the integrated iTunes system and a simplicity of design and product line (as Apple has only + 60 main SKU’s). Simply put, Apple is a leader because its highly differentiated.  And, Apple has to have a strong differentiation plan, since a bigger slice of the population uses Windows.  The result is their stuff is highly addictive.

    Microsoft needs a differentiation map, particularly to convert their Shopper Marketing thinking from B2B to B2C, if they want to “sell more”.

    Or perhaps to survive.





    Walmart said yesterday that it will be matching all prices through Christmas - but only with brick-and-mortar competitors. Which led one MNB user to write:

    How do you exclude online retailers and have any credibility?  People are increasingly becoming ambivalent about online versus in-store and that trend seems especially pronounced around the holidays.

    Agreed.

    And, regarding another Walmart initiative, a reader wrote:

    Just a couple of thoughts regarding Walmart's newest marketing initiative, the "retail development kit".  From the little bit of info given this sure sounds like the shopper marketing pitch given by nearly every other supermarket chain out there.  Basically they are trying to capture vendor funding by calling it something else and putting it in another bucket.  I'd bet a dollar to a donut that they are telling their vendors that it should come from existing consumer marketing budgets and not from trade dollars or cost of goods.  I'll also bet they offer tiered packages with various components and you can probably be a platinum, gold or silver level supporter based on the amount you are willing to spend.  Just guessing. 

    As a grocery retailer I see this as a great thing because it means WMT is wanting to play our game.  As you've said more eloquently many times over the years the best way to compete is to not play the other guy's game.  Also by accepting funding for this from suppliers, WMT loses control over the message in their stores.  I'm surprised they'd give that up but again, woohoo!  Desperation in Bentonville?


    Maybe.
    KC's View:

    Published on: October 25, 2011

    • In Monday Night Football, the Jacksonville Jaguars upset the Baltimore Ravens 12-7.

    • And, in the fifth game of the MLB World Series, the Texas Rangers beat the St. Louis Cardinals 4-2, giving the Rangers a 3-2 game lead in the best-of-seven series.
    KC's View: