business news in context, analysis with attitude

Published on: January 31, 2012

by Michael Sansolo

Arriving in an airport last week to make a speech at a nearby conference, I found my name flashing from the future. No, I didn’t have some strange vision; rather I noticed the driver picking me up displaying my name on an iPad. He explained that he has a special app that allows him to track his next passenger’s flight and, at the appropriate moment, turns the tablet into a very cool, easy-to-read display sign.

Once again the future was calling and reminding me that everything is changing.

Assuming today is an average day on the Internet, something like 70 percent of Facebook’s 800 million users will check out their accounts by mid-morning and a large percentage of that group will do so before having breakfast or getting dressed. Before the sun goes down tonight, 250 million new photos will be posted on Facebook and a similar number of updates or Tweets have been added to Twitter.

If you think that doesn’t matter to you, stop and think again because increasingly, social networking is become essential to business. (Then again, since you are reading this on MorningNewsBeat.com, the odds are that revolutionary Internet based activities won’t surprise you.)

Here are some realities you need to consider:

• The population of social web users is growing more diverse and older every day. No longer is it the domain of college students sharing information about courses, teachers and parties.

• Today one of the most talked about topics throughout the social media is food: what people are eating, cooking, buying and what they think about all those experiences. Those conversations lead to specific purchasing decisions and opinion building.

• The growing reality is that shoppers use social networking connections with friends to gather opinions and feedback, but use company connections to get ideas about where to shop and what to buy. Brands and stores can immediately learn what customers are saying and what they really want, gaining real-time feedback. The results are dramatic: When shoppers get a response onTwitter they become 60 to 65 percent more likely to follow that brand and make a purchase.

• If you have any doubt on how much power those discussion can pack, consider the use of social networking on a much larger level and how sites like Facebook have been credited, in part, for revolutions toppling long time regimes in places like Egypt, Yemen and Libya.

In other words, every day the world of social networking matters to you, your business, your associates and your customers. In fact, each day it matters more because the social network population is growing and the means to link up gets easier with the explosion of mobile devices. The power of this new force of communication is staggering based on any measure and it’s time the business discussion of social networking becomes a priority topic.

That very realization is what convinced the Coca-Cola Retailing Research Council of North America to make social networking the subject of its newest study. The first part of that study is being unveiled today at the FMI Midwinter Executive Conference and is available on line by clicking here. More sections of the report will be released throughout the next few months and a second phase of research is planned for 2013.

(In case you have missed this disclaimer before, I serve as Research Director of the Council and am actively working on this study.)

The Council members - a diverse group of retailers including large chains such as Walmart, Kroger, Publix and Meijer, along with regional and independent operators - felt the industry needed a study of social media that would provide a fundamental understanding of this new force. The study, being conducted by the Integer Group in Colorado, attempts to demystify the basics of social networking, examines the basic human needs fulfilled by networking, the expectations and opportunities facing businesses, and the impact on communication and relationships for retailers and brands in this new era.

Much of what happens on the social web is simple human dynamics super-charged by technology. For example, one metaphor offered in the first part of the study is a comparison of social networking to the cliques and social circles that dominate the halls of every high school. The same elements of popularity and group dynamics that make some circles more popular and populous can guide companies on how to successfully participate in the social web. Just as a boring group will struggle to gain popularity in high school, a boring presence on the social web is unlikely to draw followers or customers. Rather, businesses need to determine what benefit they are bringing to the realm of Facebook, Twitter or other networks to become a popular, useful and sought after connection to shoppers.

The Council members acknowledge that they, like many other executives, need a better understanding of social networking and the forces making networks like Facebook so globally popular so quickly. An overview of the entire work is also available at www.ccrrc.org , outlining all five sections of the first phase of the report and the planned release dates for each.

It’s time to start a whole new conversation in a whole new way.

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

Published on: January 31, 2012

Notes and commentary from The Content Guy...

ORLANDO -- When in search of strategic opportunities, sometimes the most important thing a businessperson can do is unlearn old lessons, trying to escape the “gravity of success.”

This was a central lesson on Day One of the annual Food Marketing Institute (FMI) Midwinter Executive Conference, a day on which a strategic consultant, a self-described guy “who sells potato chips” and an astronaut offered different - if not exactly differing views of leadership at a time of great competitive tumult.

• Peter Sheahan, author of “Fl!p,” suggested that “innovation is rarely sexy,” and often can be most effective when companies “enhance how they do what they do,” rather than just coming up with new products and services. He cited numerous examples of companies that found innovation right in front of them, such as Apple, which created iTunes not because there was no places to store music and video (there were plenty), but because there was no good organizational system. The company saw the opportunity and worked cohesively to address it....as opposed to Sony, which not that long ago owned an enormous amount of music and video content, had a distribution system and accessible technology, and possessed a terrific brand, and yet missed out on the iTunes opportunity because “nobody at Sony talked to each other anymore.” They were so entrenched in their silos, Sheahan said, that they missed the money in the cracks.

“Businesses that extract the most from opportunities are the ones that make the best assumptions from what is in front of them now,” he said. And, they are able to get past tradition and unlearn old ways of doing things, which opens them up to possibilities.

One fascinating scenario described by Sheahan had to do with the Prada chain, which puts a chip in its loyalty cards that operates on RFID technology. When a person carrying that card walks in the store, employees are instantly alerted as to who that person is and what their purchase history may be. At the same time, the technology is able to bring together purchase information about all the people in the store at the same time, and use that information to create content on flat screen TVs that is customized to all their purchase histories - thus creating compelling and relevant content that is better able to stimulate sales. “There’s no new data,” he said. “They are just leverage existing data in new ways.”

That is, in fact, in synch with a sentiment often expressed here at MNB - that the ultimate competitive advantage is to know specifically who your customers are, what they are buying and when they are buying. That knowledge can be translated into sales, because offers become relevant ... as opposed to blind offers made to consumers based on the manufacturer’s or the retailer’s needs and/or priorities.

• John Compton, CEO of Pepsi Americas Foods and Global Snacks Group, had a somewhat different take on innovation - he said explicitly that the industry needs more “blockbusters,” more big ideas that can reverse a trend toward more product introductions that generate fewer sales.

But Compton also made the case that changing consumer shopping patterns - with more people than ever going online for product information and to make purchases - have created an environment in which manufacturers and retailers needed to be faster to market with products, reducing inventory times in a way that also reduces costs. “We reset our shelves once or twice a year,” Compton said, “but Amazon resets its shelves everyday.” And he called on the industry to address these issues in a collaborative and innovative way that can eliminate billions of dollars in “trapped value.”

• Finally, Capt. Mark Kelly - commander of the final flight of the space shuttle Endeavour and the husband of Rep. Gabby Giffords, who was shot in the head a little over a year ago - offered some leadership lessons from his career.

He warned against the danger of group-think, observing that “sometimes the team will march in a direction that no individual member of the team would ever take.” He suggested that when soliciting opinions from team members, “ask the junior people first,” since if you let senior people go first you are less likely to get honest responses from younger people. And, Kelley said, when choosing his crew for the Endeavour, he picked people who “were required to question my decisions,” who were able to anticipate problems, and who were risk-takers. “I prefer someone who would rather ask for forgiveness than ask for permission,” he said.

In other news from FMI Midwinter...

• Steven C. Smith, president and CEO of K-VA-T Food Stores, Inc., received FMI’s highest recognition, the Sidney R. Rabb Award, for his exceptional service to the consumer, the community and the supermarket industry.

• Richard Parkinson, former president and CEO of Associated Food Stores, Inc., was honored with with the FMI Herbert Hoover Award for his humanitarian service in the food retail and wholesale industry.

• Danny Wegman, CEO of Wegmans Food Markets, Inc. received the inaugural FMI Robert B. Wegman Award today in honor of his entrepreneurial leadership in the design of retail strategies and imaginative merchandising.

• FMI and the Grocery Manufacturers Association (GMA) announced that beginning in 2013, they will co-locate their executive conferences instead of holding them separately. The first joint effort is scheduled for January 2013 in Scottsdale, Arizona.

More tomorrow...

Published on: January 31, 2012

In the UK, the Guardian reports that Tesco has decided not to follow through on its commitment to label all 70,000 of its products with information on their carbon footprint, “blaming the amount of work involved and other supermarkets for failing to follow its lead.”

The story notes that Tesco says that the lack of commitment from other grocers meant that project never got critical mass, and that it simply took too much time and effort to make the calculations for each of its SKUs.

Published on: January 31, 2012

The Global Food Safety Initiative (GFSI) said yesterday that a recent study conducted by the University of Arkansas “shows that food manufacturers who achieve certification on one of the GFSI internationally recognized benchmarked schemes strengthen their food safety programs, resulting in safer food for consumers.”

According to the Consumer Goods Forum (CGF), which manages GFSI, “the study evaluates the impact of a decision made by Walmart to require food suppliers to go beyond regulatory requirements by obtaining certification on one of the GFSI benchmarked schemes. Walmart commissioned the study to determine if the higher requirements are resulting in improved food safety.”

The announcement goes on to say that “suppliers were in agreement that the implementation of a GFSI benchmarked scheme resulted in a more thorough documented food safety management system, which is consistent with the requirement for food suppliers to implement preventative controls per the Food and Drug Administration’s new Food Safety Modernization Act.” In addition, “suppliers also perceived that adopting one of the GFSI benchmarked schemes was beneficial to improving the safety of their products.  Most companies agreed that changes to their food safety management system were required in order to meet certification requirements and these changes were perceived as improvements in the food safety of their products.”

Published on: January 31, 2012

Demonstrating that the old “if we build it they will come” approach to retailing isn’t always sufficient in the modern competitive climate, Outpost Natural Foods, the Wisconsin-based natural food cooperative, said that it plans to open a 225 square-foot store in the lobby of Milwaukee’s Aurora Sinai Medical Center.

According to a story from BizTimes.com, the “Outpost Market Cafe will offer a variety of signature made-from-scratch Outpost prepared food items including bakery, sandwiches, soups, salads and entrees. The kiosk will also offer hot coffee and tea, juices, a limited selection of local, fresh and non-perishable staple grocery items like milk and dairy, eggs, produce, bread, bulk items, convenient center aisle foods and bagged coffee.”

Outpost already has two food-to-go kiosks in the center’s cafeteria that will remain in place. The new facility is scheduled to open this spring.

Published on: January 31, 2012

The Los Angeles Times reports that Florida State Sen. Ronda Storms has introduced legislation in the Sunshine State that would “prohibit people from purchasing ‘nonstaple, unhealthy foods’ with funds provided by the federal Supplemental Nutrition Assistance Program, or SNAP.” The Republican senator says that she was prompted to sponsor the bill because of concerns that at a time when the state was cutting Medicaid benefits and school funding, some people were using food stamps to purchase junk food.

According to the story, the bill was approved in committee, but it may not matter, since the US Department of Agriculture (USDA) has generally taken a dim view of states restricting what people can buy with food stamps, other than alcohol and tobacco. NYC Mayor Michael Bloomberg was rebuffed by USDA when he wanted to ban soft drinks from being bought with food stamps, and the feds also rejected Minnesota’s attempt to stop soda and candy from being bought with federal assistance funds.

Published on: January 31, 2012

Marketing Daily reports that Sara Lee’s Ball Park brand is launching a new campaign designed “to appeal to the women who buy food for the men in their lives by affectionately ribbing the guys’ quirky behavior.”

The tagline: “Men. Easier Fed Than Understood.”

According to the story, “The campaign spans TV, print, digital, social media, in-store activations and public relations. The brand’s site and Facebook page (which currently has about 138,000 “likes”) have also been relaunched. Both are featuring coupons, special offers and links to the brand’s YouTube area to view its TV spots.”

Published on: January 31, 2012

(Including brief, italicized and occasionally gratuitous commentary...)

• The Wall Street Journalreports this morning on how “every year, U.S. shoppers buy more generic goods, many of them trading down from more expensive, name-brand labels to save money. But consumers are developing loyalty to store brands for reasons besides price, and that could be a problem for food and consumer-products companies as the economy rebounds.”

“Private-label products,” the story notes, “still cost an average of 29% less than their nationally branded counterparts. But they are rising faster in price, at a rate of 5.3% last year compared with the industry average of 1.9%, and can sometimes be the most expensive product in a category, according to market-research firm Symphony IRI.”

• The Austin American-Statesman reports that “H. E. Butt Grocery Co. is spending about $100 million to expand, relocate and remodel several of its Austin-area stores this year part of a larger, statewide expansion and price-cutting campaign. It's the largest-ever Austin investment for the grocery chain, which also expects to hire about 1,000 workers in Central Texas during 2012, according to President Craig Boyan.”

• The Boston Globe reports that the just-out-of-bankruptcy Friendly’s Ice Cream is teaming up with Burger King to test a co-branded shop that will feature each chain’s specialties under one roof in New Jersey.

If it works, the two companies hope to roll the concept out across the country, which would expand the troubled Friendly’s brand into markets it does not currently serve.

On the other hand, neither brand seems particularly strong right now, and it usually is folly to think that adding two weak brands together will result in a strong brand.

• Reuters reports that Starbucks “will open its first coffee shops in India in August or September, a year later than originally planned, and aims to have 50 outlets by year-end through a tie-up with the Tata group, the country's biggest business house.” The story notes that the coffee company is entering “a market with a fast-growing middle class and plenty of competition in the small but fast-growing coffee segment.”

Published on: January 31, 2012

• Safeway announced yesterday that Lori Raya, senior vice president of the company’s “Mail Meal” unit, has been named as the new president of the Vons division. She succeeds Tom Keller, who is retiring this week.

• The Associated Press reports that, as expected, Carrefour CEO Lars Olofsson is to be replaced by clothing retail executive Georges Plassat at the company’s June annual meeting.

Published on: January 31, 2012

MNB fave Glen Terbeek had some thoughts about both Target’s and Amazon’s efforts to get suppliers to offer pricing and logistical support:

Target’s and Amazon’s actions are just more examples of why it won't be much longer until the manufacturers go around the traditional retailers direct to the shoppers they want to target.  The "retail tax" is getting too large in their minds.  Let's face it, a national brand is the same wherever a shopper buys it, compounded by the fact that our saturated markets of real and virtual stores are minimizing the traditional retail values and economics.  And it is obvious that the shoppers are gaining more power and choice.  As an old economics professor said, "You have to create long term value, to make money long term".

The retail tax is not only more and larger discounts, etc, it is also the barriers the retailers create in letting the manufacturers market their brands as they would like.  In addition to asking for more from the manufacturers, these “retail partner customers” are competing directly with the very manufacturers they need with private brands.   I don't see how these trend will change, in fact they will only intensify, under the current retail model that is out of touch with long term market conditions.  Why would manufacturers continue to support and fund their "competing" customers in the future?  I argue they won't be able to afford to much longer!

The future model will connect the shoppers directly with the manufacturers, and visa versa, through a “barrier buster.”  It will eliminate the economic and other barriers that exist in today's outdated retail model.  Don't get me wrong, great retail stores will exist in the future, they will be smaller stores that survive because they create true shopper values above and beyond distribution value and price.  It will be interesting to see which retailers can make the change.




Got a lot of responses to yesterday’s piece about Walmart moving its marketing departments under its merchandising umbrella. In my commentary, I suggested that to my mind, marketing is strategic and merchandising is tactical, and so this move could reflect a philosophical shift by Walmart.

One MNB user wrote:

Walmart’s reorganization, placing marketing underneath it’s merchandising group. Like you, I cannot say whether this is the right strategic move. But it is worth noting that Walmart has always been an organization whose dynamic growth was built on supply-chain logistics, with marketing appearing as something of an afterthought. They failed miserably in their efforts to capture the coveted female shopper’s attention in the case of affordable “designer” fashion brands. Despite huge efforts, they still haven’t managed to craft an aspirational in store experience that can compete with Target.

Another MNB user wrote:

Most companies I deal with have marketing reporting into merchandising- and view it exactly the opposite - the head merchant is the strategist and the marketing arm is the more tactical piece- however- as a system of checks and balances- most company leaders require both to have very strong strategic skills sets- requiring these two areas to come up with both short and long term strategies to drive immediate sales and continue to build the brand.

I believe the thought is that the merchandising arm is more about "selling" - knows what the store needs to look like, what items, what price point, etc. The marketing arm needs to communicate it customers both inside the store - and more importantly outside the store.

That having been said, you can understand why the head of merchandising needs to be a real visionary and thought leader - talent at this level is one of the most difficult to find - sure there are a lot of them out there, but those who can truly understand what needs to be done to drive sales, be a step ahead, create a strategy around it and build/mentor a team that can implement it - very, very hard to find that person. If I were leading WalMart I don't think I would have made the same choices.

From another reader:

Hum , if I were a betting person, my bet would be, soon you will see Mr. Quinn (Walmart’s current marketing chief) leave…   don’t get me wrong, I agree with this move and marketing should be a support division ( and not a very large one at that) and since Mr. Quinn has arrived they have grown in size, and spent a ton on money  and have gotten little if any market share for it.

Another MNB user wrote:

As a former associate in the marketing department (and a cpg veteran of 20+ years), I can agree wholeheartedly with your comments on marketing typically leading strategy.  However, at Walmart, some of the most ambitious (and failed) programs such as Project Impact, Clear Action Alley (yes, they were originally two different programs) as well as sku reduction were all led by Merchandising Executives.  This movement on the org chart is just a "formal" statement of Walmart's leadership priorities in the function areas.

From still another MNB user:

Moving marketing under merchandising is not new.  Before the arrival of the outsiders, Wal-Mart was a merchant driven company with a marketing playing a supporting role.  Now that they have abandoned SKU reduction and their desire to look like Target, an initiative that was driven by people who are now spending more time with their family, it is natural to return to an organizational structure that played a strong part in their past growth.  To me this is a step in the right direction as "Be a Merchant" is part of the culture not "Be a Marketer".