business news in context, analysis with attitude

Published on: February 3, 2012

by Kevin Coupe

Interesting piece in Advertising Age that, while it looks at a specific industry, points to how competition - even from unexpected places - can have a negative impact on one’s business.

The story is about how Nickelodeon, the kid-oriented cable network owned by Viacom, suffered from a severe ratings decline in the fourth quarter ... and coincidentally, at the same time, Netflix was enjoying high usage of its “Just for Kids” channel, which allows people to stream family-friendly content. Including, as it happens, content that Nickelodeon licensed to Netflix.

In other words, Nickelodeon may be a victim in part because it is competing with itself ... allowing what should be its proprietary content to become more commoditized.

Now, to be sure, it isn’t like this has had an impact on all cable channels. But it could be that Nickelodeon is more vulnerable because its target audience is more comfortable with alternative methods of obtaining content.

It also should be pointed out that Nickelodeon and Netflix say that they don’t think there is a connection between the cable network’s diminished ratings and the success of “Just for Kids.” But then again, it is in their best interests to deny any connection - Netflix wants Nickelodeon to keep selling its content, and Nickelodeon doesn’t want to admit it may have made a bad business deal. And it may be that in 2012 and beyond, companies like Nickelodeon have to change their business models because there are so many alternative sources of content ... just like a lot of retailers may have to rethink their strategies and tactics because there are so many alternative sources of product.

But consider this a learning moment. No matter what business you are in, you cannot allow your products to become commoditized, and you have to do your best to offer your customers differentiated products and services.

Here’s the instructive sentence from Ad Age:

If kids are indeed seeing more streaming video and less live TV, that could be worrisome for the traditional model. What happens as those kids grow up?

That’s a question that every marketer needs to be asking, because those kids are going to have dramatically different acquisitive habits as they grow up, and it is going to affect every company with which they do business.

It’s an Eye-Opener.

Published on: February 3, 2012

The Los Angeles Times reports this morning that “more than 500 current and former female employees of Wal-Mart Stores Inc. have filed discrimination claims against the retailer with the U.S. Equal Employment and Opportunity Commission after a national class-action lawsuit was blocked by the Supreme Court last year ... the 500 or so Wal-Mart workers are from five states -- Alabama, Arkansas, Georgia, Mississippi and North Carolina -- and were required to file by a Jan. 27. deadline in order to pursue their claims.”

The story says that “employees in the other 45 states have until May 25 to file with the EEOC, and thousands are expected to do so in the coming months.”

The US Supreme Court ruled last year in a 5-4 decision that the various discrimination claims described in a lawsuit said to represent 1.5 million women did not rise to the level needed to be classified as a class action; the court said that there had to definitive proof that the company had a policy of discrimination, not just unconnected episodes of discrimination not sanctioned by policy.

A Walmart spokesman responded to the new suits by saying that anyone with a complaint should have her day in court, and noting that the claims had never been heard on their merits.

Published on: February 3, 2012

The Sacramento Bee reports that Raley’s has decided to separate itself from fellow grocers Safeway and Save-Mart in ongoing negotiations with the United Food and Commercial Workers (UFCW) over a new contract.

According to the story, Raley’s says that he lack of process in negotiations is costing it millions of dollars and contributed to the recent closing of two stores, and that the greater urgency in its case means that it will now bargain on its own.

The Bee writes that “the company is seeking about $18 million worth of annual savings, mostly through cutbacks in health expenses, according to a memo sent to employees late Wednesday by Chief Executive Michael Teel. The lack of a new contract since the old pact expired four months ago has cost Raley's about $6 million, he said. Teel expressed frustration that the UFCW has refused to give ground even as Raley's has explained the corrosive effects of a surge in competition from low-cost, non-union employers.”

Published on: February 3, 2012

CVS/pharmacy announced the launch of Order Ready Text Messaging. The company said that “customers can enroll in the program to receive immediate notification via text message when their prescription is ready to be picked up at over 7,300 CVS/pharmacy locations nationwide.

In a prepared statement, Rob Price, Senior Vice President, Chief Marketing Officer for CVS/pharmacy, said, “The introduction of prescription text alerts is the latest addition to our enhanced mobile offering and is designed to make filling prescriptions at CVS/pharmacy even more convenient."

Published on: February 3, 2012

The Wall Street Journal reports that Target has reached an agreement with Canada’s Fairweather Inc. that will allow the US discounter to use its familiar bulls-eye logo when it begins opening stores there next year.

Fairweather operates 15 stores called Target Apparel, which use a similar bulls-eye logo. While they will keep the name pending a trial that could start before the end of the year, the stores will discontinue use of the logo.

Details of the deal were not disclosed.

Published on: February 3, 2012

• The Wall Street Journal reports that the state of Arizona is looking to collect $53 million from Amazon.com in “unpaid transaction taxes similar to a sales tax,” an effort that Amazon said it would vigorously oppose. The period being targeted by Arizona is March 2006 through December 2010.

"The State of Arizona is alleging that we should have collected a transaction tax that is similar to a sales tax on applicable transactions during those years," the company said in a filing with the US Securities and Exchange Commission (SEC). "We believe that the assessment is without merit and intend to vigorously defend ourselves in this matter.”

Amazon has consistently fought efforts by states to get it to collect sales taxes on e-commerce purchases, though it has said it would favor a national approach to sales tax collection.

Published on: February 3, 2012

• Bloomberg reports that Tesco has promoted its UK COO Bob Robbins to what is described as “a global role that includes supporting U.K. CEO Richard Brasher,” and he will report directly to CEO Philip Clarke. Robbins recently was criticized for selling some of his shares in the company shortly before the company announced that it was reducing profit expectations.

At the same time, Chris Bush, who has been running Tesco’s Thailand business since 2010, is being brought back to the UK to take over Robbin’s former post as UK COO.

Observers say that these moves are designed to bolster Tesco’s UK operations at a time when its market share has dropped to its lowest level since 2005.

Published on: February 3, 2012

...with occasional, brief, italicized, and sometimes gratuitous commentary....

• The New York Times this morning reports that “the United States economy gained momentum in January, adding 243,000 jobs, the second straight month of better-than-expected gains. The unemployment rate fell to 8.3 percent, giving a cause for optimism as the economy shapes up as the central issue in the presidential election. The Labor Department’s monthly snapshot of the job market uses a different survey, of households rather than employers, to calculate the unemployment rate.

“As measured by both the unemployment rate and the number of jobless — which fell to 12.7 million — it was the strongest signal yet that an economic recovery was spreading to the jobs market. The last time the figures were as good was February 2009, President Obama’s first full month in office.”

• Reuters reports that “Yum Brand Inc's Taco Bell chain has been linked to a salmonella outbreak that sickened 68 people in 10 states late last year. Taco Bell said in a statement on Wednesday that investigators found that some of the people who became ill ate at Taco Bell, while others did not.”

The story goes on to say that “the cluster of illness from salmonella enteritidis infections is believed to have begun in mid-October and ended by the time CDC issued its final report. Illnesses were reported in Texas, Oklahoma, Kansas, Iowa, Michigan, Missouri, Nebraska, New Mexico, Ohio and Tennessee.”

The US Centers for Disease Control and Prevention (CDC) says that 31 percent of affected people were hospitalized. Nobody has died, the reports say.

A good rule of thumb is to never, ever eat at Taco Bell. Never.

• Reuters reports that two private equity groups - one of which used to be run by GOP presidential candidate Mitt Romney - are competing to buy British frozen food retailer Iceland Foods. Bain Capital, which Romney used to run, and BC Capital reportedly have submitted “aggressive” bids, though there is no word whether they approach the $2.4 billion that some believe the business should go for.

William Morrison Supermarkets was involved in the bidding process, but may or may not still be interested in acquiring Iceland; the company’s current CEO,Malcolm Walker, is said to have 42 days to match the outside offer.

• The Associated Press reports that the US Food and Drug Administration (FDA) has discovered “low levels of an illegal fungicide for oranges in samples taken from Florida juice manufacturers.” The levels are so low as to be no threat to people who consume it; the “juice tested was mixed with juice or concentrate from Brazil, where the fungicide carbendazim is used.”

Published on: February 3, 2012

• CVS Caremark announced the appointment of Larry D. Burton to the position of Senior Vice President of Government Affairs. He joins the company from Business Roundtable in Washington, D.C. where he was Executive Director.

Published on: February 3, 2012

Got an email from MNB user Craig Espelien that continues the saga of his customer service experience with Apple, which I think ought to be instructive for anyone in the customer service business:

Well, I still have not heard from Kimberly Wilbrecht at Apple Corporate (and probably never will) but I need to make a new computer purchase soon.  I researched Apple computers online (so many friends who use a Mac cannot say enough good things about it) online – and found a pretty good site – www.macmall.com – that had a few discounts and allowed you to build a computer (sort of like going to the Dell site) to get everything you want.

Before I took the plunge, I was determined to allow Apple one more shot at actually providing customer service – so I headed over to the Rosedale store (much smaller than the Mall of America store, more people working there, same number of people shopping and an MUCH higher energy level overall).  I walked in the door and was greeted by a Walmart refugee (younger – but probably one of those overnight greeters that Wally world recently terminated) – just kidding, there were two people “greeting” at the front of the store and they immediately engaged me.

They asked if I needed help (I said yes) and they directed me to another one of those folks playing with an iPad to get in some sort of service queue (I tensed up as the scheduler bore a striking resemblance to the slacker at the MOA store) when another Apple employee (there were three leaning against a table near the front of the store waiting to help folks – which seemed to escape the greeter) – Chelsea Matson stepped up and said she could help.  She has a card that says she is an “Expert” (she had someone shadowing her – I assume is was someone getting trained in – so my guess is she knows a bit about Apple’s offerings) and she immediately escorted me to the area where the MacBook Pro’s were (I told her that is what I was interested in).  She asked a few questions about my needs, asked a few more clarifying questions (I gave her my tale of woe with the MOA store) and she did her best to answer all of my questions, point out the benefits of the MacBook, offer their service package and did a really good job of making me feel like she actually cared (I think she did).  She also stated that they would price match – and so we went out to the MacMall site to see what they were offering.  The machine I had selected there was one generation behind and she offered a variety of ways to get a discount (my wife is a teacher – so we will get the teacher discount) and why it is better to buy it from the store (especially if there is a problem – with Apple Care they just hand you a new computer if yours breaks).

I almost pulled the trigger right there – but want to make sure Michelle can navigate the computer and want her exposed to it right out of the gate.  It looks like we will return this weekend and get a new computer!!

The lesson – it is not the company but again the people who make service come to life.  Without Chelsea’s interaction with me, I may have still bought a Mac but would not have liked the company any more (and the stores that much less).  She did a great job of helping me understand the options, the benefits and the savings of buying at the Apple store.  I still will not go back to the MOA store and if Kimberly does eventually call (I doubt it) I will certainly vent my spleen to her – negatively about the MOA store and positively about Chelsea who deserves kudos for picking up the Apple fumble!!

This reinforces the point we keep making here on MNB - there is nobody more important in the retailing business than the person on the front lines who interacts with customers. Nobody.



On another Apple-related subject - accusations that its many of its Asian vendors abuse the workers in their factories - one MNB user wrote:

CBS Sunday Morning News show ran a segment on Apple's vendor relationship with Foxconn who makes most of the worlds small consumer electronics.  Worth watching on the CBS webpage.  I cannot look at my loved iPhone without wondering about about the preteen kid who made it working up to 36 hours in one shift.  In reaction to worker suicides Foxconn factories installed suicide-prevention netting.

I am sure Tim Cook, CEO of Apple is flat out doing everything he possibly can to protect these young workers, unless of course it holds up production, increases cost or reduces the profit of an Apple product.  It was noted, Foxconn manufactures a lot of electronic products for companies besides Apple.




On the subject of how far companies need to go to assure food safety, MNB user Curt Lindy wrote:

Food safety is the responsibility of everybody involved in the long chain from the producer to the ultimate consumer of the product. When one cowers behind ‘I did everything legally required’ it speaks to insufficiency of inadequate regulations at all governmental levels. I applaud those companies that realize higher standard are in everybody best interest and then implement them.”

MNB user Mike Franklin added:

As far as I am concerned about food safety, government regulations set the floor…great companies create the ceiling.




MNB user Jarrett Paschel had some thoughts about the importance of food culture:

The idea that food retailers need to take food—and food culture—seriously is no longer an opinion, position or an insight, it is simply a requirement to ensure any food retailer’s future survival. And as obvious as this sounds, few retailers are currently equipped to handle this challenge.

The main problem is that most of these folks think that the issue can be solved by bringing in a chef and having them build “chef-inspired” recipes for prepared foods or give demos. This kind of thing is simply a thin veneer which sits atop the foundational challenge. Namely, ALL of the team members need to be passionate about food. Best in class examples here include the usual suspects (Whole Foods, Wegman’s etc.), where employee training programs are encouraged to generate true food passion. Currently many major retailers are union shops. And of those that aren’t, few are staffed by food-knowledgeable and/or food-interested team members.
 
Yesterday I went to a great local food retailer. The Halibut I purchased was firm and pristine, and the counter-person walked out from around the counter and presented me with my selection the way the folks at Nordstrom do. While checking out the team member noticed my collection of items. Red curry paste, coconut milk, lime leaves, limes, ginger and a white wine. He then said “Looks like someone is making a nice Halibut in red curry sauce tonight. Yum. Hey, did you remember the fish sauce?” I replied that I had some at home and he said that was one of the things many people forget. I submit to you that this kind of interest and/or attention would almost never happen at any mainstream grocer. And yet there will be a day when said grocers will need to be at this level to compete.

On the issue of the market for great food being larger than many believe; This idea that consumers are increasingly willing to pay extra for high quality food like the stuff served in food carts. I continue to encounter all sorts of folks who can’t get their heads wrapped around this idea. I once took a VP from a major CPG company to a specialty cupcake place. He scoffed aloud at the idea that “fools” would be suckered into paying $3 for a cupcake. Whenever I meet this attitude I always remind them that some 20+ years ago a company jumped into the American consciousness and convinced us to start paying $2.50 for a cup of coffee instead of the customary 50 cents. Roughly a 3-4X premium. If Starbucks can raise the bar with 3X premiums, it shouldn’t be too hard to accept the fact that most Americans will be willing to part with an extra dollar or two for great food. Ask yourselves, do you want to be the folks left dickering about the price of the 50 cent coffee because you’re worried about causing your customers “sticker shock”? Or would you rather jump ahead with a real quality proposition?

Published on: February 3, 2012

One of the things I got to do this week while in Florida was go to one of the best barbecue places I’ve been to in a long time. 4Rivers Smokehouse, in the Orlando area, looks like a veritable gold mine, with people lining up for piles of some of the best Texas brisket I’ve ever eaten, as well as melt-in-your-mouth ribs that are just amazing. There also are tons of delicious side dishes - I particularly enjoyed the fried pickles and the smoked jalapeños, and they had bread pudding to die for (always a deal-maker for me).

4Rivers has an interesting story - it is the creation of a fellow named John Rivers, who used to be the CEO of a major pharmaceutical company who,after he left corporate America, began his barbecue career as a way of fundraising for charity. Now, he thinks of 4Rivers as a kind of “barbecue ministry” - he’s got three locations, and a small online business selling sauces and rubs. You can see more about it by clicking here.

The 4Rivers Smokehouse struck me as a perfect example of something we talked about during our ”Stomach Wars” panel discussion at the FMI Midwinter Executive Conference. Great food doesn’t have to be upscale or hoity-toity. At 4Rivers, they don’t even have plates - they just pile the food high on trays covered with thick paper. The prices are reasonable, alcohol is not sold, and the whole presentation is family-friendly.

I do have one thought. Somebody - especially a retailer with a strong specialty foods orientation - ought to contact 4Rivers and try to become their exclusive distributor in some distant market that isn’t competitive with the original locations. They could sell the sauces and rubs, and maybe even license the recipes and reproduce them - the goal would be to offer something that nobody else in a particular market s offering, and to do so with tastes and aromas that will make customers hungry the moment they walk through the front door.

(By the way, I have no business connection to this company, and have never met John Rivers. I just loved the food and I have my own “ministry" - eat great food as often as possible, and then spread the "gospel" so that other people can be saved from mediocre, lowest-common denominator food. Can I get an "Amen"?)

Check 4Rivers out. You can thank me later.




I enjoyed a terrific Italian red wine this week - the Prugneto 2009 Sangiovese di Romagna Superiore. It is like a chianti with just a bit of the edge taken off, and it is smooth and wonderful with spicy Italian food.

Also, compliments of my son the beer-and-wine guy, I tasted a wonderful Hefeweizen Ale from the Berkshire Brewing Company - just outstanding.




Looking forward to making red beans and rice this weekend, and watching the Giants beat the Patriots by three points. (I’m a Jets fan, but I went to high school with John Mara - not that he would remember - and so I root for his team except when they’re playing the Jets. I also think that the Giants are a perfect example of how to run a franchise - with class, a long-term strategic view, and with a front office that understands that games are won on the field, not in the newspapers).




Have a great weekend. See you Monday.

Slainte!