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    Published on: February 15, 2012

    by Kevin Coupe

    We spend a lot of time here on MNB talking about the constantly growing power of social media. According to the New York Times, that power now is sufficient to propel one onto the cover of the annual Sports Illustrated swimsuit issue.

    The Times writes about how Kate Upton, who adorns the cover of the just-published magazine, “has arrived on the scene as a largely self-created Internet phenomenon.” Described in the piece as a “curvaceous and rambunctious” blonde with “the legs of a W.N.B.A. point guard” who is “a long way from the coolly robotic Eastern European beauty ideal that has dominated the catwalks for many seasons,” Upton apparently was dissatisfied with the progress she was making in her modeling career. And so, she used a YouTube video as a way of building a fan base; the video went viral, the “right” people took notice, and her career got an enormous jumpstart.

    Upton, who the story says “has a coolly appraising approach to her assets,” as well as “a big laugh, no shortage of confidence and the habit of cracking her knuckles like a tomboy bombshell,” tells the Times that her fame is no accident, that she decided to use social media as a way of making herself relatable, to display personality that she thought would help her in the long run.

    Apparently it worked. Her visage is on display on virtually every magazine rack in America.

    Score another one for social media. It’s an Eye-Opener.
    KC's View:

    Published on: February 15, 2012

    by Kate McMahon

    In a masterful mix of music, medium and message, the big winner at the 54th Grammy Awards was … Chipotle Mexican Grill.

    Yes, British songstress Adele swept the six major recording categories on Sunday night, as expected. But it was a two-minute-20-second Chipotle television commercial promoting sustainable farming that had Twitter buzzing and led to online headlines such as “Chipotle steals Grammy spotlight.”

    The acclaim comes on the heels of last week’s Slate article calling Chipotle the new Apple, comparing founder Steve Ells and the fast casual chain’s signature burrito to the legendary Steve Jobs and the iPhone.

    While many (including myself) consider that comparison a stretch, Chipotle certainly stands out for delivering a quality product, impressive revenue growth (23% increase in 2011) and share value (up 50% on the year and 500% over five years).

    Equally important, its commitment to using more natural ingredients – “Food with Integrity” – including pork and beef for burritos and tacos has resonated with consumers and plays out daily on Facebook, Twitter, YouTube, iTunes and its website.

    Which brings us back to the animated ad, entitled “Back to the Start.” The soundtrack features country music veteran Willie Nelson covering the haunting ballad “The Scientist” by the alternative rock band Coldplay. It portrays a family farmer switching to “factory farming” – with his pigs and cows being penned, injected with antibiotics, processed on assembly lines and trucked into the city in 18-wheelers. One minute and 26 seconds into the clip, the dejected farmer realizes he must “go back to the start” and reverses course, freeing his animals and happily sending his product off in a small Chipotle Mexican Grill truck. The final credit urges watchers to download “The Scientist” on iTunes, with 60-cents from each 99-cent download going to The Chipotle Cultivate Foundation, which has donated more than $2 million toward initiatives that support sustainable agriculture, family farming, and culinary education.

    “Back to the Start” debuted last year online and in 10,000 movie theaters. As of Sunday, it had been viewed 4.4 million times on YouTube. As of yesterday, that number skyrocketed past the 5 million mark.

    Additionally, the ad was tweeted 10,000 times during the Grammy broadcast, including several that found the farmer’s plight more moving than the show’s tribute to the late Whitney Houston. The song had been downloaded on iTunes 25,000 times prior to Sunday night.

    The Grammy ad was also Chipotle’s first foray into national TV advertising. It’s impossible to predict how the reaction will impact sales in Chipotle’s 1,230 (and counting) outlets across the nation. But it does reinforce the company credo that “Good food is good business.”

    And that is certainly the case for the other runaway fast-food success story, Five Guys Burgers and Fries, proving consumers are willing to pay a premium for quality fast food. A similar up-and-comer is the New York City/D.C. salad assembly line chain, Chop’t, which boasts a food philosophy of “Better is Better.”

    The "good food" story is one that retailers can share in, if they actually make the commitment to the product.  That means sustainable sourcing, flavorful preparation, and understanding that food can be a differential advantage rather than a lowest common denominator offering that doesn't deliver.

    To borrow they key line from “The Scientist”: “Nobody said it was easy.”

    Comments? Email me at .
    KC's View:

    Published on: February 15, 2012

    Notes and comment from the Content Guy...

    LAS VEGAS -- Tuesday’s opening session at the NGA Show here looked at “how to compete with non-traditional formats, and win.”

    There were 10 suggestions. Nine of them sounded, well, familiar...

    Product variety. Meat quality. produce & floral. Differentiate through bakery. Event merchandising. Ethnic marketing events. Employee engagement. Dedicated, trained associates. Community involvement.


    Only one competitive tactic mentioned - using social media - seemed like it might have been something new...and, quote frankly, something not embraced and pursued by pretty much every independent retailer in the room.

    My sense, from talking to a few folks, was that the people in the room loved the presentation. But at the risk of insulting someone - and that certainly is not my intention here - I think that perhaps they loved it because it reinforced extant priorities and programs. All those things are important - so much so that they already are being done, to varying degrees.

    I think many of the retailers liked the presentation because it made them feel good about the tactics they are using to combat non-traditional formats. Feeling good is important, but it isn’t the only thing. Sometimes you have to face the truth.

    Now, we all have our own versions of the truth. I certainly have my biases.

    But I would suggest that some independent retailers make the mistake of believing that because they are independent and locally oriented, they are somehow morally superior to chains and behemoths. I would argue that there are things about their business model that can give them an advantage, but this is not about moral superiority.

    This is about understanding that every day can be a fight to the death.

    As was pointed out earlier in the week, things like social media can give big companies the ability to localize their promotional, marketing and charitable activities. Which can erode an independent’s advantage, unless the smaller company is fighting that battle every day, being more granular, more intimate, more committed to really understanding and catering to customers’ individual needs and wants. (Better produce, meat, floral, bakery, etc... is just the cost of admission, the cost of getting into the game. It’s what you do beyond these basics that can make the difference.)

    Alternative formats have been created not just because big retailers wanted to create different sized boxes. They usually grow out of some understanding of the public mood. They are not evil. They’re just alternatives.

    (I will give them this. There seemed to be a real recognition that dollar stores are an enormous threat to the independent sector, as the universe of dollar stores expands and swallows up more and more market share.)

    And by the way...if you are going to look at the advantages and problems inherent in Walmart’s new smaller stores, it might make sense to consider the possibility - or probability - that these small stores are being designed in part to serve as delivery depots for Walmart’s e-commerce business, which sort of changes the economics and competitive set. And, while you’re at it, you might want to think about companies like Amazon and Peapod and Alice and FreshDirect and the other entities that are trying to revolutionize the grocery space.

    Sure, revolutions don’t often happen. E-commerce is not likely to take over the food retailing world. But in the words of Leo McGarry, “In the history of everything that works, there was a time when it did not.”

    The grocery space remains a highly competitive environment. It likely is only going to get tougher.

    In a separate presentation, Mark Batenic of IGA and Joe Sheridan of Wakefern both agreed that growing private label sales - and improved products in this segment - are a bright spot for independents, though it was clear that there is no time for the industry to rest on its laurels. And Todd Hale of The Nielsen Co. painted a picture of the current economy that, while better than during the recession, suggested that plenty of challenges remain.

    Sheridan said something that caught me by surprise - that between 30 and 40 percent of the people being hired by his company are bi-lingual. That was a “wow.” That kind of attention to detail can be a real differential advantage for any store.

    Independents can be different. Can be innovative. Can change the rules of the game. Take RF Buche, of Buche Foods in South Dakota. His company took an enormous amount of money out of their operating budget by switching to all-digital advertising, completely getting rid of their newspaper circulars. It went smoother than anyone could imagine, is more effective than the old method, is using weekly “barn burner” specials to drive traffic and sales, and seems to have caught the competition flat-footed. He told a panel that I moderated about “Marketing on a Budget” that one competitor tired to replicate the move by going digital-only, but didn’t do anything else special ... and that competitor is no longer in business.

    It is about going beyond the basics. it is about changing the rules of the game.

    I have enormous respect for the independent sector. Most of the independent retailers I know have the basics covered, and are seeking the innovative opportunities that can help them stand apart. And they should feel good about that.

    But not too good.

    Not long ago, Michael Sansolo wrote here about the scene from War Horse when, during World War I, rifle and bayonet-carrying British soldiers on horseback come face-to-face with German soldiers carrying machine guns.

    The Brits probably thought they were on the side of good and right, that they were morally superior. But they also probably figured out pretty quickly that in a fight between a machine gun and a bayonet, moral superiority means very little.

    In other news from the NGA Show...

    • Stephanie Teteak of Larry's Piggly Wiggly in Kaukauna, Wisconsin, won the 2012 NGA Best Bagger Championship.

    • The 2012 NGA Creative Choice for Merchandising went to Broulim's of Rigby, ID, for its "Wild Alaska Seafood Sale". For advertising, the Creative Choice was awarded to Niemann Foods, Inc. (County Market) of Quincy, IL, for its "Free Turkey Loyalty Promotion".
    KC's View:

    Published on: February 15, 2012

    A new study says that only eight major companies - out of 206 evaluated - deliver what consumers would call an “excellent customer experience” - Sam's Club, Publix, Starbucks, Subway, Chick-fil-A, Aldi, Winn-Dixie, and H.E.B. And, at the other end of the spectrum, “ 76 companies (37% of the total) earn ‘poor’ or ‘very poor’ ratings” from those polled.

    This is the second annual customer service study released by Temkin Group, based on a survey of 10,000 US shoppers conducted last month.

    According to the report, “The research examines customer experience across 18 industries: airlines, appliance makers, auto dealers, banks, car rental agencies, computer makers, credit card issuers, fast food chains, grocery chains, health plans, hotel chains, insurance carriers, Internet service providers, investment firms, parcel delivery services, retailers, TV service providers, and wireless carriers.

    “Grocery chains, fast food chains and retailers are the top three industries, earning an average rating of ‘good.’ At the bottom of the ratings, TV service providers, Internet service providers, and health plans earn an average rating of ‘poor.’ Health plans show up in seven of the bottom 14 spots in the ratings.”

    The report goes on: “This analysis uncovers eight companies with double-digit leads over their industry average: Kaiser Permanente (health plans), credit unions (banks), Sam's Club (retailers), USAA (credit cards), TracFone (wireless carriers), Southwest Airlines (airlines), PNC (banks), and Alamo (car rental services).

    “Seven companies are 10 or more percentage points below their industry average: DHL (parcel delivery services), RadioShack (retailers), Citibank (banks), Days Inn (hotels), EarthLink (Internet service providers), Charter Communications (TV service providers and Internet service providers), and Bank of America (banks).”
    KC's View:

    Published on: February 15, 2012

    Reuters reports that Kroger is saying that increased sales to its best customers suggests that “ it is more competitive with Walmart and other food sellers after cutting prices and reducing checkout wait times.”

    CFO Mike Schlotman told Reuters in an interview yesterday that the company is focused on “keeping its gross margin dollars flat rather than focusing on keeping gross margin rate flat,” a move that is seen as being better for shoppers than for stockholders, who “would rather see its margin rate improve at a faster clip.”

    The CFO also says that “another goal has been to reduce wait times in checkout lines. Changes as basic as scheduling more employees to work at the cash registers at what are usually busy times, along with in-store televisions broadcasting secret codes, have helped Kroger now measure wait time improvements at most stores in seconds, rather than minutes.”

    The result, he says, is that “Kroger gets about 50 percent of its best shoppers' total spending on food, excluding purchases made at restaurants. Recently, that rate has increased about 1 percentage point a year.”
    KC's View:
    The line that I think is most important in this story is the one saying that “moves taken during the 1990s to please shareholders led to the grocer losing its relevance with shoppers, Chief Executive David Dillon said.” Which means that the company is now focusing on pleasing customers, figuring that improved relevance will lead to improved sales, and eventually the stock price will take care of itself.

    Too many retailers over the years have worried about Wall Street first and Main Street second. Pretty much always a mistake, I think.

    Published on: February 15, 2012

    The Wall Street Journal this morning reports that as Whole Foods moves “into smaller, suburban areas where its new, smaller stores are seeing stronger returns,” it has to “counter its reputation for being expensive” by “offering more price promotions and discounts in all of its stores, and lately it has held many of its grocery prices flat despite its own costs rising. The idea is for customers to feel that while there may be certain product prices that are going up, they are finding plenty of good deals to make up for that, said executives, who call the strategy ‘price perception’.”

    The strategy is critical, the story suggests, in part because moving into new markets means facing off against new competitors, which it cannot allow to draw sharp price comparisons against it, though the story also notes that these new competitors often are not as focused on the natural/organic segments.

    Co-CEO Walter Robb told analysts recently, "We've done surprisingly well in some of these secondary markets; a lot better than we thought we were going to do. It's a very powerful economic model, so I think we're going to open a lot more of those types of stores."

    The Journal writes, “In its recent quarter, Whole Foods opened six stores, focusing on these new markets where its says rent is lower, square footage is smaller and competition for natural, organic food isn't as heated.” And, over the past few months, “Whole Foods signed eight new leases for smaller stores averaging 33,000 square feet, which is about 25% smaller than some of its traditional stores.”
    KC's View:
    No reason to think that Whole Foods can’t make this work long-term. After all, the company managed to not only survive the recession, which could have devastated it because of its “whole paycheck” image, but come out of it in better shape than ever.

    Published on: February 15, 2012

    • Cowen and Company, a financial services and investment management group, is out with a survey of Prime customers, discovering that satisfaction levels are very high. The company estimates that 12 percent of Amazon’s total customer universe - or about 11 million people - are paid Prime members, spending $79 a year for free two-day shipping, plus free video streaming. And, the study - reported by - predicts that eventually Amazon could have as many as 50 million Prime shoppers.
    KC's View:

    Published on: February 15, 2012

    • The Kroger Co. announced that associates working at four distribution centers and two dairy manufacturing facilities have ratified new three-year labor agreements with the International Brotherhood of Teamsters. Facilities included in the agreement are located in Hutchinson and Goddard, KS; Houston, TX; Memphis, TN; Indianapolis, IN; and Livonia, MI.

    • Kellogg Co. announced this morning that it is acquiring the Pringles brand from Procter & Gamble for $2.7 billion.

    The move comes as P&G and Diamond Foods said that they were mutually agreeing to call off their $1.5 billion deal which would have had Diamond getting Pringles. According to the Associated Press story, “the news comes a week after Diamond Foods said it was replacing its CEO and CFO after an internal investigation found that the company improperly accounted for payments to walnut growers and it needs to restate two years of financial results.”

    • The Boston Globe reports that Friendly’s, which has been closing stores and dealing with bankruptcy issues lately, seems to be doing better outside its four walls, “signing ice cream contracts with major retailers such as Walmart and Food Lion. In the past eight months, Friendly’s products have been added to the freezer aisles of 3,200 more supermarkets, a 40 percent increase.

    The company sees that lessening its dependence on its own retail units is a “huge opportunity.” Analysts agree ... though they say that Friendly’s moves are long overdue.
    KC's View:

    Published on: February 15, 2012

    • Publix Super Markets Charities announced the promotion of Kelly Williams-Puccio to Executive Director of the Foundation, “responsible for the strategic direction of the Foundation, managing Foundation giving policies and processes and maintaining the charitable legacy of company founder, George Jenkins.”

    The announcement notes that Williams-Puccio began her Publix career in 1979 as a cashier, and has moved up the ranks, most recently serving as Director of Associate Relations since 2000.
    KC's View:

    Published on: February 15, 2012

    Continued email about the situation at Supervalu...

    One MNB user wrote:

    After 14 years of working for American Stores/Albertsons/Supervalu, I was one of those let go in last year's round of "reductions". (My department was trying to match experience and background of the consultants, Oliver Wyman, and since I didn't have a PhD in stats and math I no longer meet their needs).

    While I was bitter for a few days I was surprised to realize that I was happier than I had been in years and while I will never be grateful for how my loyalty was treated, I probably should be grateful for the chance to leave what is becoming an increasingly toxic place to work. Like some of your other readers I was hating having to get up and go to work. I have had start over at a lower level and pay, but i am at a company that values my knowledge base and where I feel like I am making a difference.

    Albertsons was a great company, (of course it was even better before Larry Johnston, but that's another story), and I understand that Supervalu was a well run successful company before the "merger" as well. The problem is that together they became a company that could not make hard decisions early enough to make a difference; that settled for common practices instead of best practices when they had the chance; that can't stick with a long term plan for more than six months; and  that was so enamored in technology as a solution to all problems instead of investing in people, (customers and associates).The disappointment is that once again the right people are not losing their jobs, just more loyal associates that have the know how keep the wheels on the bus while making Supervalu successful again.

    All the latest round of cuts is going to do is make it harder for those good folks still remaining to be excited about turning around the company while doing not only their jobs, but the additional workload that 800 people used to do. In reality what is going to happen is a lot of that work is going to fall through the cracks, and unfortunately for Supervalu that is a lot of the work that was going towards helping the banners figure out how to do a better job.

    And another reader chimed in:

    Got an e-mail yesterday from our local produce director in a Supervalu division.  Two key persons let go in an already severely scaled back dept. All future vendor meetings cancelled (it was already nearly impossible to get a meeting or establish any kind of contact). A floral employee will now be trained to take on some produce responsibilities to try to keep the ship from sinking. Things were already bad enough.

    Tough times. And probably going to get worse, because a company can’t move forward if the people on the front lines are spending much of their time looking over their shoulders.

    I wrote yesterday about a presentation at NGA by Phil Lempert in which he said that statistics show that “41 percent of all meals prepared at home are being prepared by the dad.” I said that I was shocked by that number. I’ll accept it on faith, but it is a lot higher than I would have expected. (Even twenty percent would have surprised me.)

    MNB user Cleve Young responded:

    I’m not at all surprised by the 41% of dads preparing meals. Women make up a huge part of the workforce, and in my social and family circles it is often the male who is cooking dinner because they get home a little earlier than the working wife/significant other. Add in the growing percentage of stay at home dads, unemployed dads, and younger generation of men who are more willing to go outside of the John Wayne stereotypes, and you’ve got some real numbers. What I would find much more interesting is what, if any, differences there are between WHAT and HOW the men are cooking. Men do many of the same activities as women, but definitely have a tendency to do them differently. So if a retailer wants to help teach these men how to plan, shop, prepare and cook a meal they better make sure not to make the mistake of just showing them how the women do it.

    Wasn’t it John Wayne who said, “A man’s gotta do what a man’s gotta do”?

    MNB user Jeff Weidauer wrote:

    I have to take issue with this stat; you say you'll accept it on faith, but you also note that it's double what would surprise you. I wasn't there, so maybe there were other supporting data given for this surprising claim. Why the change, and how much of a change is it from five years ago? Is it a result of the economy and are these dads mostly un- or under-employed, trying to help out at home? Or is this a sea change in the American household and its habits? And what exactly constitutes "preparing meals?" I get cynical when someone tosses out a factoid like this without back-up data.
    The other thing that concerns me is the leap from making dinner to doing the shopping. While I've seen some stats that more men are shopping, I don't know that just because they are cooking more at home (which could be heating up a frozen pizza) that it means they are now also doing the shopping. And even if they are, who is making the list?

    I'm all for buying into these facts if they are indeed facts. But without the background info, and some insight into what this means, I don't know that I'd be changing my target market just yet.

    I asked Phil Lempert about this, and he said that the 41 percent number comes from the US Bureau of Labor Statistics, and he was kind enough to share the entire paragraph from the written presentation:

    This time it is not about the metrosexual – it is all about “dad” and family. After surveying 1,000 professional fathers from Fortune 500 companies in four different industries, Boston College Center for Work and Family learned that, “Today’s dads associate being a good father just as much with the role of effective caregiver as the traditional role of breadwinner. These men want to be engaged parents and successful professionals, yet find conflicts as they try to achieve both objectives.”

    Because of the economy, more men are at home. The good news for them is that studies suggest a link between husbands who help out at home and happier relationships. According to a report in the Wall Street Journal, “for husbands and wives alike, the more housework you do, the more often you are likely to have sex with your spouse”, and that’s when they are not burning calories while cooking – according to the Bureau of Labor Statistics 41 percent of men are now doing the food preparation as compared to just about half that amount in 2003.

    Wait a minute. Four out of ten men are having more sex because they are doing more cooking?

    Now that’s what I call a marketing hook:

    ”A recipe for happiness... Go to the supermarket. Buy food. Take it home. Cook it. Feed your family. Go into the bedroom...”

    Regarding using aromas to sell food (and a store’s food culture), MNB user Lisa Malmarowski wrote:

    I always say... If your grocery store doesn't smell like food, time to find a new one. 

    But please, no fake smells at bus stops or anywhere else. How many more synthetic chemicals must we pump into the air especially when people don't have a choice about them?!

    Michael Sansolo had a piece yesterday that in part took note of how hard it is for the supermarket industry to attract new talent, which led one MNB user to observe:

    Grocery career?

    If the grocers have a problem with recruiting all they have to do is look at their pay scales.  I’ve worked for both a local small grocer with 31 stores, and now a food broker.   I was the HBC Manager at store level making $10 an hour with 2 college degrees, one in engineering and an MBA.  I knew I wanted to be in category management and knew I had to start somewhere.  I wanted to get promoted but I also wanted to work my way up, learn the ropes.  Well I finally got in front of the person who could pull the trigger on a promotion and was told they had that role covered.  Actually he told me that unless Mike gets hit by a bus there’s no opportunity for you here.  Of course all my friends asked me how I missed.

    The bigger issue for grocers is how can you attract and retain people who would be the future of the organization when you pay $10 an hour for your top people at the store level?  My impression is that the people who float to the top were good at one thing…Putting stuff on a shelf or motivating others to do the same.  That skill or personality, primarily motivating people making $7 an hour to increase their case rate, while tactically useful is not exactly the same talent needed for making complex financial, pricing and item assortment decisions for the organization.

    I really felt that the people running the chain I worked for were good at putting stuff on a shelf with limited skills needed to run a business.  More than that, there was a sense in the organization that if you worked there you must be stupid.  One incident that really sticks in my mind was when one of our best stockers interrupted a conversation the grocery manager and his territory manager were having to let the grocery manager know what his next task would be.  The territory manager - and I am not exaggerating here - looked him square in the eye and without mincing words told him to wait till he was told what to do and that he was too stupid to know what to do.  To believe it about your employees is one thing, to actually say it is another.  I couldn’t leave that environment fast enough.  The experience I gained was invaluable to what I do now as a business analyst but it was expensive training.
    KC's View:

    Published on: February 15, 2012

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