retail news in context, analysis with attitude

MNB Archive Search

Please Note: Some MNB articles contain special formatting characters, and may cause your search to produce fewer results than expected.

    Published on: April 23, 2012

    On Sunday, in a 7,800-word, front page story, the New York Times provided an inside look at Walmart’s Mexico division, suggesting that its fast growth over the past decade was fueled by bribes, and that top management was more concerned with details not being revealed and investigations not being allowed to move forward than it was with stopping the systematic corruption and adhering to US law that forbids American companies from bribing foreign officials.

    You can read the entire story here. To begin with, here is how the Times frames the story:

    “In September 2005, a senior Wal-Mart lawyer received an alarming e-mail from a former executive at the company’s largest foreign subsidiary, Wal-Mart de Mexico. In the e-mail and follow-up conversations, the former executive described how Wal-Mart de Mexico had orchestrated a campaign of bribery to win market dominance. In its rush to build stores, he said, the company had paid bribes to obtain permits in virtually every corner of the country.

    “The former executive gave names, dates and bribe amounts. He knew so much, he explained, because for years he had been the lawyer in charge of obtaining construction permits for Wal- Mart de Mexico.

    “Wal-Mart dispatched investigators to Mexico City, and within days they unearthed evidence of widespread bribery. They found a paper trail of hundreds of suspect payments totaling more than $24 million. They also found documents showing that Wal-Mart de Mexico’s top executives not only knew about the payments, but had taken steps to conceal them from Wal-Mart’s headquarters in Bentonville, Ark.

    “In a confidential report to his superiors, Wal-Mart’s lead investigator, a former F.B.I. special agent, summed up their initial findings this way: ‘There is reasonable suspicion to believe that Mexican and USA laws have been violated.’

    “The lead investigator recommended that Wal-Mart expand the investigation.

    “Instead, an examination by The New York Times found, Wal-Mart’s leaders shut it down.

    “Neither American nor Mexican law enforcement officials were notified. None of Wal-Mart de Mexico’s leaders were disciplined. Indeed, its chief executive, Eduardo Castro-Wright, identified by the former executive as the driving force behind years of bribery, was promoted to vice chairman of Wal-Mart in 2008. Until this article, the allegations and Wal-Mart’s investigation had never been publicly disclosed ... Under fire from labor critics, worried about press leaks and facing a sagging stock price, Wal-Mart’s leaders recognized that the allegations could have devastating consequences, documents and interviews show. Wal-Mart de Mexico was the company’s brightest success story, pitched to investors as a model for future growth. (Today, one in five Wal-Mart stores is in Mexico.) Confronted with evidence of corruption in Mexico, top Wal-Mart executives focused more on damage control than on rooting out wrongdoing.”

    In addition to Castro-Wright, the Times reports, the senior executives who knew about the allegations and apparently did little to put an end to the practice of bribery in Mexico included current CEO Mike Duke and then-CEO Lee Scott, as well as “Thomas A. Mars, Wal-Mart’s general counsel and a former director of the Arkansas State Police; Thomas D. Hyde, Wal-Mart’s executive vice president and corporate secretary; Michael Fung, Wal-Mart’s top internal auditor; Craig Herkert, the chief executive for Wal-Mart’s operations in Latin America; and Lee Stucky, a confidant of Lee Scott’s and chief administrative officer of Wal-Mart International.”

    Indeed, the story suggests that Walmart’s internal Corporate Investigations unit was understaffed and underfunded, and that top executives routinely prevented it from doing its job.

    Responding to the Times story, Walmart officials said they were launching an internal probe and also have referred the case to the US Department of Justice. “‘If these allegations are true, it is not a reflection of who we are or what we stand for,’ the spokesman, David W. Tovar, said. ‘We are deeply concerned by these allegations and are working aggressively to determine what happened.’

    “In the meantime, Mr. Tovar said, Wal-Mart is taking steps in Mexico to strengthen compliance with the Foreign Corrupt Practices Act. ‘We do not and will not tolerate noncompliance with F.C.P.A. anywhere or at any level of the company,’ he said.

    “The Times laid out this article’s findings to Wal-Mart weeks ago. The company said it shared the findings with many of the executives named here, including Mr. Scott, now on Wal-Mart’s board, and Mr. Castro-Wright, who is retiring in July. Both men declined to comment, Mr. Tovar said.

    “The Times obtained hundreds of internal company documents tracing the evolution of Wal-Mart’s 2005 Mexico investigation. The documents show Wal-Mart’s leadership immediately recognized the seriousness of the allegations. Working in secrecy, a small group of executives, including several current members of Wal-Mart’s senior management, kept close tabs on the inquiry.”

    Kept close tabs. But, according to the story, they may have fallen short of what company founder Sam Walton once said about ethics: "Personal and moral integrity is one of our basic fundamentals, and it has to start with each of us." And, what the company’s official policy is on the subject: “Never cover up or ignore an ethics problem.”
    KC's View:
    The Times story is an extraordinary piece of journalism. I have to admit that I had some concerns about it going in, seeing as many of the allegations were being made by one man - Sergio Cicero Zapata, a former executive with Walmart’s Mexico operation. But best I can tell, the story seems to be extensively researched, with enormous documentation to back up the charges, which at least give current and past management an enormous black eye.

    I’m sure there will be some who will shrug their shoulders and say that this is just reality, how business gets done in Mexico. That may be true - but it is not how business is supposed to be done. Ethics are not only supposed to guide one’s behavior when it is convenient.

    Once again, it proves a truism that goes back to the Nixon administration - it’s always the cover-up that will get you.

    Walmart’s current reaction seems disingenuous at best. The company seems to be saying that gosh, we didn’t know about all those horrible things that were happening, but because we are a company with a deep moral center, we’re going to get to the bottom of things now, and besides, all these charges are more than six years old. Which would be a defense except for the fact that most of the article is about how the company ignored investigations bringing them to light six years ago, and so it is little defense at all.

    Frankly, it is hard to imagine how these allegations - unless, somehow, leadership in Bentonville is able to pull a rabbit out of its hat - do not lead to a dramatic shakeup in the company’s hierarchy. The charges make what former vice chairman Tom Coughlin’s actions look like petty theft.

    I’m not alone in feeling this way. A number of analysts have gone on the record doubting that people like Mike Duke can continue to lead the company if these charges are true. And one has to wonder what impact the article will have on the futures of people like Craig Herkert and John Menzer, who have left Walmart but are mentioned in the article as being less than vigilant about alleged misdeeds.

    I hope all the people mentioned in this article have been saving money from their stock options over the years. Because it is at least possible - and maybe even probable - that they may be spending some of that dough on defense attorneys.

    Let me reiterate. You can - and should - read the entire story here.

    Published on: April 23, 2012

    The Chicago Tribune reports that Mari Gallagher, the food policy researcher who coined the term “food desert,” is rebutting a story that ran in the New York Times last week saying that new studies throw doubt on the contention by many policy makers and health advocates that so-called “urban deserts” are “bereft of fresh fruits and vegetables.”

    According to the story, two new studies say that “such neighborhoods not only have more fast food restaurants and convenience stores than more affluent ones, but more grocery stores, supermarkets and full-service restaurants, too. And there is no relationship between the type of food being sold in a neighborhood and obesity among its children and adolescents.”

    According to the Tribune, “Gallagher's main criticism of the story was that it started with a false premise: that anyone has promoted food access improvements as a silver bullet for the obesity epidemic.”

    “We have stressed throughout the course of our work that plopping down a grocery store does not mean that these problems are instantly solved,Gallagher wrote on her blog. "Yet (the Times) unfairly suggests that community leaders, policy makers, Mrs. Obama, and so many others want to 'combat the obesity epidemic simply by improving access to healthy foods.' To my knowledge, no one of any credibility has ever suggested that access was the entire solution or that anything involving the complicated relationship between diet and health is simple."

    In addition, Gallagher “further noted problems with comparing store proximity in suburbs--where most people travel by car--and low-income urban areas, where many rely on walking or public transportation.”

    The Times reporter on the story, Gina Kolata, responded that she was simply referencing existing studies and that Gallagher’s issue was with them and not her.
    KC's View:
    I said last week that I was gobsmacked by the Timespiece and the research on which it was based, and so I’m not surprised by Gallagher’s response. I also agree with her points about the connection between food deserts and obesity.

    It is fair to suggest that maybe the Times did not cast a critical enough eye on the research. Some of the assertions simply did not make sense.

    Published on: April 23, 2012

    The Atlanta Journal Constitution reports that “several former managers and assistant managers are suing Publix Super Markets, claiming they were underpaid for overtime work ... The suit claims Publix did not include regular bonuses the managers received in calculating their rate of overtime pay. The managers, who were non-exempt employees eligible for overtime, also claim they should have been paid using ‘time and a half’ rates instead of ‘half time’ rates when they worked more than 40 hours a week.”

    Lawyers for the plaintiffs are seeking class action status for the case.

    Publix management says the company will not comment on open litigation.
    KC's View:

    Published on: April 23, 2012

    The Food Marketing Institute (FMI) has announced the 20 culinary contenders from grocery retail that will compete in Dallas at the FMI Supermarket Chef Showdown, a culinary challenge integrated into the FMMI2012 food retail show program.

    “These 20 retail chefs exemplify how supermarkets are more than a venue in which to shop – they have talented associates who breathe life into the menus for their customers,” FMI President and CEO Leslie G. Sarasin said. “FMI2012 is the best venue for us to shine the spotlight on how the food retail industry inspires as well as nourishes.”

    The finalists are broken out into four categories:

    Ethnic: John Depaolis, Giant Eagle, Inc.; Shornalee Banerjee, Harris Teeter Supermarkets Inc.; Alexander Strauss, Hy-Vee, Inc.; Brian Dunn, Roche Bros. Supermarkets, Co.; and Chris Wilson, United Supermarkets, LLC.

    Healthy Alternatives: Kara Behlke, Hy-Vee, Inc.; Richard Babcock, Hy-Vee, Inc.; Rachael Perron, Kowalski's Companies; Daniel Bonner, Publix Super Markets, Inc.; and Jose Vargas, Winn-Dixie Stores, Inc.

    Indulgent: Jason Miller, Balducci's; Keoni Chang, Foodland Super Market, Ltd.; James Alexander, Hy-Vee, Inc.; Chris Delise, Kings Super Markets, Inc.; and Mike Grimes, Publix Super Markets, Inc.

    Family Meals: Rob Dumont, Balducci's; Jennifer Gritters, Meijer, Inc.; Tim Donnelly, Publix Super Markets, Inc.; Amber Pruett, Publix Super Markets, Inc.; and Greg Roach, Wild Oats Markets, Inc.

    The Recipe Contest segment of the competition closed on March 15, and 182 supermarket chefs registered for the contest, submitting a total of 357 recipes. On May 3, the winner from each category will receive a $1,000 prize and will compete to determine the Supermarket Chef Showdown Grand Chef Champion who will receive a three-day professional development course at the Culinary Institute of America.
    KC's View:
    I applaud FMI for bringing some focus to the subject of food, which has largely been ignored by many in the food business over the past few decades.

    Published on: April 23, 2012

    The Associated Press reports that the US Food and Drug Administration (FDA) issued tentative guidelines last week saying that food and cosmetic companies wanting to use nanoparticles in products “will have to provide extra testing data to show the products are safe.:”

    Nanoparticles, the story explains, are submicroscopic engineered particles that “are increasingly showing up in FDA-regulated products like sunscreens, skin lotions and glare-reducing eyeglass coatings.”

    According to UnderstandingNano.com, engineered nanoparticles may be able to help fight disease, cure infections, and even help in cancer treatments by being more targeted in their application than traditional treatments.
    KC's View:

    Published on: April 23, 2012

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

    • The New York Times had a piece in its Sunday Business section about how Kellogg’s, unhappy with declining sales for some of its mainstay cereal product lines, is “cooking up new products at a frenetic pace — new cereals as well as new categories of food and flavors for what everyone here calls ‘snacking occasions’.”

    The lead dog in this race is Pringles, which Kellogg’s is buying from Procter & Gamble is a $2.7 billion deal. “What the company is buying with Pringles is not just a line of products that is already huge internationally, but a group of Procter & Gamble merchandisers with what (CEO John) Bryant calls ;the snack mind-set.’ Their job will be to bolster the company’s foreign snack divisions, and to step on it.”

    • The Los Angeles Times reports that “long portrayed as a key contributor to childhood obesity, fast-food kids meals may be losing their appeal to youngsters — and, more importantly, their parents. The emergence of dollar menus among restaurants has given price-conscious parents a powerful incentive to choose an a la carte burger or fries rather than ponying up nearly $4 for a kids meal.

    “Industry observers also say the toys served up with every meal aren't capturing older kids' attention, while others add that children are simply aging out of the meals earlier as they're becoming more technologically savvy.

    “According to the research firm NPD Group Inc., visits to fast-food restaurants in which kids meals were purchased have declined every year since 2007, falling 5% in 2011 from 2010.”

    • The Chicago Sun Times reports that “Walgreen Co. will pay $7.9 million to resolve allegations it illegally tried to get federal health-care beneficiaries to switch their prescriptions to Walgreen pharmacies, the U.S. Department of Justice said Friday. The Justice Department says the company offered inducements to people who get their health care from government programs. Walgreen offered $25 gift cards to people who transferred their prescriptions to Walgreen pharmacies.”

    ABC News reports that “an Illinois man who claims tainted dog treats killed his Pomeranian has sued Nestle Purina and Wal-Mart for $5 million in federal court, becoming the latest dog owner to allege publicly that treats made out of chicken jerky from China have caused sickness or death.”

    According to the story, “Nestle Purina has declined to comment on the litigation, but spokesperson Keith Schopp has previously told ABC News that the safety of pets is the company's utmost priority and that production of the treats in China is held to the highest quality and safety standards.”

    And Walmart thought it had its hands full with the whole mexican bribery allegations. Once pet owners begin marshaling their forces, the folks in Bentonville may have to erect barricades and install gun turrets...
    KC's View:

    Published on: April 23, 2012

    • Lee Javitch, former president and chairman of Giant Food Stores and son of David Javitch, who founded the company as Carlisle Meat Market in 1923, has passed away. He was 81.
    KC's View:

    Published on: April 23, 2012

    by Kevin Coupe

    The New York Times had a piece the other day that explored how people feel connected to certain kinds of brands, with women equating the severing of ties with certain brands - in this piece, clothing - with romantic break-ups. Both, the story suggests, can come at an emotional cost.

    For the most part, the piece focused on women and various kinds of retail clothing brands such as J. Crew, looking at how difficult - but often necessary - it is to break up with a brand that one has worn for a long time. Sometimes, it is because the person’s sense of style has evolved or her body has changed, and sometimes it is because the brand has morphed into something different.

    (I can remember years ago having this debate in my household, when Mrs. Content Guy would complain that Gap had somehow changed; I’d simply point out that Gap was targeting the same demographic it always had, and that she was no longer part of that demographic. I was right, but some arguments are not worth winning.)

    But the larger point is a good one - that the greater goal for every retail brand should be to establish that kind of relationship with the shopper, becoming an intimate and necessary resource and part of how they live their lives. You want people to feel disconnected, ill at ease and even a little guilty when they visit a competitor ... it means that you are making a difference in people’s lives.
    KC's View:

    Published on: April 23, 2012

    Got a lot of reaction over the weekend to the piece we ran on Friday referencing an excellent piece on Slate.com by columnist Farhad Manjoo, in which he wrote about what Best Buy needs to do in order to survive in what for it has become an increasingly hostile retail environment. He argued that “big has become the domain of the Web,” and that Best Buy has to get smaller and more targeted, becoming - to use a phrase often turned around here - a resource for customers and not just a source of product.

    I commented:

    If you are going to compete in a cutthroat environment, you cannot do so by playing into the strengths of the other guy, even if those used to be your strengths. At some point, you have to recognize that the world has moved on, and create for yourself a new differential advantage.

    One MNB user wrote:

    It would seem that not only are the customers confused, the staff is, as well.

    MNB user Bill Jensen wrote:

    Best Buy is trying/has tried that model of a streamlined store, in their ‘Best Buy Mobile’ stores. They are focused, and somewhat welcoming. Unfortunately, one of the nicer ones in Fair Oaks VA is inside a mall a short walk away from the Apple Store.

    Guess which store is busier. (notice I didn’t use a question mark).

    The only things I buy at BB are customer return items at a reduced price. I can check them out for possible missing parts or damage (unlike the fulfillment section at Amazon) and I have an easy return policy.

    A retail store like BB can learn a lesson from the Apple Stores though. They sell technology in varied ways, but the use of the technology is far more varied than the normal consumer can approach/understand. The manufacturers often use incomprehensible manuals to use their products. BB could begin to fill that gap with experienced personnel.  Having classes in those “hulking” stores to embrace the customer, and keep traffic in the stores, would be a great way to drive return sales. Even a sale from someone who purchased their expensive coffee machine or home theatre system elsewhere. Apple invites customers to attend classes in their stores teaching them how to use the product (and of course, how to buy more Apple products). It is not much different than a food store offering cooking classes, or recipe tips.


    MNB user Dan Graham wrote:

    What Manjoo describes is basically what Costco has done in most categories across their stores,  including electronics.  Consumers know Costco will have limited selection, but the items they do carry will be great values.  In effect "they've done the shopping for you".

    Best Buy's challenge is that they have a very different item and category mix than Costco and as a result will continue to be dependent on electronics and be challenged by compressing margins.  Consumers will still be able to easily compare prices even if Best Buy has a streamlined selection so I do not think that is a way to solve their profitability issues.


    MNB user John Giggy wrote:

    Every time I read something about Best Buy and their death spiral I have to think about all of my experiences with their stores. I am not tech savvy. When I go looking for something to bring myself into the modern world the last place I want to go is BB. When you finally run down a 20 something kid to ask a question about a product and its use and applications they begin talking down to you as if you are stupid. I AM - that is why I am asking the question. Why not replace about 5 of these kids with a mature individual that is really interested in selling the benefits of a product and sharing information that applies to my life and needs. Yes I am a senior and am getting grumpy in my old age but when I walk into a store I have the ability to buy what I want and need just help me in doing that.

    MNB user Scott Latta wrote:

    I totally agree with Manjoo.  I've done a lot of store design work and worked with one of the Best store design firms in the country/world JGA.  The founder Ken Niche was fond of saying, "there are two ways to go with a store concept - if you go for big assortments, you have to compete on price, because you are making the customer do all the work in picking what they think is best and the customer charges you a fee for that by making you have the lowest price...if you do the editing for the customer and give them a logical edited assortment where the customer only has to pick what "level" they want, you can charge the customer a premium for that service.”

    This is Amazon/Wal-mart vs. Apple - at the extremes - You can have everything OR you can have One and we think it's the best. 

    Best Buy being able to walk the line and make the switch...that's a whole other conversation...


    MNB user Bob Vereen wrote:

    hhgregg is a locally based electronics/appliance chain (publicly owned) competing effectively with Best Buy and more successfully.

    Its stores are about the same size, but less cluttered, and apparently its merchants have practiced item-selection as advocated by Mr. Manjoo.   Not down to a single item, but to several items in a category with different features from which to choose.


    From another MNB user:

    I can personally relate to the buying experience at Best Buy.  When shopping for a TV two years ago, I was absolutely inundated with selection and even more confused with the “speeds and feeds” that came were espoused from various salespeople.  Contrast that to a local shop where there were 12 models that they had determined “best in class” from a value perspective.  I paid a bit more but oh so worth it.

    MNB user Bill Smillie had a different perspective:

    My wife went to Office Depot to buy new copy machine after searching the web.  She got the worst customer service from a major company you could imagine and little product knowledge.  She went across the street to Best Buy and received the “Best” customer service you can imagine from a young lady and then another associate joined the sale and demonstrated the product to my Wife’s satisfaction.  Of course, she bought the best model they had, found out it was on sale and saved $100.  Those of us in retail can only hope our associates treat our customers with the same professional knowledge and salesmanship as she received at Best Buy.  Our local Best Buy must be different than others around the country.  They are busy...




    MNB took note last week of a National Public Radio report that just six months after the US Department of Agriculture (USDA) lifted its ban on the slaughtering of horses for human consumption, a New Mexico rancher has applied for an application to reopen a former beef slaughterhouse as a place that would turn horses into food.

    I commented:

    Let’s face it. We think of horses, we think of Trigger. Silver. Scout. And all those other horses from those thrilling days of yesteryear when all a man really needed was a good horse, a comfortable saddle, and a prairie to ride.

    I have to admit, though, that while it is hard for me to imagine eating horse, I was caught off guard when I saw in the NPR story that horse apparently tastes a little like kangaroo. Fact is, I’ve had kangaroo. In Australia. And I liked it a lot. (Waltzing Matilda, anyone?)

    So maybe one man’s horse is another man’s kangaroo...


    Which led MNB user Hortencia Espinoza to write:

    Wow Kevin, you totally dated yourself. LOL!! Young people today have no idea who Trigger, Silver and Scout are. (I date myself here too because I DO know who they are.)

    They don’t care about Flicka or Black Beauty either, and those are books that are still read in school. Mr. Ed isn’t on TV anymore. I think Bullseye from Toy Story is the most famous horse right now.

    There isn’t the same sentimental value on the “pet” horse as there used to be. He is no longer your trusty steed and side kick. He is now the horse in battle that gets impaled just like the guy riding him.

    The younger generation is much more into exotic dining and venturing away from steak and potatoes then ever before. International cuisine tops all restaurant visits and request for exotic meats is in demand. Trust me, I buy the game meats here at work and I can’t believe how expensive Buffalo and Kangaroo have become due to demand.

    In order for the sentimental value on the horse to remain, and not just be seen as another dietary protein, Hollywood needs to make a horse a star.


    Another MNB user wrote:

    On a trip to Italy 2 years ago, I bought a few varieties of horse lunchmeats.  They were very good, and really, I think most people would have been hard pressed to tell the difference between them and beef based lunchmeat.  The meat was a little darker red and had a little more chew to it than beef and pork based lunchmeats, but the flavor was nothing out of the ordinary.  I wasn’t able to try any of the steaks or roasts, but I don’t think I’d have a problem with them.

    The little deli that I bought the meat in had a sign extolling the virtues of horse meat.  Based on that little bit of info I think horse has a lot of benefits over beef.  Dare I say it could be the next healthy protein option on American plates?


    MNB user Mike Franklin wrote:

    Good to know that in Washington DC, both the house and Senate, both Republicans and Democrats were able to agree on at least one thing…Americans can begin to eat horses…

    Surprising, though.  Since so many of them on both sides of the aisles are horses' asses.




    Responding to my notes about the passing of Levon Helm, MNB user Ken Wagar wrote:

    Thanks for honoring the memory of Levon. He went a long way to defining my college years starting with the Album “Music from Big Pink”. I have owned his records, then tapes, then CDs and now his songs on my I-Pod for a total of some 44 years and I still enjoy every tune.

    MNB user Mark Raddant wrote:

    Last Waltz — best music movie of the rock era by miles.

    I saw the Before The Flood tour in Ann Arbor, Michigan.  Wonderful, and I will listen to the album when I get home tonight. Thanks.

    MNB user Jamie LaRue wrote:

    The Last Waltz is the best concert film ever.  Bar none.  Martin Scorsese directing.  Tons of great guests.

    And the opening title:  "Best Played Loud."  Kinda like Levon played life.


    I noted on Friday that Helm also was an actor, and served as the narrator of The Right Stuff, the opening eight minutes of which, I wrote, are among my favorite in the movies.

    Which led MNB user Michael Freese to write:

    You are right, Kevin. If you don't get piloerections from the opening sequence, something is wrong with you.

    Okay, I’m gonna admit it. I had to look up the definition of “piloerections.”

    And I’m going to let you do the same thing.
    KC's View:

    Published on: April 23, 2012

    Phil Humber, who underwent Tommy John surgery on his pitching arm in 2005, threw a perfect game on Saturday afternoon as the Chicago White Sox beat the Seattle Mariners 4-0. It was the first perfect game pitched in Major League Baseball in almost two years, the third pitched for the White Sox in the team’s history, and just the 21st in the history of the sport.
    KC's View:
    It was noted with some frustration around our house that Humber was a first round pick for the New York Mets when he was drafted ... and that not only have the Mets never had a perfect game thrown for them in their entire history, but they’ve never even had a no-hitter. (Despite having pitchers like Tom Seaver, Nolan Ryan and Dwight Gooden on the staff at various times.)

    Oy.

    BTW...we got proof positive yesterday that God must be a Red Sox fan. Because it rained so hard in New England that the Sox-Yankees game got postponed.