retail news in context, analysis with attitude

Fascinating email from MNB reader Amanda Malusky Krauss:

I’ve found the commentary you’ve received in response to the Walmart bribery investigation to be interesting.  I am a forensic accountant, and therefore my job is to perform investigations of this type.  I also have experience in the grocery industry, hence why I follow MNB – working at Dorothy Lane Market during high school and college, and then auditing a large grocery chain when I started out in the accounting industry. 

Yes, bribes are a way of doing business in certain other countries.  Because of this, companies have to figure out whether they want to do business in those countries, and if they can do so without violating the Foreign Corrupt Practices Act.  A company considering doing business in another country, and certainly a company of Walmart’s size, would have fully vetted the nature of getting business done in the country before entering it, and decided whether it could operate in that country without violating the FCPA. 

The FCPA relates to bribery of foreign officials, and therefore does not cover the U.S. activity some of your readers questioned as being the same as bribery.   But there are numerous federal and state statutes that do cover such U.S. activity, and associated investigations and prosecutions. 

Regarding what constitutes a bribe, the FCPA is pretty clear in defining this point.  I agree that the cover-up is what makes this worse, and U.S. authorities won’t look favorably on the fact that Walmart covered up instead of self-reporting.  Also, not only does it appear that Walmart violated the FCPA’s anti-bribery provisions, but they disguised the payments in the accounting records and therefore likely violated the FCPA’s record-keeping provisions as well.

Like I keep saying, they got Al Capone for tax fraud.

Got the following email regarding yesterday's mention of a Fortune piece about Coke CEO Muhtar Kent:

As a former Coke employee, I read the Fortune article and concluded this is another in a long line of “Coke-favorable” articles that Fortune has written over many years. With the stock price continuing to grow and a possible stock split on the horizon, it is easy to have a “Coke and a smile” when reading Fortune articles.

I am very impressed that Muhtar is professing the need for cash management. Turning off the lights on the 25th floor is important, but I’m hopeful that same attitude is applied to a number of other symbolic areas, like who uses the company aircraft, Director remuneration for services rendered and other cash-burning areas recently identified in the 10-K filing.

What mystifies most who leave Coca-Cola for more entrepreneurial roles elsewhere is the cost of process that snuffs out employees who have innovative ideas. Or, worse, looking first to shift costs to the bottlers, many of whom suffer the cash impact first with erratic fuel pricing and imposed taxation levies (outside the US). The most innovative business unit in Coca-Cola has been The (now former) Minute Maid business unit, who have managed to grow non-sparkling business over the last 30 years by operating leaner and with less bureaucracy than Atlanta. It’s amazing what Minute Maid colleagues got done by not being under the process-centered, risk averse approach taken in Atlanta. For example, Minute Maid innovated Orange Juice flavors, packaging (as far back as 1988) – were first in Coca-Cola to sell retailers like Toys R US and Target - and led retailers in the area of efficient shipping and billing practices. All of which contributed immediate cash to The Minute Maid business.

On the “respect for cash” point: understanding cash is a huge issue that goes well beyond Coca-Cola and the corporate world. There is very little of this taught in our schools. Our kids have such a limited understanding of cash. ATM cards & easy credit availability, combined with parents who can’t say “no” – have created a culture where kids just simply don’t understand cash 101.  We all have friends / colleagues / relatives that can’t manage their cash because they were never trained to do it.  I have talked to my son’s school principal about adding courses on cash management. He agrees with the need but they haven’t made it a priority. My son thinks I’m a bully because he’s getting his “training”, which I mention only because it’s an issue when he can’t get confirmation through the school as to the messages I’m trying to leave with him.

I’d love to see Coca-Cola drive an initiative to teach cash management to our youth. As reported a few days back, Joe Tripodi has linked Olympics to youth via EPS (or as you put it Social Shared Value). To me, Coca-Cola linking the “respect for cash” initiative to one focused on youth development might not lead to a bunch of kids holding hands on a hilltop. However, it would lead to our kids understanding the importance of managing cash and might also stimulate parents to focus upon this as well.

On another subject, an MNB user wrote:

I am not at all surprised by the NCL complaint about the NuVal system, but I think the only real issue here and the one the complaint sort of touches upon but does not come out clearly and state is all about education.  I was fortunate enough, in a previous position, to be part of a group reviewing the NuVal system for use in our stores.   Through that education we were given a true understanding of the simplified value/purpose of the system for the consumer: to compare like items to each other, providing an easy to use comparison tool to select the item with the best balance of nutrition.  The system, as I understand it, was never meant to compare Donuts to canned peas but rather to compare canned peas to other canned peas as well as to frozen and fresh peas.  This IS valuable to the consumers but it is not very well explained to them….the how to use it.  I believe there is probably a relatively easy to implement solution to this but I will leave it to NuVal to figure that out.

I think we are fooling ourselves if we actually think the FDA will, in a timely manner, develop a system that will be acceptable to all and be overly influenced by one Lobbyist group or another.  I have reviewed many systems and find this one to be well done, certainly there is always room for improvement.  In that light I am also impressed by the fact that the NuVal system is updated periodically to revise their algorithm to incorporate new learnings on Nutrition, again something a privately held company can do quickly and seamlessly.  If the FDA had to update their systems or recommendations it would take numerous committees and congressional hearings and numerous years, by which time the “new” learning would be outdated and proven false… fact I am still not sure if Caffeine is good for me or bad for me.

Another MNB user wrote:

I am not going to guess for what reason NCL is complaining, but this goes straight to the heart of the issue of transparency, and how I, for one, argue that *sometimes* it’s best that things remain confidential in order to save the people from themselves. If you make that algorithm public, then it will inevitably become corrupted by industry, special interests groups, and the public at large. It would probably also lead to the spawning off of a variety of alternative algorithms/scores that would only serve to confuse people even more.

Finally, I wrote yesterday - after taking note of the fact that 7-Eleven is introducing a low-cal Slurpee - that I've never had one, and wondered if I'm in a minority.

One MNB user wrote:

Probably not the only person to never have a Slurpee, but close. You may have had a Slurpee by a different name. Have you had an Icee, a frozen coke, a DQ Freeze? They go by many names. Never been one of my favorites, but then I don’t do Kool-Aid either. Having a Lite version probably won’t entice me to start drinking them, although having a diet coke version might.

And MNB user Paul Schlossberg wrote:

I too have never had one. But if you ever had a frozen margarita, you're probably in a related sub-group of the club - alcohol-based. It's been around since at least the 1930's.

Oh, I've had margaritas. Lots of them. Often while nibbling on sponge cake. Or smelling the shrimp as they come to a boil...

Cue the steel drums...
KC's View: