business news in context, analysis with attitude

Published on: October 16, 2012

by Michael Sansolo

For reasons I cannot explain, I read the weddings section in the New York Times this weekend and found the following shocking statistic: New Jersey is the best place to get married in the United States.

Despite its media-created reputation (looking at you, Snooki) New Jersey is a pretty nice place. It’s got nice towns, some rural areas and, of course, the beautiful Jersey Shore. But a paradise for marriage? Come on.

Yet, only about nine percent of New Jersey residents list their marital status as “divorced,” which is well below the national average and far below many states that are usually connected with more traditional values. What’s more, both New York and California also were on the very low end of the spectrum.

As always, there’s more to this story. How we measure things and how we use those measurements always merit discussion, whether it concerns the Oakland Athletics baseball team, marital bliss in New Jersey or the performance of products on a supermarket shelf. So let’s start in New Jersey.

According to experts, the reasons for the low divorce rate in New Jersey are fairly simple. Many of the predictors of divorce surround the age at which people marry along with their economic level and educational status. In many of the states with low divorce levels like New Jersey, people get married older or, as is the case with North Dakota, live in relatively secure economic conditions.

All the same, I’m betting that many of us found this a really surprising statistic.

That is, of course, the key to understanding statistics. As the old saying goes, there are three kinds of falsehoods: lies, damned lies and statistics. Knowledge comes from getting beyond coincidences or biases and learning to look for the real insights. That’s why the relative success of marriages in New Jersey is both eye-opening and understandable at the same time once we look deeply enough to find out why.

That’s also why the Oakland A’s, eliminated from the playoffs last week, always merit our attention. The A’s, as everyone who read or saw Moneyball knows, are the poster child for creative interpretation of statistics. A small budget team, the A’s routinely win far more games than teams with far more famous and expensive players. This year was no exception: the A’s won’t win the World Series, but they got far more bang for the buck than every other team in baseball.

What the A’s do (and it’s the reason you should read or see Moneyball if you haven’t) is find the statistics that truly define winning performance. Baseball is awash in statistics measuring every aspect of the game. Yet the new thinking of the game is that many of the time-honored stats are poor measurements of achievement and potential. Rather they are stats that are unfairly influenced by luck and factors beyond any player’s control.

So using new measures - arguably, better measures - the A’s stock up on players whose skills produce victories, yet who are undervalued.

Again, that is a powerful lesson for businesses. The simple measures of performance - sales, profits, return on investment, etc. - still matter, but only with the context like the information from New Jersey. Because it’s highly possible that a store with weak numbers might really be outperforming its potential because of countless external and uncontrollable issues. Similarly, measuring products just on gross or net profit might misstate the importance of specific products to shopping trips.

Statistics and insights are essential to business performance. Gauges and measures help us all better understand what is happening, what is succeeding and what is not. But without context and without trying to understand new and better measures, we limit ourselves to misunderstanding what might be happening in New Jersey or Oakland.

Then again, nothing explains why I was reading the weddings section of the New York Times.

Some things can’t be explained.

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: October 16, 2012

by Kevin Coupe

Talk about getting burned.

Pizza Hut decided recently that it might be fun to offer free pizza for life to any of the "regular citizens" attending tonight's Town Hall-style presidential debate between Barack Obama and Mitt Romney if they ask the candidates if they prefer sausage or pepperoni on their pies.

Now, however, it has backed off the offer - stung by the barrage of bad publicity that followed the offer. The company is no longer urging people at the debate to pose the question, though it does say that it will pay off on the free pizza offer is someone actually does.

What morons.

Perhaps Stephen Colbert of "The Colbert Report" put it best: "What could be more American than using our electoral process for product placement?"

It is a great lesson in "be careful what you wish for." The only thing that could be worse for Pizza Hut than the backlash against the offer would be if some idiot citizen actually were to pose the question.

There is a huge difference between the promotions being featured by some companies (choose one cup for your coffee if you prefer Romney, another one if you prefer Obama) and the stupidity of what Pizza Hut has done, which threatens to mock what should be a very serious democratic exercise.

I've long said that every company should have someone on staff who has as his or her sole responsibility to be at every meeting and say, when appropriate, "What the hell are you thinking?" It should be that person's job not to drink the Kool-Aid, not to breathe the company's exhaust, not to buy into the notion that the company (and its executive leadership) can do no wrong.

That's exactly what Pizza Hut needed. Instead, it dropped the ball (and the pizza) by indulging in a promotion that shows contempt for our political system.

Now, I know there will be emails that will say that Pizza Hut has already won because everybody is talking about it. But in my view, that is a 20th century view of the world; it used to be said that there is no such thing as bad publicity, but that isn't the case anymore.

This was a dumb idea, poorly executed, conceived and approved by people of questionable judgement.

What morons.

Published on: October 16, 2012

Bloomberg reports this morning that a Texas-based US District Judge has ruled that Walmart will not have to face a class action gender discrimination suit there, saying that the statute of limitations has passed and that the suit was filed too late.

The suit was one of four filed against Walmart on a regional basis - the other three are in California, Florida and Tennessee - in the wake of a US Supreme Court decision that a national class action could not be certified because a) there were not enough similarities in the various cases, and b) there was no evidence of a corporate policy endorsing gender discrimination.

Published on: October 16, 2012

The Wall Street Journal reports that "it keeps getting tougher to compete with Walmart, with new numbers out today showing the company is lowering its prices even as groceries, on average, are getting more expensive at the country’s big chains."

The story says that grocery prices were up 0.6 percent nationally in the third quarter (there are some huge swings on a regional basis). However, Walmart is said to have dropped its grocery prices by 1.6 percent during the period.

"While Safeway's drop was larger, it has also been much choppier: the company’s prices rose 10.6% in the second quarter, the fastest among the big five. Wal-Mart keeps on consolidating its position as the leader for low prices — the price of a basket of goods at its stores has fallen in five of the last 12 quarters, while the price across the industry has only fallen twice in the same period."

Published on: October 16, 2012

Mark Bittman, the food writer for the New York Times, has an interesting piece in the paper in which he outlines what he thinks the "ideal" food label would look like to consumers.

"Right now, the labels required on food give us loads of information, much of it useful," Bittman writes. "What they don’t do is tell us whether something is really beneficial, in every sense of the word. With a different set of criteria and some clear graphics, food packages could tell us much more ... Choices based on dietary guidelines are all well and good - our health is certainly an important consideration - but they don’t go nearly far enough. We need to consider the well-being of the earth (and all that that means, like climate, and soil, water and air quality), the people who grow and prepare our food, the animals we eat, the overall wholesomeness of the food - what you might call its 'foodness' (once the word 'natural' might have served, but that’s been completely co-opted), as opposed to its fakeness."

And so, Bittman has devised a label concept that "can tell a story about three key elements of any packaged food and can provide an overall traffic-light-style recommendation or warning."

It is an intriguing approach, and can be read about here.

Published on: October 16, 2012

The National Retail Federation (NRF) reports that September retail sales (excluding automobiles, gas stations and restaurants) increased 0.4 percent seasonally adjusted from August, and 2.1 percent unadjusted year-over-year.

"In spite of the uncertainty and unease surrounding our nation’s high unemployment and long-term fiscal challenges, consumers continue to spend and shop," Matthew Shay, NRF's president/CEO, said in a prepared statement. "Robust back-to-school spending combined with a series of new, technology-led product launches certainly helped retailers in September. The American consumer is holding their own in this economic environment but the question remains, for how long?"

Published on: October 16, 2012

The Nielsen Company is out with a new analysis saying that "higher consumer confidence levels, increased impulse buying and consumer intent to spend more could all lead to an upside surprise in 2012 holiday spending ... For sales in 89 categories across five key departments (food, beverages, alcohol, health/beauty and homecare), Nielsen is forecasting spending for November and December, 2012 to reach $98.3 billion. Nielsen expects dollar sales to increase 2.3 percent and unit sales to remain generally flat (0.1%)."

The report goes on to say: "The number of respondents saying they plan to spend more with online retailers leads all channels at 18 percent, up from almost 13 percent last year. Consumers saying they’ll spend more at mass merchandisers doubled this year to 12 percent in 2012, from six percent in 2011 and 2010.

"Although almost six out of every ten consumers (59%) reported plans to spend the same as last year, there is a 10-point drop (from 37% in 2011 to 27% in 2012) in the number of people expecting to spend less. Eight percent of respondents reported plans to spend more this holiday season, up from 5 percent in 2011 and 2010."

Published on: October 16, 2012

USA Today reports on a new study from the US Centers for Disease Control and Prevention (CDC) saying that "diet drink consumption has increased over the past decade, a trend that reinforces other research showing intake of calories from sugar in regular soda has decreased ... The new diet drink analysis shows that the change in diet drink consumption occurred for both women (up from 18% in 2000 to 21% in 2010) and men (up from 14% to 19% in the same period).

"Still, only about 20% of people in the USA consume diet drinks on any given day with the majority (80%) not drinking them, the report finds ... Overall, about half of the population, ages 2 and older, consume sugary drinks on any given day. Among boys 2 to 19, 70% consume these types of drinks while 40% of adult women consume them."

Published on: October 16, 2012

Nordstrom has informed its employees that it officially supports the Washington State referendum initiative that would legalize gay marriage, sending a memo co-signed by Blake Nordstrom, Erik Nordstrom, and Pete Nordstrom that saying that they believe in a workplace where "every employee is welcomed and respected."

According to the Los Angeles Times story on the subject, "Nordstrom already offers domestic partnership benefits to same-sex couples, and sexual orientation is included in its anti-discrimination policy."

The memo says: "We feel the next step in this journey is to now support freedom to marry, also called marriage equality. We gave this thoughtful consideration and felt the time was right to come out in support of this civil rights issue. It is our belief that our gay and lesbian employees are entitled to the same rights and protections marriage provides as all our employees."

Published on: October 16, 2012

Just got a press release regarding the formation of a new professional development group called Women Impacting Storebrand Excellence (WISE), described as "designed specifically for developing and promoting women leaders in store brands by offering educational opportunities, coordinating business networking events, and advocating mentorships for store brands professionals. Membership is open to store brand retailers, manufacturers, brokers, consultants, and suppliers, both men and women."

WISE says it already has strong industry support from companies such as Ralston Food Group, McCain Foods USA, Clement Pappas, and Hormel Foods.

The WISE Kick-Off event, “Connecting Women, Inspiring Futures,” will be hosted on November 11th in conjunction with this year’s PLMA Trade Show in Chicago.

Published on: October 16, 2012

• Smart & Final Holdings announced yesterday that Ares Management will acquire a majority stake in the 235-store retailer from Apollo Global Management. The total enterprise value for the transaction is said to be $975 million, "subject to certain closing considerations."

• The Wall Street Journal reports that "Americans boosted their spending in September on everything from iPhones to restaurant meals in the latest sign that the consumer economy is gaining strength even as other sectors are weakening.

"Retail and restaurant sales rose a seasonally adjusted 1.1% in September from August, and the Commerce Department boosted its estimate for sales over the summer. Sales have now climbed for three consecutive months after flagging during the spring.

"The stronger retail numbers provide some of the first evidence rising consumer confidence is translating into actual spending."

• The Associated Press reports that CVS Caremark Corp. has agreed to pay the US Department of Justice $5.25 million "to settle allegations that it reported false information on prescription drug prices to the government's Medicare program." According to the story, "Federal investigators said CVS' RxAmerica subsidiary reported false information about the prices of generic prescription drugs between 2007 and 2008. The Centers for Medicare and Medicaid Services used this information in a website called Plan Finder, which seniors could use to estimate their out-of-pocket drug expenses. But Department of Justice officials said the actual drug prices offered by the company were 'in some cases significantly higher' than those submitted for use on the website."

The story goes on to note that "CVS said it agreed to the settlement to avoid protracted and expensive litigation. It noted the period in question came before it acquired RxAmerica through its takeover of Longs Drugs Stores. In January, CVS agreed to pay $5 million to resolve similar allegations filed by the Federal Trade Commission."

Published on: October 16, 2012

• Weis Markets said yesterday that it has hired Shirl Stroeing as the company's new Vice President, Chief Information officer. Stroeing most recently worked at Supervalu where she was Vice President, Service Management and Operations Support IT.

• Family Dollar yesterday named Jocelyn Wong as its senior vice president/chief marketing officer. Wong most recently served as group vice president of shopper marketing for Safeway Inc.

Published on: October 16, 2012

We continue to get email about the NYC ban on jumbo sugared soft drinks...especially since yesterday NYC got sued in an effort to block the new rules. We noted that Mayor Bloomberg's office derided the suit, saying that the city already has "won fights over outlawing smoking in bars and offices and forcing fast-food restaurants to list calorie counts on their menus."

One MNB user wrote:

Limiting the size of a soft drink is a total different issue from listing calories and smoking bans. Smoking bothers others and can cause others serious health issues. The case for not smoking in public buildings is not to ensure the health and safety of the smoker, but others who choose not to smoke. Simply listing calories does not limit one’s purchasing power – it provides information for informed choices. But limiting the size of soft drinks should be up to the restaurants, vendors and consumers. We do not want government telling us what and how much we can drink.

In America, people get to make choices and be left with the consequences – good or bad – as long as they’re only hurting themselves. Now when it comes to employer’s paying for health care, that’s a different matter – and employers are rewarding employees who are healthier and live healthier lifestyles. Again, the people don’t lose the freedom to make their own choice.

From another MNB user:

The mayors spokesperson response referring to the stopping of smoking in restaurants and offices is ridiculous, smoking affects others. As far as fast food listing nutritional value (or lack thereof) on menus, well that is educational. I hope NYC spends a fortune on this drink policy. I am all for helping obesity, especially in children, but by showing them how to make better choices. Let me guess Mayor Bloomberg, what is next, no more double cheeseburgers, no meat portion in a restaurant over 6oz? Seriously! This reminds me of the TGIF two drink rule on Mojitos, max of two for everyone, regardless of size or what they had prior, etc. Again, teach your people to recognize and control what you serve, educate consumers through facts, do not just have a blanket policy to cover your butt, be politically correct and make your insurance company happy. This should be fun to watch and perhaps it will educate people in doing so.

And from another reader:

Power of the City/State over its citizens is limited to their Charter.  If the ability to limit beverage size is not written in the City Charter, then the people should litigate and push back on these incessant power grabs resulting in the continuous erosion of individual rights.




On another subject, an MNB user wrote:

At this point I may have to disagree with you that Ron Johnson's approach at JC Penny is the right one.  I went into a JC Penny last week for the first time since new management took over and here are my observations:

- Clothing quality/brands look to have declined. Not sure if my tastes have changed, but nothing exciting there.
- Without the sales tags on the displays, the store seems a bit sterile and a little boring.
- Fixtures and lighting appear unchanged and still drab
- What I did see was some new signage with a down-to-earth font and conversational tone. While a plus, this cosmetic change is not going to lead the much talked about turnaround.

Overall, there is a lot of work still to be done and I'm not sure if its enough to stem the loss of traffic and sales.

The "coupon that's not really a coupon" could be an admission that senior management behind the scenes is started to get very worried about the potential for a weak holiday shopping season.

It is possible that you were in an old JC Penney that has not yet been upgraded.

But I agree that it is going to be a long, hard road with plenty of pain. The question is whether JC Penney is even viable without going through it.

Published on: October 16, 2012

• In Game Two of the National League Championship Series, the San Francisco Giants defeated the St. Louis Cardinals 7-1. The teams now are even at 1-1 in the best-of-seven series.

• And, in Monday Night Football action, the Denver Broncos came back from a 24-0 first half deficit to defeat the San Diego Chargers 35-24.