business news in context, analysis with attitude

Published on: February 15, 2013

by Kevin Coupe

It already has gotten a lot of attention, but I need to dip my beak a bit on this story.

Have you heard about John Alleman? He was a 52-year-old man who died of a heart attack the other day. In some ways, the heart attack was unexpected - Alleman was 180 pounds and at least from outward appearances, in decent shape.

But what made the heart attack so ironic was that for more than two years, Alleman ate at least once a day at a Las Vegas restaurant called the Heart Attack Grill, which has as its slogan, "taste worth dying for," and sells high-calorie, high-fat meals including Double Bypass Burgers, Flatliner Fries, Full Sugar Cokes, and Butterfat Shakes. Reports also are that the Heart Attack Grill would give free meals to customers weighing more than 350 pounds.

Let me be clear about this. I think that Alleman had the right to eat anything he wanted.

I think that the Heart Attack Grill has the right to sell anything it wants - and you certainly cannot accuse it of misleading labeling.

There are some who are saying that the Heart Attack Grill should be shut down. I'm not sure why. The restaurant didn't kill this guy. If anything, he committed suicide ... though it certainly was complicit is his death.

But what really bothers me about this is something that cannot be legislated. It is the exploitive nature of this restaurant, that it seems to delight in catering to lowest common denominator instincts. The restaurant certainly isn't alone in this - we live in a culture that does so. Think reality television. Think Donald Trump. Think anyone named Kardashian.

The best that the owners of the Heart Attack Grill could do with their lives is sell, among other things, a three-pound hamburger that had more than 9,000 calories, and give away food to people who are morbidly obese.

Heaven knows what these people would do for a living if heroin were legal. probably open a store and sell it to most people, but give it away to people with track marks on their arms.

At this moment, I'm sort of embarrassed that the Heart Attack Grill was included in MNB's "best hamburgers in America" list.

I think people should eat what they want, and I'm all in favor of gastronomic indulgence.

But there is something about this story - and what it says about our culture - that just makes me sick.

Published on: February 15, 2013

InsideCounsel.com reports that the 8th Circuit federal appeals court reversed a lower court decision, and sent a case involving Supervalu and C&S Wholesale Grocers to trial.

The story says that the court "reversed a lower court’s ruling dismissing the case, which five grocers brought against the two companies claiming they colluded to raise prices on groceries. The grocers say that a 2003 agreement between C&S and SuperValu to exchange assets in the Midwest and New England and not compete with each other for customers was a violation of antitrust laws. They claim the deal allowed the two wholesalers to overcharge retail customers in the Midwest and New England.
Each of the retailers had arbitration agreements with one or the other wholesaler. To get around having to arbitrate the case, the retailers brought suit against the wholesaler with which they did not have an arbitration agreement. The question over these agreements played a role in the previous court’s decision to dismiss."

Neither Supervalu nor C&S have responded to the decision.

Published on: February 15, 2013

The St. Louis Business Journal reports that Schnucks has filed complains with the attorneys general of Missouri and Illinois, complaining that Walmart is engaging in "misleading" and "willfully deceptive"price comparison advertising that claimed Walmart's prices are 20 percent lower than Schnucks'.

The story notes that last December, both Best Buy and Toys R Us filed similar complaints about Walmart's price ads.

"Schnucks filed the official complaints after filing complaints with Wal-Mart that asked the company to stop running the commercials," the Journal writes.

Published on: February 15, 2013

Reuters reports this morning that legislation is being sponsored by members of both parties in both house of the US Congress that could lead to national laws allowing all 50 states to collect sales taxes for online purchases.

The move to collect sales taxes for online purchases is based on a growing conviction that by doing so, it will level the playing field for online retailers and bricks-and-mortar retailers, as well as providing tax revenue for state governments that have been cash-strapped in recent years.

While e-commerce companies have long claimed that having to collect sales taxes would slow the growth of their nascent businesses, the success of e-tailers like Amazon and the growth of e-commerce to five percent of all US retail sales suggest that these no longer are legitimate concerns.

And, while Amazon has long said that it prefers a federal solution to the sales tax issue, it in fact has begun collecting the taxes in a number of states where it has a physical presence, and is opening new distribution facilities all over the country - which suggests that it believes that a broader physical footprint that allows it to speed up its delivery times will have a greater imp[act on its future than sales taxes.

According to the Reuters story, "The bills introduced on Thursday reconcile differences in legislation that the House of Representatives and Senate considered last year. The nearly identical details in the bills and strong bipartisan support mean the final bill could be sent to President Barack Obama this year."

Published on: February 15, 2013

Bloomberg Business Week reports this morning that while then-Walmart CEO Lee Scott said in 2007 that in-store health care clinics represented "a great opportunity for our business," and pledged to have as many as 2,000 of them open by mid-2012, in fact the retailer only has 130 of them open at the moment "and is closing locations faster than it’s opening them."

According to the story, "Walgreen and CVS, the two largest U.S. pharmacy chains, respectively, are opening more clinics, as is Target and grocery chain Kroger. CVS, which has about 630 MinuteClinics, is opening about three a week, and aims to have 1,500 within four years. While the chains don’t report clinic results, CVS says its business has grown at a compound annual rate of 39 percent during the past six years."

A key difference between the two business models may explain why one is growing and the other is not. Walgreen and CVS own their own clinics and market them aggressively, knowing that they can lead to stronger sales throughout the store because they are establishing deeper connections to shoppers. Walmart, on the other hand, has outsourced its health clinic business to other companies, and then resisted advertising and promoting them.

However, there may be time for Walmart to change course, because of Obamacare.

"Walmart may have time to grab more of the market," Business Week writes. "As key parts of the Patient Protection and Affordable Care Act - Obamacare - phase in starting next year, some 30 million newly insured Americans will be looking for care amid a doctor shortage. Clinics, usually staffed by nurse practitioners or physician assistants, generally stay open evenings and on weekends when most doctors’ offices don’t. They can relieve some of the pressure on MDs by handling acute care for minor illnesses and injuries, giving vaccinations, and monitoring chronic diseases."

Published on: February 15, 2013

The Financial Times reports that French authorities say they have identified a company that was deliberately labeling and selling horse meat as beef, and they say they have "enough evidence to pass the case to state prosecutors."

The company, Spanghero, "is to be stripped temporarily of its hygiene licence that allows it to prepare meat and could lose its operating licence, pending the results of tests at its premises," FT writes, adding that "Spanghero denied the accusations in an emailed statement and said it firmly believed that what it was selling was beef."

The sale of horse meat labeled as beef, and its inclusion in prepared foods such as meat sauces and lasagnas, has caused an uproar in the European Union, with 13 countries said to be affected by the scandal. As many as 28 companies have been implicated to varying degrees.

Published on: February 15, 2013

The New York Daily News reports that Tiffany and Co. is suing Costco, complaining that the warehouse club chain "is selling counterfeit diamond engagement rings under the Tiffany brand." The suit says that "a customer notified Tiffany and Co. that a Huntington Beach, Calif., Costco was promoting 'Tiffany' diamond engagement rings in the store."

However, while the rings were not described as being from Tiffany on Costco's website, they were described as such by Costco salespeople in-store.

No response yet from Costco.

The New York Times reports that "on Thursday, watches by Breitling, Cartier and Chanel were on sale for as much as $15,000 on Costco’s Web site. An engagement ring in the 'Audrey' collection — Costco’s advertising makes no mention of any connection to Audrey Hepburn, the star of the film Breakfast at Tiffany’s — was priced at more than $60,000."

Published on: February 15, 2013

• Toys R Us announced yesterday that its CEO, Gerald Storch, is stepping down, though he will remain as chairman. A search has begun for a successor.

According to Reuters, the move comes "just weeks after the world's largest dedicated toy retailer reported disappointing results for the all-important holiday season."

Published on: February 15, 2013

Monday, February 18, is President's Day here in the US, and a national holiday. MNB will be taking the day off, but will return on Tuesday morning.

Published on: February 15, 2013

Just a couple of quick things this morning...

The other day, MNB took note of a Chicago Sun Times report that "Maker’s Mark bourbon is being watered down slightly to stretch supplies of the liquor," and now will be "distributed at 42 percent alcohol by volume, down from 45 percent alcohol, or 90 proof." Chairman emeritus Bill Samuels Jr. says in a letter posted on the company's website that the decision has been made because of a national bourbon shortage, but that "every batch at 42 percent ABV had the same taste profile that we’ve always had... there’s no difference in the taste."

Now, I admitted that I know almost nothing about bourbon ... which is the reason I found this email from an MNB user so interesting:
 
I’m a Maker’s Mark Ambassador, and have been for over 10 years.  Being an Ambassador means that you share the love of Maker’s Mark, by telling others how it’s made and what it tastes like.  I also live in Kentucky, and we take our bourbon pretty seriously.  Needless to say, I was surprised by this news when Maker’s sent an email to all of their Ambassadors this past week.   While I appreciate their transparency in this decision I don’t agree with it.

As far as I know, there is no national bourbon shortage.  The bourbon category is growing rapidly right now, but no other bourbon makers are diluting their bourbon (or at least not telling people that it has been diluted).  Maker’s Mark is just having trouble keeping up.  It is understandable… good bourbon takes a while to make, 6-8 years in Maker’s Mark’s case.  But, if they have a shortage of bourbon, why are they coming out with bourbon line extensions such as Makers 46, or Maker’s Mark White (moonshine/un-aged bourbon)?  Both put added strains on production capacity.

To me, this is nothing more than a price increase, equivalent to adding a false bottom to a cup of yogurt or adding more air to an ice cream mixture.

Since my time as an ambassador, Maker’s Mark has changed greatly, slowly focusing more on the bottom line than the bourbon.  You used to be able to take a distillery tour for free, and hear about the history, the land, the ingredients and the bourbon, and they gave you a sample of one of their bourbon chocolates.  They had a gift shop that seemed like more like an afterthought.  Now they charge $7 for a tour, and the tour is dominated by the very large, redesigned gift shop.  At Christmastime, Maker’s Mark would send Ambassadors a small gift like branded coasters or drink stirrers, as a way of saying thank you for being a loyal Ambassador.  The last couple of years, the gifts have been items to help them sell more bourbon.  The notes would encourage you to buy your friends a bottle of Maker’s Mark, and use the enclosed bottle bag to wrap it in.

Not too long ago, Maker’s Mark’s master distiller stepped down.  At the time, I wondered why someone would leave a job as a master distiller.  It is a dream job in the bourbon world, and takes many, many years of apprenticeship.  Now I wonder if the master distiller saw the changes coming at Maker’s Mark, and didn’t agree with some of the decisions about the bourbon and the brand, and decided to leave. 
 
“Every batch ... had the same taste profile that we’ve always had... there’s no difference in the taste.”  I don’t believe it.  That is pretty standard language to use when making a change to a formula.

I’m no longer going to tell others to try Maker’s Mark.  They’ve lost my trust.  I have no problem with brands and companies growing and making more profits.  That’s the goal of business.  But, you can’t also have this “awe shucks, we’re just a small bourbon maker here in Loretto KY” attitude at the same time. 
 
I’ll be doing my part to help Maker’s Mark alleviate their bourbon shortage, by drinking some of the other good bourbons out there.  For the value seeker, W.L. Weller makes a nice wheated bourbon similar to Maker’s Mark, for half the price.  A more premium bourbon would be Blanton’s.

Man, is this is a lesson ... and not just about the bourbon business. It is a lesson in how a company can apparently ruin its brand equity, turning its advocates (who are its best salespeople) into former customers.

Wow.




Finally, yesterday I was finishing MNB the story broke that Warren Buffett's Berkshire Hathaway conglomerate was buying HJ Heinz for $23 billion. The New York Times story noted that Heinz fit nicely into a portfolio that includes Ore-Ida potatoes.

Which led me to comment:

So let me get this straight - a company owned by a guy named Buffett now owns companies that make both Heinz 57 and french fried potatoes?

Time to buy stock in Vlasic...

To which one MNB reader responded:

I catch MNB almost every morning and enjoy the frequent references to Jimmy Buffett and his music.

When can we expect your next book…”Essential Business Lessons from Music”…specifically Buffett’s?
 
“Breathe in, Breathe out, Move On”
“Changes in Latitudes, Changes in Attitudes”
“When the Coast is Clear”
 
Fins Up!
 
From another reader:

So….I work for Heinz (purchased today) on the Supervalu account (longer story).  How do you think MY world is today?
 
Just FYI – we have a full line of pickles, so your song analogy is spot on!
 
Thanks for making what is very tough day a little brighter!

My pleasure.

And from MNB user Steve Deveau:

Your response was gold, Kev,  gold.

Thanks.

I have to be honest here.

When that story broke yesterday, I thought of that line almost instantly. And as I was writing it, all I could think was that the past 11+ years of doing MNB were leading to that moment, and coming up with that phrase. It just seemed to encapsulate everything that MNB is all about.

So, yes... Fins Up!

Published on: February 15, 2013

Did you see the story this morning about how meteorite fragments fell to earth in western Siberia early this morning, damaging a number of buildings and injuring as many as 500 people?

According to the New York Times, "the governor of the Chelyabinsk district reported that a search team had found an impact crater on the outskirts of a city about 50 miles west of Chelyabinsk, which would indicate the meteor did not explode in the atmosphere. An official from the Interior Ministry told Interfax that three large pieces of meteorite debris had been retrieved in the area and that 10,000 police officers are searching for more."

And while I wish no harm to the good people of Siberia, all I can think is that we in the west better hope that it was just a meteorite.

Because if it was something more - say, a small spacecraft carrying a small child who is the last survivor of the planet Krypton, which was destroyed when its red sun exploded - we could have something to worry about. Because if that child is raised by Vladimir Putin, instead of by a good and decent Kansas couple named Jonathan and Martha Kent, there could be an enormous shift in the balance of power.

Some might say a "super" shift.

I'm just sayin...




And, did you see the story about the former mayor of San Diego, Maureen O'Connor, who stands accused of misappropriating $2 million from her late husband's charitable foundation "because of a gambling addiction."

National Public Radio had the story, and I have to say that "gambling addiction" strikes me as typically elegant NPR understatement.

Because it also ends up that between 2000 and 2008, O'Connor gambled "more than $1 billion."

That's right. One billion dollars. With a "b."

Now, O'Connor's late husband apparently had some money. He co-founded the Jack-in-the-Box fast food chain, as well as Southern California First National Bank Corp.

And O'Connor's explanation is that a brain tumor contributed to her video poker addiction.

But I cannot even imagine gambling a billion dollars. Or losing $2 million.

I chatted with Mrs. Content Guy about this last night, and I got the impression that if I gambled away even a thousand dollars, she'd probably send me for counseling.




Had a nice, and very affordable, white wine last night - a 2010 Caulino from Italy's Michele Alois Vineyards. Excellent with shrimp and pasta.




That's it for this week. Have a great - and hopefully, extended - weekend, and I'll see you Tuesday.

Slàinte!