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    Published on: February 21, 2013

    This commentary is available as both text and video; enjoy both or either. To see past FaceTime commentaries, go to the MNB Channel on YouTube.

    I think it has been pretty well established here on MNB that I enjoy the occasional beer or wine. I'm by no means a connoisseur, but I do have what might be called a healthy thirst. Now, when it comes to beer, I've been a long neck guy about as long as I can remember.

    Actually, I'm pretty sure I do remember when it occurred to me that long necks were the way to do ... and it was when I began reading Spenser novels back in the late seventies and early eighties. It always struck me that in addition to be terrific hard boiled detective novels, they also served as a kind of manual on how to be a man ... and if Spenser was going to drink from long necks, so was I.

    Well, there was a terrific story in the Boston Globe the other day that I want to bring to your attention, because it sort of challenges long neck orthodoxy. It is about how Jim Koch, the visionary behind the Boston Beer Co. and Sam Adams beers, has finally agreed after almost three decades to make some of his products available in cans.

    But not just any can. The fascinating thing to me about the story, which you can read in its entirety here, is that Koch and his folks were unwilling to just put the beer in any old can, take the money and run. No, they spent two years and more than a million dollars to come up with a patent-pending design with what is described as an hourglass-style can with a wider lid.

    In the end, Jim Koch wasn't happy with just satisfying his customers. He had to be satisfied himself, and he was going to be more demanding than anyone. But, he also knows that Sam Adams devotees - and I would count myself among their number, especially when it comes to their Red Ale - think of the product as theirs. Mess with it, and you mess with something important to us.

    This is a terrific lesson in how to preserve and enhance brand equity. And when these cans find their way onto store shelves, I'm going to be among the first on line to buy a six pack and test them out.

    I'll drink a toast to Spenser, who helped teach me how to drink. And to Jim Koch, who remains relentlessly devoted to quality in a world where that attitude often is watered down in search of the fast buck.

    That's what is on my mind this Thursday morning. As always, I want to hear what is on your mind.

    KC's View:

    Published on: February 21, 2013

    by Kevin Coupe

    The Boston Globe reports that "working wives now account for 47 percent of household earnings, up from 38 percent in 1988, while husband’s contributions have dropped to 53 percent from 62 percent."

    The story says that women's "share of family income had the biggest one-year increase in nearly a quarter century between 2008 and 2009 — the worst of the recession — according to a report by the Carsey Institute at the University of New Hampshire ... Women’s contributions to family incomes have historically risen during recessions, as men lose jobs and women become primary breadwinners," the study says, and "those earnings tend to remain higher even after husbands return to work, as families try to make up for diminished bank accounts and other financial losses."

    More from the report:

    "In households in which men don’t have a college degree, women’s financial contributions play an even bigger role. Men with lower levels of education were hit hardest by job losses during the recession, and wives’ share of family earnings income surpassed husbands in these households, according to the Carsey study. Women married to men with a high school diploma or less provided 51 percent of the household income in 2011, a jump of 4 percentage points from 2009.

    "More educated men, on the other hand, tend to marry educated women, and these couples’ earnings took less of a beating during the downturn, further widening gap between the highest and lowest incomes."

    All things that marketers need to keep an mind as the consumer population continues to morph into something different, something that may not respond to same old, same old product and service pitches.
    KC's View:

    Published on: February 21, 2013

    Albertsons LLC announced yesterday the executive organizational structure that will be created for the company after it closes its deal with Supervalu to acquire stores and divisions from the company. In the announcement, Albertsons emphasized that "all of the new Division Presidents worked for Albertsons LLC previously or are currently employed by the Company," and said that "a combination of internal talent and external expertise with deep roots in retail, the new leadership will assume responsibility of their respective operating areas following the close of the transaction."

    The Albertsons-Supervalu deal is expected to close during the third week of March 2013.

    According to the announcement, "Bob Butler, currently Executive Vice President of Operations for Albertsons LLC, will be named Chief Operating Officer with responsibility for all Albertsons banner stores. The Albertsons divisions will be operated by Albertsons LLC. Justin Dye, currently Chief Strategy Officer, will be named Chief Operating Officer, with responsibilities for the Acme, Jewel, and Shaws/Star Markets banners, and the total company pharmacy operation, which will be operated by New Albertsons, Inc. (NAI).
    "Albertsons LLC and NAI will both be operated by AB Acquisition Inc., which will be led by CEO Bob Miller.  Rick Navarro, Chief Financial Officer; Paul Rowan, General Counsel; Andrew Scoggin, Executive Vice President of Human Resources and Public Affairs; and Mark Bates, Chief Information Officer will oversee their respective functions at both Albertsons LLC and NAI."

    The division president lineup looks like this:

    • Acme Markets: Jim Perkins, "formerly Vice President of Operations for Albertsons Inc., and Director of Operations for Albertsons LLC’s Southern Division, Jim began his career at Albertsons in 1982. Jim is returning to the Company after having held the role of Regional Vice President with Giant Food."

    • Jewel Osco – William Emmons, "formerly Southern Division President of Albertsons LLC, William is returning to the Company following his retirement in October 2010. He began his career at Albertsons in 1971."

    • Shaws & Star Markets: Shane Sampson, "formerly Vice President of Marketing and Merchandising for the Albertsons LLC Southern Division, Shane started with Albertsons in 1983 and was a division president in the Intermountain and Florida divisions of Albertsons Inc. Shane is returning to the Company after having held the role of Senior Vice President Operations at Giant Food."

    • Albertsons' Intermountain Division: Susan Morris, "currently Vice President of Marketing and Merchandising for the Albertsons LLC Southwest Division, Susan began her career with Albertsons in Denver in 1985."

    • Albertsons' Southern California Division: Wayne Denningham, "currently the Albertsons LLC Southern Division President, Wayne began his career at Albertsons in 1977."

    • Albertsons' Southern Division: Mike Withers, "currently Vice President of Albertsons LLC Marketing and Merchandising for the Southern Division, Mike began his career at Albertsons in 1976."

    • Albertsons' Southwest Division: Shane Dorcheus, "currently Albertsons LLC President of the Albertsons LLC Southwest Division, Shane started with Albertsons in 1980, and will continue in his role as Southwest Division President."

    Albertsons also said that it is forming "a new Northwest division office, to be based in Portland, OR, which will manage operations for stores in Northern Idaho, Oregon and Washington." It will be headed by Dennis Bassler, "currently a District Manager in the Albertsons LLC Southern Division and formerly the Senior Vice President, Marketing/Merchandising for Albertsons, Inc., Dennis began his career at Albertsons in 1981."
    KC's View:
    My sense is that this structure reflects two things - Albertsons LLC's conviction that the path it has taken over the past few years has been working, and Bob Miller's belief that the company will only be as successful if division presidents are running their own shops, making sure that the people on the front lines are empowered, responsible and empowered.

    Published on: February 21, 2013

    In Sunday's New York Times Magazine, available online now, there is an extraordinary story about how certain kinds of food are engineered to be addictive by companies that know that their success depends on their continued and growing sales.

    And in one of the most interesting revelations in the piece, they also seem to know better ... since in April 1999, executives from Nestlé, Kraft and Nabisco, General Mills and Procter & Gamble, Coca-Cola and Mars gathered at Pillsbury headquarters in Minneapolis for a presentation by that company's executives on why they needed to embrace the nation's obesity challenge, and even a suggestion that "the toll taken on the public health by a poor diet rivals that taken by tobacco.”

    The facts, as presented by Pillsbury's executives, were essentially ignored ... and now, 14 years later, the scenario that was predicted then has become reality.

    An excerpt from the piece, written by Michael Moss:

    "The public and the food companies have known for decades now — or at the very least since this meeting — that sugary, salty, fatty foods are not good for us in the quantities that we consume them. So why are the diabetes and obesity and hypertension numbers still spiraling out of control? It’s not just a matter of poor willpower on the part of the consumer and a give-the-people-what-they-want attitude on the part of the food manufacturers. What I found, over four years of research and reporting, was a conscious effort — taking place in labs and marketing meetings and grocery-store aisles — to get people hooked on foods that are convenient and inexpensive.

    "I talked to more than 300 people in or formerly employed by the processed-food industry, from scientists to marketers to C.E.O.’s. Some were willing whistle-blowers, while others spoke reluctantly when presented with some of the thousands of pages of secret memos that I obtained from inside the food industry’s operations. What follows is a series of small case studies of a handful of characters whose work then, and perspective now, sheds light on how the foods are created and sold to people who, while not powerless, are extremely vulnerable to the intensity of these companies’ industrial formulations and selling campaigns."

    It is a fascinating story ... and worth reading here ... because it suggests not just responsibility but potential culpability. Which are, of course, not the same thing.
    KC's View:

    Published on: February 21, 2013

    Al Plamann, CEO of Unified Grocers, announced yesterday that he will retire from the company, effective May 1, 2013. He has served as CEO since September 1999, when Los Angeles-based Certified Grocers of California, Ltd. merged with United Grocers, Inc. of Portland, Oregon. Prior to the merger, Plamann served as president/CEO of Certified Grocers of California for six years and also spent four years as the company's senior vice president of Finance/CFO.

    The announcement by the company notes that "during Plamann's tenure as CEO, Unified has grown from a Company with $1.8 billion in annual sales to nearly $4 billion. Additionally, the Company has expanded its customer base to an area that stretches from Mexico to Alaska, as well as to key international points around the globe."

    In his statement to shareholders, at the company's annual meeting yesterday, Plamann said, "With Bob Ling's nearly two years of experience as President of the company, an energetic management team in place, a loyal and dedicated group of associates and a strong base of independent retailers, I feel that this is an ideal time for me to step back and let this dynamic group take the Company to new levels of prosperity. I am confident that Unified Grocers is well-positioned for success in the years to come."
    KC's View:

    Published on: February 21, 2013

    The San Francisco Business Times reports that Safeway has "introduced a combined debit card and store loyalty card so that it can pull money directly out of a customer's checking account without paying the hefty fees it incurs when customers pay with a bank's debit card.

    "Those signing up for the program get a new Safeway Club Card that includes the Fast Forward debit feature."

    According to the story, "Customers choosing not to carry their Club Card can still pay with Fast Forward debit by using the phone number linked to their loyalty card account and a PIN."

    The program currently is only available in the Sacramento market, and no timetable has been announced for a rollout to other markets.
    KC's View:
    My guess is that Safeway will roll this out pretty quickly if it sees strong interest and/or returns from the project, because it caters to a consumer climate in which people may be getting fed up with the transaction fees being charged by banks. This program will allow Safeway to deny the banks some of that revenue, reduce fees, and dip its beak a bit to add to its bottom line.

    Published on: February 21, 2013

    Interesting story in The New Yorker about how two companies - Walmart and Apple - have defined the country since the mid-seventies, years that have seen an "unwinding" of the social contract "to the point of disintegration."

    So what's happened during the past 3+ decades?

    "The middle class has shrunk; tax rates (especially on upper brackets) have plunged; inequality has exploded; the safety net (especially for the poor) has weakened; the old power structure has given way to a more diverse and broad-based upper class based on education; bipartisanship—well, you know; and business culture has become entrepreneurial, fast, risk-taking, and harsh. The trade-off: more freedom, less security."

    The analysis goes on:

    "Two companies have defined the years of the Unwinding: one is Apple, the other, Walmart. Steve Jobs’s genius for design and marketing helped create the consumer taste of that educated upper class—the spare, sleek, Bauhaus-inspired devices; the turtlenecks and jeans; the self-congratulatory language of revolution and inspiration; the Einstein fetish—with the Apple Store a kind of secular temple for devotees in prosperous cities and suburbs, mostly along the two coasts.

    "Jobs’s stylistic and philosophical opposite was Sam Walton. He came out of the heartland, where he saw the potential for a strategy of low cost and high volume in overlooked backwaters like Siloam Springs, Arkansas, and Coffeyville, Kansas. Walmart’s period of explosive growth coincided with decades of wage stagnation and deindustrialization. By applying relentless downward pressure on prices and wages, the company came to dominate both consumer spending and employment in small towns and rural areas across the middle of the country. The hollowing out of the heartland was good for Walmart’s bottom line: its slogan might have been an amoral maxim attributed to Lenin—'The worse, the better'."

    The story suggests that it is the driving down of costs and prices by Walmart over the years that actually led to its apparent susceptibility to a same-store sales "disaster" during February when a two-per-cent increase in payroll taxes took effect with the new budget deal on New Year’s Day.

    It is a fascinating analysis, and worth reading here.
    KC's View:

    Published on: February 21, 2013

    In the UK, the Guardian reports that Tesco has been labeled the nation's worst supermarket chain in a poll conducted by a respected consumer organization.

    According to the story, "Tesco was at the bottom of the table of the nine major supermarkets, scoring just 45% and receiving poor marks for its pricing, store environment, quality of fresh produce and customer service.

    "In contrast, Waitrose received a customer score of 82%, including five-star ratings for its customer service and the quality of its fresh produce, putting it at the top of the table for the fourth year in a row.

    Discount supermarkets Aldi and Lidl came second and third with scores of 74% and 69% respectively, beating some of their bigger rivals such as Morrisons (59%), Sainsbury's (58%) and Asda (53%) ... Fourth place went to Marks & Spencer with 68%, while the Co-operative scored just above Tesco with 48%."

    The survey says that the rankings suggest the degree to which value has moved to the forefront in terms of consumer priorities.
    KC's View:

    Published on: February 21, 2013

    We can't make this stuff up.

    The US Postal Service (USPS), mired in billions of dollars in red ink, shutting down post offices and cutting back on services, reportedly has signed a deal with a company called Waconah Group to produce a line of "Rain Heat & Snow" all-weather apparel and accessories.

    According to the Washington Post story, the licensing agreement allows Waconah "to produce the new line, which will include jackets, headgear, footwear and clothing that allows integration of modern technology devices such as iPods," with Waconah saying that it will "put the Postal Service on the cutting edge of functional fashion."

    The USPS will collect licensing fees, but won't have to invest anything in the project. The Post writes that the goal is to improve its brand equity.
    KC's View:
    I can only imagine the ads...

    Go Postal...with "Rain Heat & Snow" Outwear.

    All I know is when I think about my mailman's fashion choices, I think of the guy who delivers mail to my office, who wears - except in below-freezing temperatures - blue shorts, high black socks and black shoes.

    Great guy. Friendly. He even looks out for me if I'm out of town and the office mailbox gets a little crowded.

    But I'm not turning to him for fashion advice.

    Also, as my friend Glen Terbeek says, "If they can't be profitable as a monopoly, how can they compete in the fashion world?"

    Published on: February 21, 2013

    Bloomberg reports that a gender discrimination class action suit against Walmart filed by female workers in Tennessee and four other southern states cannot be pursued because it was filed too late.

    According to the story, US District Judge Aleta Trauger said that a "1988 decision by the federal appeals court in Cincinnati in a separate case, known as Andrews v. Orr, blocks the women from joining a new class action ... The lawsuit was filed in Nashville last year by three women who claimed Wal-Mart, the world’s largest retailer, paid women less than men in comparable jobs and blocked promotions for female workers in five southern states. The women sought to proceed on behalf of Wal-Mart’s female employees in the company’s Region 43, which comprises Tennessee and parts of Alabama, Arkansas, Georgia and Mississippi."

    Lawyers for the plaintiffs say they will appeal.
    KC's View:

    Published on: February 21, 2013

    • The Wall Street Journal reports this morning that BMO Capital Markets retail analyst Karen Short is telling investors that Ahold is the most logical buyer for Harris Teeter Supermarkets, which acknowledged a few days ago that it is considering its various strategic options, including a possible sale of the company.

    The reasons? Ahold has "an acquisitive nature, a desire to move into southern U.S. markets and a mix of union and nonunion supermarkets."

    Private equity groups are less likely to be interested in Harris Teeter because it is "an exceptionally well-run company," and not the fixer-upper that private equity companies prefer.

    • The Washington Post reports that "as much as one-third of seafood" sold in Washington, DC, restaurants and groceries "is fraudulently labeled, according to a report the advocacy group Oceana released Thursday. The group sampled 674 retail outlets in the District and 20 states between 2010 and 2012, often finding cheaper, farmed fish being sold in place of wild-caught ones."

    Reuters reports that, as expected, " Office Depot Inc will acquire smaller rival OfficeMax Inc in a $976 million all-stock deal, the companies said on Wednesday, confirming an agreement inadvertently announced earlier in the day, before it was completed.

    "The combined entity's name, headquarters and CEO are all undetermined, an unusual level of major decisions yet to be made that points to the integration challenge the companies face."

    Approval from antitrust regulators will be necessary for the deal to be closed.
    KC's View:

    Published on: February 21, 2013

    MNB tends to have a lot of stories about brand equity and bad corporate behavior, and how the latter can affect the former. Which seems to have prompted this email from an MNB user...

    Corporations and their trade associations love to lobby against regulations, and one of the first lines of defense is always “we don’t need more laws, we are self-policing”. And the second line of defense is  “we don’t need more laws, we just need to enforce the ones we have”.

    But even a casual observer can see that industries are most definitely NOT self policing – indeed, those who bend or even break rules and regulations pose a significant competitive threat to the less aggressive that usually means the least attractive behavior gets copied faster in the name of “leveling the playing field”.

    And you don’t have to look much farther to see all the coordinated efforts to reduce, remove, delay, water down, under-fund, and totally undermine those laws and regulations that do pass.

    I love our industry, but at times it is not very admirable.

    I recently saw a respected consulting and polling firm display a graphic that more than 75% of people agree with the idea that large corporations are untrustworthy and will behave poorly and unfairly if they think they can get away with it.

    I don’t care if your brand is based on being a retailer OR a supplier – when you become permanently and systematically untrustworthy, your brand is built on sand and the next scandal will threaten to wash you out of existence.

    Wish I'd said it as well.

    Regarding yesterday's "Kate's Take," one MNB user wrote:

    I thought Kate's Take was excellent today.  How do you actually monetize social media rather than just feeling good because you're in the game?  Well, one way is to leverage the speed and viral nature of it opportunistically (like during a Super Bowl blackout) to create positive spin and coverage that would have previously been impossible.  Free exposure, if you're alert and clever enough.

    On another subject, MNB user Lisa Malmarowski wrote:

    Regarding your piece about the People's Community Market - welcome to the 'We' society. It's not a coincidence that these types of business models are seeing a surge in our country. Community cooperatives are experience growth both in expansions and new stores that hasn't been seen in decades and it's part of of a larger trend - a move towards a more cooperative future and economic models where people share and not compete in the traditional sense. People want to be a part of something larger, they want to control where their goods and services come from and what better way than to pool their resources and build something that works for them and their community. It's a quiet revolution, but it's a revolution.

    Regarding Don Marsh's transgressions, one MNB user wrote:

    I was instantly reminded of Stew Leonard, Sr.'s infamous $17 million cash skimming scheme, which was certainly more extensive than Marsh's malfeasance in sheer dollar amounts, though I admit that the details of Don's misconduct make for somewhat sexier reading. Stew Sr. went up the river for more than four years, and Jr. escaped prosecution by the skin of his teeth when Sr. copped a plea. Just a day after the guilty plea, Stew Leonard's was dinged by Connecticut state officials for short weighting. Considering all the bad publicity Stew Leonard's got 20 years ago, it's something of a miracle that they survived.

    I have some familiarity with the Stew Leonard's situation because I've been shopping there for almost three decades - I recently estimated that I've spent more than $200,000 there over the years.

    I think that one of the reasons that Stew Leonard's has not just survived, but thrived and grown, is the guilty plea. There's an enormous difference between pleading guilty and filing a countersuit and going to court to defend what strike me as indefensible actions.

    I also know for a fact that Stew Leonard Sr., who I know a little bit, is very upfront about what he did - he never wants it to be the elephant in the room that nobody talks about. And I give him credit for that.

    It also helps that Stew Leonard's is a highly differentiated shopping experience. If it had been just another store, I'm not sure it would have survived.

    That said, I must concede that I remember watching a TV news story about Stew's tax evasion case with my son, who then must have been about 9-10 years old. Stew was on camera saying that he "made a mistake." My son looked up at me and said, "Dad, he didn't make a mistake. He did something wrong on purpose."

    I was very proud of him that day. (Still am, in fact.) And it needs to be pointed out that there is a difference between making a mistake and doing something wrong on purpose. There's also a difference between doing the time and continuing to greedily, unrepentantly work the system.
    KC's View: