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    Published on: March 5, 2013

    by Michael Sansolo

    Given the current pace of change and challenge we all face, it’s hard to think ahead to the challenges yet to come. But the simple truth is that change is coming and much of it could present major hurdles for any business.

    So better to get thinking about it now because the issues of the future promise to be as profound as anything we have today. And this is all without considering the impact of technology.

    Consider:

    In the past television rating sweeps for the first half of February, NBC managed to fall to fifth place when it came to attracting viewers in the prime demographic between 18 and 49. That can largely be blamed on less than compelling programming and the seasonal hiatus of NBC’s two biggest draws: "The Voice" and NFL football.

    Yet the bigger story is what network beat NBC. It’s old news that CBS, ABC and Fox led the field. The story is that Univision, a Spanish language network, defeated NBC and ran only slightly behind ABC.

    No matter how you might feel about this issue, the reality is that the burgeoning population of American Hispanics promises wide scale change in all parts of life. Whether it’s voting patterns or the types of products growing in use at supermarkets everywhere, Hispanic influence is growing and promises to grow more.

    Yet that’s not the only population change you need to consider. The Washington Post reportedly recently on the incredibly bleak outlook for Baby Boomers looking ahead to retirement. According to statistics in the Post, Boomers between age 55 and 64 have a median net worth of $120,000. Taken one step further, 53% of those in the Boom generation are considered at risk in retirement.

    The long-term drop in real estate values, the lack of company supplied pensions, combined with widespread economic issues and lack of savings. have left the Boomer generation looking at bust years ahead. To give you a sense of how that could impact buying power, if Boomers turn $120,000 into annuities to produce some measure of regular income, they are looking at less than $600 per month. (Remember, half of those in the study have less than that amount of money.)

    Put another way, to make ends meet Boomers need to go on a savings binge, plan on working well past typical retirement age or start paring back on their purchase decisions. None of that portends great economic news for the near future.

    Their economizing won’t be a solitary affair though. As the Christian Science Monitor, among others, reported recently, the US birthrate has fallen to historic lows. Here again economics are playing a huge role. The young adult population has also been hit hard by the economic conditions of the past five years. Even as the economy has improved, some problems haven’t disappeared. Those with college degrees are facing both a tough job hunt on top of daunting college debts.

    The result of that economic pressure is a steep decline in the birth rate, a problem long ago experienced in Western Europe and Japan, where in many areas retirees outnumber the young. The same pressures are blamed on the declining percentage of young people getting married and the continual rise in the average age of marriage.

    Taken one by one, each of these scenarios should be enough for companies to consider fresh strategies for the future. How can you better position yourself for the quick growing Hispanic market? How might the values of the once spendthrift Boomers change as they start hitting 65 in record numbers? How would a slowing of the American population impact change your customers and associates going forward?

    Incredibly, all three are happening together and not in a vacuum. Sure you’re busy, but the future keeps coming. Time to get thinking it seems.

    Michael Sansolo can be reached via email at msansolo@morningnewsbeat.com . His book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available by clicking here .
    KC's View:

    Published on: March 5, 2013

    by Kevin Coupe

    Since Michael Sansolo's column this morning uses the the falling fortunes of NBC and the rising ratings of Univision to illustrate the first of several demographic points, this morning's Eye-Opener will use a similar television metaphor to make a point about consumer decision-making.

    In his regular New York Times column yesterday, media writer David Carr writes about the success of "The Walking Dead," the zombie TV series that can be seen on AMC.

    "The Walking Dead" continues to outdraw many series on traditional networks. The zombies of 'The Walking Dead," Carr writes, "continue to gnaw on everything in their path, including the broadcast networks’ historical claim to being the only place to find a mass audience. Three weeks ago, the zombies owned Sunday night, attracting 7.7 million viewers in the 18 to 49 range, more than any broadcast show in the land."

    Carr continues: "It’s worth noting that the gap between basic cable and broadcast television has gradually shrunk as satellite and telecommunications companies have joined the fray. There are about 115 million television households in America, and some 99 million of them have access to AMC. On the networks, old franchises are tiring, new efforts are flopping in record time and a show like 'The Walking Dead,' whose audience grew slowly and steadily over three seasons, is just not in the playbook."

    (By the way, the Times has a piece this morning that follows this story to the next logical step. Because the traditional networks have found themselves to be vulnerable to programming seen in non-traditional venues, more non-traditional venues are now investing in original programming. These days, one can find content as easily on Netflix, Amazon, AOL, or YouTube as on ABC, NBC, CBS or Fox. And the thing is, to a large degree the traditional networks did not see the fresh competition coming, and have been in denial about the impact it could have on their businesses. Sounds familiar?)

    Here is the big point, made to Carr by Josh Sapan, CEO at AMC Networks, when talking about the ability of hot cable shows to surpass traditional broadcast network shows in terms of ratings and buzz. "It’s a big moment to those of us who are in the business,” he says, “but I don’t think the general public, especially young people, even think about where programming comes from.”

    Let me repeat the important part of that sentence:

    "I don’t think the general public, especially young people, even think about where programming comes from."

    Bingo.

    The public doesn't care what network a show is on. Doesn't care if it is produced by CBS or Netflix. Doesn't give a damn whether it watches a show on a television, a laptop screen, a tablet computer or a smartphone.

    Just as the public doesn't much care what store format they shop in, or whether it is a bricks-and-mortar unit or an e-commerce store.

    They just want the products they want. And are generally agnostic - and growing more so - about the company or service from which they source those items.

    That's the 2013 competitive environment, whether you are NBC or AMC, Walmart or Kroger or 7-Eleven or Amazon. Or any of the hundreds, perhaps even thousands, of options available to consumers.

    The smart companies keep looking for their differential advantages, exploiting them at every turn and always looking for the next new thing they can bring to an insatiable consumer class.

    The less smart ones ... well, they are so locked into format and traditional ways of thinking and doing business that they don't take risks, don't look for new ways to engage with the shopper.

    They run the risk of being a different kind of walking dead. You know...the kind with an obsolete business model, but without the self-awareness to realize it.
    KC's View:

    Published on: March 5, 2013

    Supervalu yesterday announced a series of executive changes in its various businesses, in advance of the expected closing on March 18 of its deal to sell five banners to Cerberus Capital Management. In addition to making new appointments, the company announced the departure of Kevin Holt, president, Supervalu Retail; Tim Lowe, executive vice president, merchandising; and Michael Moore, executive vice president and chief marketing officer.

    The changes include:

    • Mark Van Buskirk has been named executive vice president, merchandising and marketing for Supervalu, "where he will be responsible for overseeing companywide retail merchandising and marketing efforts, along with directing Supervalu’s private brand offerings and retail pharmacy teams." Van Buskirk is a 20-year kroger veteran, most recently as vice president, meat and seafood merchandising and procurement.

    • Rob Woseth, a 10-year Albertsons and Albertsons LLC veteran, has been named executive vice president, chief strategy officer, and will "focus on identifying strategic growth opportunities that support independent grocers, as well as working with banner leadership to build and maximize the company’s traditional and discount retail businesses."

    • Steve Fox has been named senior vice president, food merchandising; Fox spent 41 years with Kroger's Fred Meyer division.

    • Ritchie Casteel was named president/CEO of Save-A-Lot. the announcement notes that Casteel "has more than 40 years of experience in retail, including over 30 years in a variety of leadership positions with the original Albertsons Inc, where he finished his tenure as vice president of operations for Albertsons’ Intermountain West Division." Casteel succeeds Santiago Roces, who is leaving the company.

    Supervalu said in its official announcement that following the transaction, Supervalu will retain five regional retail banners, which will be run by the following executives:

    • Eric Hymas, most recently Supervalu's senior vice president of merchandising, has been named president of Shop 'N Save, succeeding Marlene Gebhard, who is leaving the company.

    • Bill Parker has been named president, Farm Fresh, after serving for the past seven months in the role of interim president.

    • Supervalu said that Brian Audette will continue as president of Cub Foods, Matt Leiseth will continue as president of Hornbacher’s, and Bob Bly will continue as president of Shoppers.

    "We have much work to do, both today and after the transaction closes," CEO Sam Duncan said in a prepared statement, "but I am pleased with the new leadership team we are assembling and know together we will work tirelessly to improve our business and increase shareholder value.  I am energized by what I have seen every day and believe this company will be successful going forward."
    KC's View:

    Published on: March 5, 2013

    CNN decided this week to find out if the class action lawsuit against Anheuser-Busch InBev - charging that it has been systematically watering down various beer brands as a way of saving money - has any validity. So, it conducted what it calls "an independent lab test of Budweiser and related brands."

    Here's the report:

    "Budweiser contained 4.94% alcohol by volume, compared with 5% stated on the label.
    Bud Light Lime possessed 4.13%, compared with 4.2% stated on the packaging.
    And Bud Ice showed 5.35%, compared with the label's 5.5%."

    Peter Kraemer, vice president of brewing and supply for Anheuser-Busch, tells CNN that the lab results confirm its contention that the accusations are groundless: "The sample test results you provided are well within the variability of the all-natural brewing process and all in full compliance with all alcohol labeling laws, as we noted."

    However, the plaintiffs' attorneys continue to insist that when broader tests are run and A-B's internal numbers are examined, it will prove, for example, that "a bottle of Budweiser has 4.7% alcohol instead of the label's 5% figure," and that when taken over a year of brewing, the difference could add up to millions of dollars in savings.
    KC's View:
    It seems likely that this story is going to drive us all to drink...

    Published on: March 5, 2013

    Wall Street Cheat Sheet has a story about Walmart's online sales efforts, noting that the retailer knows that to be really competitive with Amazon it needs to find a way to blunt the impact of the Amazon Marketplace, which allows third parties to sell products on Amazon's site.

    To be sure, Walmart has such an offering, with six independent merchants displaying their wares. But this is what the site calls "a tad shy" of the more than two million merchants with products on Amazon.

    Bill Simon, Walmart's US CEO, calls the Marketplace Amazon's "number one weapon."

    However, the story also notes that Walmart is implicitly resistant to giving too much power to third party merchants, because it sees them as competitors that could take business away from its core bricks-and-mortar retail business.
    KC's View:

    Published on: March 5, 2013

    Great little piece in the Baltimore Sun about one of that city's morticians, Erich March, who said that "he was tired of seeing people in his East Baltimore community die of conditions like diabetes and hypertension. He blamed the lack of grocery shopping choices in the neighborhood where he grew up and where his Aisquith Street funeral home is located."

    And so, March and his wife are opening a food store, the Apples & Oranges Fresh Market, which they say is not aimed at vegans or food faddists, but rather at regular people who are seeking healthier options. Apples & Oranges won't sell sugary drinks or tobacco products, he says, but will have a community space for food demonstrations and healthful cooking classes.

    The story notes that banks weren't willing to lend March money to get the venture started, but that once he got help from an organization called The Reinvestment Fund, which is active in Baltimore's inner city neighborhoods, the city and state followed suit.

    "It's a mission, an exciting mission," March said. "We've had nothing but encouragement."
    KC's View:

    Published on: March 5, 2013

    • In the UK, Marketing Week reports that "Tesco is set to roll out an at-checkout price matching scheme that compares prices and gives customers a voucher if shopping would have been cheaper at a rival."

    According to the story, the program has been piloted in Tesco's Northern Ireland stores, though the company is not confirming plans to extend it into its home market. Marketing Week also reports that the Tesco plan is similar to one offered by Sainsbury, though it also includes and compares private brands, and bears some resemblance to an Asda program, though it says the savings are more immediate.

    • Also in the UK, the Telegraph reports that Tesco "is preparing to launch two specialist ebook and music retail websites later this year, alongside the Blinkbox online movie store which it already owns ... The three Blinkbox retail sites will sit separately from Tescos’ main online store and will only carry subtle Tesco branding. However, the supermarket will advertise the sites heavily in store and use them to ensure that customers in search of specialist online sites for books, music, films and TV box sets continue buying from the Tesco empire instead of falling into the habit of shopping for entertainment products elsewhere. It will target the millions of customers who still haven’t started shopping online in a big way."
    KC's View:

    Published on: March 5, 2013

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

    • The New York Times reports this morning that the Hess Corporation has announced "a plan to sell off its retail and refining operations and focus primarily on oil production. The streamlining comes as it seeks to fight off an activist investor, the hedge fund Elliott Management, although Hess presented the new strategy as the culmination of a multiyear campaign."

    Reuters reports that Monster Beverage Corp. said yesterday that its doctors and lawyers have found no evidence that consumption of its energy drinks led to the death of a 14-year old Maryland girl.

    It made the comments as Monster "has come under fire from regulators and politicians. On Tuesday, a Chicago committee on health and environmental protection will discuss an official's proposal to limit the sale of energy drinks."

    The family of the teenager has sued Monster, saying that she died of cardiac arrest related to "caffeine toxicity" after she drank two Monster Energy drinks in a 24-hour period.

    The US Food and Drug Administration (FDA) also is looking into possible connections between energy drinks and several deaths.

    I am no fan of energy drinks. I have long said that they strike me as a disaster waiting to happen.

    That said, it is hard to believe that two Monsters in 24 hours could kill this girl. But I feel for the family, and am certainly willing to listen as they plead their case.

    I also am unimpressed by what Monster's doctors are saying. Call me a cynic, but time and experience have shown that when big companies are writing a check, you can get doctors and scientists to say pretty much anything.

    KC's View:

    Published on: March 5, 2013

    MNB yesterday took note of a Los Angeles Times story about how a number of airlines - ranging from United to Southwest - are introducing new fees as a way of bolstering their bottom lines. (Fees contributed $36 billion to airlines' balance sheets last year.)

    "Among the fees airlines have announced in the past few weeks are a charge to zip through airport screening gates and board early, a fee to watch streaming movies and a fee to have your bags delivered in  36 cities around the country," the Times writes.

    United is the airline said to be charging fees for early boarding, a privilege that used to be saved for frequent flyers and people paying for first class or business tickets, while Southwest is charging one fee for Wi-Fi access and another for people who want to stream movies onto their laptops or tablet computers.

    I commented:

    While these moves may be seen as positive in the short-term for airlines, the question that remains to be answered is whether, in the long-term, they are damaging airlines' value propositions and their relationships with frequent flyers. Privileges used to be earned, which resulted in passengers - like the character played by George Clooney in "Up In The Air" - being loyal so they could get preferred boarding/seating advantages.

    But now, in search of the short term buck, airlines are selling those advantages to the highest bidder. It remains to be seen whether they are really selling themselves short.


    Got a number of emails in response...MNB user Richard Boyd wrote:

    On a recent flight after the door was closed I asked if I could move to the exit aisle. I was told yes but it would cost as those seats were an upgrade. It wasn’t like I was asking to be put in first class so I stayed where I was…

    Because I have so many miles, I usually get those good seats for nothing. But I've always thought that it is short-sighted not to allow other folks to move up to empty premium seats. After all, the seats are empty ... and I think it is good customer service to give folks in the back a free upgrade. It costs nothing, it doesn't hurt me at all, nor does it make me feel less special. (And let's face it ... it is making me feel special that is what is really important here.)

    From another reader:

    Re: Southwest charging for boarding preference...

    Many years ago as I was in the short "frequent flyer" line at the airport a man in the adjacent long snaking line to the ticket counter loudly and publicly berated me for my special privilege.  My explanation that the airline extended this courtesy to me because I was one of their better customers did not resonate with him at all.  I think the pay for privilege model will garner even more resentment as it will be perceived as a class warfare issue - the 90% vs. the 10%.   However, as one who would probably never pay to board early I appreciate that the suckers who are willing to pay extra for that privilege are helping to keep my ticket price low.


    I always sort of feel bad when my status allows me to get through security faster, board the plane first, and then get better seats.

    But only sort of bad.

    There is a great line in Tom Stoppard's 'The Real Thing" in which one character explains rationally why the class system is not really a negative thing, which another character says only really works when you're saying it in first class.

    Which is true.

    But I've earned those privileges, damn it!

    MNB user Mark Boyer wrote:

    I was waiting to board a flight yesterday and observed another flight being boarded where they made every passenger with a roll-aboard prove that it would fit before boarding. Probably 8-10 wouldn’t fit in the device they use for sizing, and each had to check their bag at the gate and pay $25. So an additional $200-250 for the airline, but also 8-10 passengers who are now pissed.

    I’m not a big fan of passengers who try to bring everything they can on board, so while I applaud the airlines for stopping that, there must be a better way.


    MNB user Rich Heiland wrote:

    Let's connect dots on early boarding fees. United, and others, start charging for checked bags. So, more people take bags onto planes, which eats up overhead bag space. So, getting on board early becomes required to ensure you have a place for your bag. So now they start charging for early boarding, which devalues the frequent flyer perk. Have I got that about right?

    Sounds like it.

    And from another reader:

    Excellent points in your column this morning, as you are “right on”.  Airlines continue to diminish the value of being loyal, due to so many “perks’ being offered for sale to anyone who will pay for them.  The end result is that my loyalty is not as strong to one airline anymore, as it was in previous years of travel.

    Unfortunately, I still travel extensively.  In the past, I would do almost anything to fly my preferred airline.  However, nowadays, it takes less for me to consider (and buy) other flights on other airlines, due to the diminished value of being in the highest tier of my preferred airline’s frequent flyer programs.  Obviously this has cost my preferred airline revenue.


    And MNB user Glenn J. Rosati wrote:

    As a frequent flyer for more than 25 years who has earned, at one time or another, top level elite status on American and US Air (and on Continental and America West before they faded into memory), I have to admit to being put off by the airlines’  attempt  to “sell” these privileges. 

    As frequent flyers whose ticket prices are generally higher than the casual flyer, we bear the brunt of the cost to operate a plane.  And, as we are the most loyal source of revenue for the airlines, such privileges we earn are greatly appreciated.  I understand the airlines have a right and a duty to shareholders to maximize revenue and profit, but to lessen the value of an earned privilege is a blatant disregard for your best customer. 
     
    Loyalty works both ways; it’s round trip, not one way.


    Always.




    On another subject, a revealing email from MNB reader Jerome Schindler:

    I had a fraudulent practice complaint I wanted to send to the US Post Office Inspector General's office.  It is very difficult to find a mailing address for them - their preferred method for complaints is an e-mail form on their website.  Go figure!




    I've been saying that there must be a lab report in the hands of the plaintiffs that makes them confident about their lawsuit claiming that A-B is watering down its beer. Which prompted MNB user Matt Mroczek to write:

    Someone might have a lab report that A-B should be worried about, but that doesn’t mean the report is correct.  While I don’t know if A-B was selling less potent beer than labeled (after all, who would know?  It already tastes like water.) , I give them the benefit of the doubt.

    This story reminds me a lot of the lawsuit filed against Fred Meyer (the week before Thanksgiving 2004) alleging a conspiracy of many minuscule proportions: tare weights.  A math professor, from the university that I’m normally proud to have attended, weighed meat after purchasing it and compared it to the weights on the labels.  The problem with that unscientific (no control subject) study was that by the time the product was purchased, the meat had released liquid into the packing material.  This made the meat weigh less and the packaging way more than when the product was initially weighed and labeled.

    If A-B is found to have done no wrong here because of a flawed analysis or simple fraud, I might try choking down a six pack of ice cold Buds to help right a wrong.  However, like in the Fred Meyer case, we’ll probably never get finality on this issue because it won’t make for a sexy story and we’ll have moved on from horse meat and watered down beer to the next scandal about product adulteration.


    True.

    But let's keep one thing in mind. Stories about horse meat and watered down beer and whatever the next thing happens to be keep people like me in business. So I'd like to think there is a silver lining...




    And finally, this email from MNB user Karen Shunk:

    Your spotlight on how much technology has changed since 1969 reminded me of something a French professor once said about the Empress Eugénie of France; he noted that she was born in 1826 and died in 1920, and in his opinion her life spanned the period of the greatest technical innovations to date (I had this class around 1990).  He cited electric lights, air travel, telephones and the like as technological game changers, not to mention changes in manufacturing processes, etc. as the basis of his opinion.

    I wonder if later generations will say the same about us?  I really appreciate the fact that I ponder these things as a result of reading your newsletter.


    Then my work here is done. And will continue...
    KC's View:

    Published on: March 5, 2013

    by Kevin Coupe

    Have you heard yet about the saga of Khalil Edney?

    Edney is a senior at New Rochelle High School, in the suburbs of New York City. He's a star quarterback as well as a reserve for the school's varsity basketball team. The other day, despite a bum ankle, he found himself on the court during the final moments of a game against rival Mount Vernon High School. New Rochelle was losing 60-58.

    New Rochelle was driving toward the basket, but a Mount Vernon player intercepted a pass and the player, apparently believing the game was about to end, tossed the ball up in the air. Or tried to. But instead, the ball went to Edney, who had been following the play intently ... and when he got it, he immediately took the shot, despite the fact that the New Rochelle basket was almost an entire basketball court away.

    And it went in. New Rochelle won, 61-60, sending the team to the state regional semifinals and sending video images of that shot almost instantly to YouTube, where it quickly was seen by more than a million people.

    But this business lesson is not about the modern nature of instant communications, and how three seconds of a high school basketball game can turn into a national moment.

    Rather, it is about the importance of taking the shot, of playing every game until it is over. Remember what Yogi Berra said?

    Edney could have just walked off the court, dejected, in that final moment. He could have not followed the play, believing that his team had lost.

    But he stayed with it. Instinctively, he seemed to know that one has to take advantage of every opportunity, use every moment, exploit every advantage, and extend every possible effort if one is going to be a winner.

    Sometimes you win. Sometimes you lose. Sometimes it rains.

    But there's never any excuse for not playing every moment, and playing to win.

    It is a great business lesson, compliments of a 17-year old high school student.

    KC's View: