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    Published on: April 26, 2013

    by Kevin Coupe

    PORTLAND, Ore. - I am in the city that I like to think of as my home away from home, and I spent a few hours last night in a Retailing class taught by Matt Mroczek at Portland State University. I'm here for other business, but Matt was kind enough to take me up on my offer to teach the class for a few hours.

    I've said it before, but it is worth saying again. There are few things so energizing and cheering as a couple of hours spent with college students. We essentially talked about stories and commentaries that have appeared on MNB and elsewhere - about subject ranging from GMO labeling to Amazon's grocery business, how Netflix is changing its business model to respond to changing consumer behavior to Tesco's virtual store experiment - for two solid hours. I found the students to be probing, insightful, funny, passionate and highly engaged.

    It was an Eye-Opener. Which is exactly what I find every time I come to PSU.

    (To be fair, this is generally what I find whenever I teach at schools that include USC, Western Michigan University, and Cornell University. I am cheered when I meet college students; I generally walk away thinking that the world is in pretty good hands. I'm writing in this space about PSU because it is where I happen to be ... and because PSU has adopted me, to some extent. Or maybe it is me who has adopted PSU, and Tom Gillpatrick, and his terrific program...)

    I'll be back here in Portland in a week or so for PSU's annual food retailing conference, and I can't wait. As always, it will be a mix of students and industry professionals, and the sessions should be fascinating. (I'll be doing two of them, one on the demands and challenges of local sourcing, and another entitled "Everything You Need To Know About Your Next Job But Were Afraid To Ask," which will look at the shifting demands of the job market in the 21st century.)

    If you are anywhere in the vicinity of Portland, Oregon on Monday, May 6, I hope you'll join us at PSU for what I think will be an entertaining and engaging afternoon and evening ... I always find that I may show up in the role of "teacher," but I end up learning an enormous amount.
    KC's View:

    Published on: April 26, 2013

    USA Todayreports that "the Food and Drug Administration will conduct fewer food safety inspections this year because of the government sequester," according to FDA commissioner Margaret Hamburg.

    According to the story, "While consumers may not feel the impact immediately, the loss of $209 million from its budget will force the agency to conduct about 2,100 fewer inspections, an 18% decline compared to last year. The funding loss, part of the $85 billion in automatic budget cuts that took effect March 1, will also delay the agency's implementation of the 2011 Food Safety Modernization Act."

    Two additional excerpts:

    • "The FDA will prioritize programs that have the greatest effect on public health, including disease outbreaks, she said. Hamburg does not expect to furlough workers. One in six Americans, or 48 million people, develop a food-borne illness each year, according to the Centers for Disease Control and Prevention. About 3,000 die, and 128,000 are hospitalized."

    • "The FDA is already facing sharp criticism, and even legal action, for being slow to implement the food safety law. The law aimed to refocus the FDA's efforts on prevention, rather than responding to crises."
    KC's View:
    Smart people who know far more about this stuff than I do seem to be relatively unconcerned about this. I'm willing to accept their judgement until the facts contradict them.

    That said, it is interesting that Congress isn't moving to deal with the FDA's assertions, but is moving to address flight delays because of sequestration and airport furloughs. Y'know why? Because the people stuck on the tarmac are rich people who write campaign checks.

    Published on: April 26, 2013

    ABC News reports that Associated Wholesale Grocers (AWG) has filed a lawsuit in US District Court claiming that "America's potato producers have conspired to fix spud prices in the $25 billion a year industry ... The grocers allege that potato growers in 12 states, controlling 80 percent of total U.S. potato acreage, have engaged in a conspiracy to fix prices--using OPEC as their model. That makes everyone's French fries, hash browns and mash more expensive, driving up the prices on many more potato-associated products."

    The complaint says that the "cartel" was formed in 2003, and that the grocers charge that "growers and shippers used both pre-harvest and post-harvest methods to control and reduce the supply of taters, to raise and stabilize prices. Their methods included a deliberate reduction of potato acreage, destruction of potato inventory, and a limitation of the number of potatoes available for sale, the result being a 'dramatic increase in the prices of potatoes'."

    The United Potato Growers of America (UPGA) responded with this statement: "United Potato Grower's goal has been to help growers provide quality potatoes at reasonable prices to American consumers. We have always acted openly and within the bounds of the law. We are confident in our legal position and look forward to a favorable outcome in court."
    KC's View:

    KC's View: I'm not a lawyer or an antitrust expert, so I can't make an informed comment about this suit. But I rarely let things like that stop me ...

    It seems to me that the potato growers better have a really good defense, because the AWG complaint seems pretty persuasive. If they've got evidence, the potato folks may have some trouble on their hands.

    One person's "reasonable prices" may be another's "fixed prices." The question will be where the judge comes down.

    Published on: April 26, 2013

    Hedge fund billionaire George Soros said yesterday that he has acquired a 7.9 percent stake in embattled retailer JC Penney, buying 17.4 million shares of the company - a move that sent JCP's shares up seven percent in after hours trading.

    Soros is now the fourth largest investor in the company. The investment is said to be "passive," meaning that he has no intention of influencing the company's operations.

    JC Penney has had more than its share of problems in recent years - the company hired Ron Johnson of the Apple Store to revamp and re-energize the stores, and when that did not work fast enough, it fired Johnson and rehired the man he replaced, Myron E. Ullman III.
    KC's View:
    I guess it is a passive investment because Soros is too busy trying to collapse the US economy and create a new world order. Even he would have a hard time doing that and helping to save JCP. (And fixing JCP is a much, much harder job...)

    Published on: April 26, 2013

    The US Senate reportedly reached an agreement to delay any vote on empowering states to force online retailers to collect sales taxes. The reason?

    Well, for one thing, they are going on vacation.

    A vote on the bill is now scheduled for May 6.

    Fox News reports that "a handful of senators from states without sales taxes were blocking the bill, which has widespread bipartisan support in the Senate."
    KC's View:
    I have tremendous respect for anyone who runs for public office, regardless of whether I agree with them. But I am really getting tired of hearing about how the Senate and the House of Representatives are in recess.

    Recess? Really?

    It ought to be like elementary school. You only get to go to recess if you get your work done and play well with others.

    Published on: April 26, 2013

    Netflix CEO Reed Hastings, fresh off a strong earnings report and creative successes like "House of Cards," has posted an 11-page essay on the Netflix investor website, in which he reiterates some of his core beliefs.

    "We compete very broadly for a share of members’ time and spending," he writes. "Over the coming years, most other forms of entertainment will improve. Consumers will choose and consume from multiple options. Generally, cable and Internet networks have mostly exclusive content against each other. Piracy and pay-per-view are the only two competitors that can have a nearly full set of content.

    "We call competitors for entertainment time and spending that do not bid against us for content (such as video game providers, sports networks and piracy) 'competitors-for-time'. We call the narrower set of firms that do bid against us for content 'competitors-for-content'."

    Hastings makes the point that to be successful, Netflix has to compete in both arenas - that it has to define "competition" in the broadest possible way, because to ignore anyone or anything as competition is to open a door and allow them to compete on their own terms. (Which essentially what Netflix has done, allowing the company to reach the point where it now has more US subscribers than HBO.)
    KC's View:
    That's a lesson that every competitor need to keep in mind.

    I am, by the way, sort of reassured by this other passage from the manifesto...

    "If we could look decades into the future at the ways that people access entertainment, we would no doubt see a very different image than we see today - mind-blowing video quality, a proliferation of screens, yet unimagined natural user interface, and an unbelievable range of  choice.

    "But if we were to turn instead and look at the person watching that screen, we believe we would observe a number of similarities across generations. We'd see someone who is getting a moment to escape into a story - to simply relax and enjoy one of life's real pleasures with their friends and family.

    "People love TV shows & movies. We love being the best possible place to enjoy them. Ours is an amazing opportunity to grow, innovate and lead for several decades. We know we will have great competition along the way, and we embrace the challenge."

    It is all about good stories. In the end, I think that's what really made "House of Cards" so successful - it was a ripping good yarn.

    Published on: April 26, 2013

    • Walmart is circulating a memo saying that it is expanding a program that it says allows employees greater opportunities within the company.

    According to the memo, "Walmart is fulfilling a commitment its U.S. President and CEO Bill Simon made in January to bring more transparency to its scheduling and allow associates to choose more hours for themselves.

    "Walmart is piloting the program in Denver and Fort Smith, Ark., to provide associates with transparent and consistent information on available shifts throughout the store and give them the opportunity to request to work any of those shifts.

    "Associates now have more transparency into available shifts outside of their department: For example, a bakery or deli associate can now request to work an available shift in electronics or the lawn and garden area and vice versa.

    "This program is showing value beyond filing available shifts. It’s providing associates the opportunity to help build their careers by learning about different departments, which helps strengthen our stores and benefit associates and our customers. We want every associate to find the career opportunities they want while at Walmart."

    Walmart says that the pilot program, "which began Feb. 1, is scheduled to expand to more stores in July and roll out to the company’s more than 4,000 stores by the end of October."
    KC's View:

    Published on: April 26, 2013

    The Wall Street Journal reports on how, following a disappointing first quarter performance, IBM CEO "Virginia Rometty delivered a rare company-wide reprimand telling employees to move faster and respond more quickly to customers." The comments came in a video that was distributed to every company employee, in which she made the following points:

    • "Where we haven't transformed rapidly enough, we struggled. We have to step up with that and deal with that—and that is on all levels."

    • "If a client has a request, a requirement, a question, an expectation, respond in 24 hours."

    • "And if anything slows you down, call it out. Engage management, engage leadership and let's deal with it."

    • "The wonderful news is our strategy is the right one. Our fundamentals are strong and our future is in our own hands."

    • "I know we will confront this honestly and with urgency, and moments like this are when IBMers rise to the occasion. We don't retreat; we go on the offense."
    KC's View:
    I thought this worth noting because some of the comments she makes cut across channels and industries - the importance of speed, the need for total engagement, the requirement that offense is where you move the ball (as opposed to defense, which is where you stop the other guy from moving the ball).

    Published on: April 26, 2013 has a story estimating that "US retail ecommerce sales will total $259 billion, a 14.8% annual increase over 2012’s $225.5 billion.

    The story goes on to note that "computer and consumer electronics, as well as apparel and accessories, account for the bulk of US retail ecommerce sales. Combined, they will contribute 42.9% of total retail ecommerce sales in 2013, rising to 45.6% by 2016. At the other end of the spectrum, large retail categories like auto and parts, as well as food and beverage, have disproportionately low sales online, indicating a lot of room for ecommerce growth."
    KC's View:

    Published on: April 26, 2013

    • In Florida, the Sun Sentinel reports that Walmart " is intent on grabbing a bigger piece of the grocery business. The retail giant is opening and expanding stores throughout South Florida neighborhoods, often just around the corner from Publix stores.

    "It's all part of an aggressive two-year growth plan that Walmart kicked off last year. Walmart wants to get bigger and Publix stands in the way. They have attacked Publix directly in television commercials touting lower prices , and Publix has fired back with ads of their own disputing Walmart's claims."

    • Weis Markets announced it would invest $135 million in its 2013 capital expenditure program, an 8 percent increase compared to the year prior. In 2013, the company is planning 37 major projects including four new stores, 15 major remodels and 17 remodels.
    KC's View:

    Published on: April 26, 2013

    • The Seattle Times reports that yesterday "said its first-quarter sales rose 22 percent, a rate of growth matched by its spending, and the company’s profit plunged 37 percent from a year ago.

    Amazon posted Q1 sales of $16.07 billion, and a profit of $82 million.

    Amazon's spending has focused onKindle devices, distribution centers around the country, and licensing agreements for its video streaming business.

    • The Associated Press reports that "Coinstar's first-quarter earnings plunged 58 percent amid signs that its Redbox kiosks for DVD rentals are losing their appeal as more people switch to Netflix and other Internet video services."

    Coinstar earned $22.6 million, down from $53.7 million during the same period a year ago. Revenue was up one 1 percent from last year to $575 million.
    KC's View:

    Published on: April 26, 2013

    Got several emails responding to yesterday's piece about Mickey Drexler's rules for corporate creativity.

    MNB user Chuck Jolley wrote:

    I have three rules that tell me when a company is doomed to failure.  They usually work.

    • Check their web site.  Is it led by copy about corporate governance or investment opportunities?  They are ego driven and not concentrating on building a good product or service.

    • Are the top "C" level officers people with a financial background?  The company will spend too much time trying to drive costs out of the system and not enough time building a good product or service.  Bean counter should count the beans, not make product or marketing decisions.

    • Do they have someone or (worse) a department devoted to 'risk management'?  The company is absolutely protecting its status quo and it will be killed off by when another company reinvents the market.

    MNB user Pat Patterson wrote:

    After reading your Mickey Drexler piece I am struck by a singular thought.  That thought being Drexler is successful at building a business and doing so with concepts that have been around for years.  A good idea is a good idea regardless of its age.  Military folks would not still be studying Sun Tzu's The Art of War from about 500 BC if it weren't so.  The whole concept of store site analysis is based on work done in 1931.

    To address a couple of the ancient management thoughts presented in the past used by Drexler:

    Companies Are In The Stone Age Organizationally - in 1970 Robert Townsend authored Up The Organization offering the concept of trying to call yourself from the outside to see how many layers you have to go through just to reach your desk.  How many hoops has the organization placed between you and the "doers" in the company.

    You Can Drown in Data - in the middle 70's I attended a retail seminar in Columbus, Ohio presented by a think tank style research firm.  There were several hundred of us at the opening session and one of the Ph.D. type presenters told us there are X number of phones in the lobby.  When we break for coffee there will be lines at every one of those phones, people calling to get the latest numbers.  His posed question was what are you going to do from several hundred miles away to make a significant change in a days worth of activity.  Sure enough, at break they were five deep. The point is that unless there will be an action it is a waste of time to stay that current.

    There is always room for new ideas, but that doesn't mean we should forget proven axioms that have proven themselves historically time after time.  Along the way it appears that Mickey Drexler picked up on that idea and has blended new and old.

    Regarding Wakefern's $1 million gift to St. Joseph's University, MNB user Glenn Cantor wrote:

    As anyone who lives in a market served by a Shop Rite store will attest, Wakefern’s Shop Rite stores are far and away the best supermarkets in their neighborhoods.  Wakefern’s commitment to The Academy of Food Marketing at St. Joseph’s University, in Philly, validates the forward-thinking training that dozens of their current leaders have received from this school.  One of the reasons for Wakefern/Shop Rite’s continued meteoric growth is their dedication to progressive training for young managers.  Wakefern is always out front of every advancement in the food industry, including “Shop Rite from Home,” shopper loyalty marketing, and community involvement.

    If appropriate for this space, recognition should be given to Richard George and John Stanton, two food industry professionals who have dedicated their lives to educating future leaders in our industry.  Rich and John’s classes were always the best in the program because they challenge students to move from their comfort zone and explore new ways to “delight” shoppers.  The thinking they instilled remains with me.
    Thank-you, Wakefern, for your commitment to progressive education of the leaders of our industry.

    But Steve Kneepkens wrote:

    Wakefern: An amazing gift, and the kind of donation that will not be forgotten; it will resonate in the lives of young people for many years to come.

    But you could not give Walmart credit without some snarky / cocky remark. Sitting on the judgment thrown is a tough place to reside.

    Also – if people are going to write in and comment – PUT YOR NAME ON IT.

    Life is about ownership. If you want to speak do it in the light – not in the dark. Take responsibility.

    Like I said the other day ... snarky is what I do. Not all the time, but often.

    As for people who do not put their names on their emails, while I get your point, I firmly support people's right not to have their opinions attributed. I decided 11 years ago that anonymity sometimes would have to be protected if that meant we could have a more robust dialogue.

    Since I think, immodestly, that MNB has the most robust and differentiated ongoing conversations around, I think I'm going to stick with that. (And as I've said before, sometimes I will take people's names off their emails if I think their opinions might get them fired. That wouldn't do them any good, and it doesn't do me any good. We're all in this together.)

    Yesterday, MNB took note of a New York Times report that the Securities and Exchange Commission (SEC) has been "flooded" with calls to propose new disclosure rules that would "require publicly traded corporations to disclose to shareholders all of their political donations, a move that could transform the growing world of secret campaign spending."

    There's a lot of debate about this.

    I commented:

    For a moment, let's forget the politics of this. And trust me, this has the potential to turn into a partisan hairball.

    I cannot help but think that the people and organizations that do not want this information divulged, and do not want regulations that require that such information be made available, are deluding themselves. These days, the internet makes pretty much everything knowable and findable. And what cannot be found on the internet inevitably gets revealed by people within organizations who have a problem with certain political positions and financial contributions.

    To try to prevent such information from being made public is to fight the last war. It doesn't make sense. People should look at this potential regulation and see it as an opportunity to be up-front and transparent with investors, rather than as an obstacle to be avoided or overcome.

    That all said, I have to admit that I think that such information should be public, regardless of whether the SEC mandates it or not. My feeling is that there are certain companies in which I will not invest, just as there are some companies that I will not patronize because of positions they have taken. It ought not be permissible to obfuscate such information from the people who are thinking about investing their money in such companies.

    One MNB user responded:

    Only if the unions are under the same rules of disclosure.

    Absolutely. I have no problem with that.

    Another MNB user wrote:

    I don't think it's tenable to "forget the politics of this" [proposed SEC regs that would require full disclosure of publicly traded companies' political donations] because, at the root of it all, I think this drive is about nothing but politics.  Nominally, a proponent of this sort of regulation could say that they're only looking out for current & potential future investors' interests, but that strikes me as barely believable.  Rather, this drive seems more likely motivated by a desire to put a visible target on certain companies' chests so they can be (further) demonized in the press and elsewhere.  Interesting, in fact, that this drive was conceived so as to apply solely to publicly traded companies, overseen to whatever extent by the SEC which would enforce the rule, which conveniently excludes other major power entities like labor unions and trial lawyers, just to name two.  Why?  Is there somehow less public interest in the political leanings of those groups than there is in same for publicly traded corporations?  Don't know why there would be.  Fair's fair.  Or at least, it ought to be.

    I firmly believe that publicly traded companies, unions, trade associations - in fact, any organization that takes in money from members or investors - ought to be required to make their political donations public. All of them.

    We have a political system that is being corrupted by the corrosive power of money. One of the ways you can deal with that is to make everything as transparent as possible. If I am an investor, or a union member, or a member of any association, I'd want to know how they are distributing my money to exercise political power.

    If I largely agree with their decisions, I'll stick with them. But if I don't, I may consider moving my money and support elsewhere.

    But I am really sick and tired of people telling me that there are things I don't need to know, usually because they have a rooting interest in me not knowing.
    KC's View:

    Published on: April 26, 2013

    If you don't come from the New York metropolitan area, the name Mike McAlary may not be familiar to you. Sure, he won a Pulitzer Prize for his columns about the Abner Louima case (another reference that may escape you - he was a Haitian immigrant who was the victim of police brutality). But McAlary was more than just a columnist. He was a New York tabloid columnist, which is something very specific, following in the footsteps of people like Jimmy Breslin. He wrote during the great tabloid wars of the eighties and nineties, when the New York Daily News, New York Post and New York Newsday fought tooth and nail and noun and verb and especially adjective and adverb for every reader.

    I tell you about Mike McAlary because he is the subject of new play: "Lucky Guy," the last plan written by the great Nora Ephron before she died about a year ago. "Lucky Guy" is on Broadway now, starring Tom Hanks in his first Broadway play, and I am here to tell you that when we saw it a week ago, we had an exhilarating time. "Lucky Guy" is sort of a "Front Page" for the late 20th century, and succeeds in being a funny, sometimes scathing, and frankly adoring look at the New York newspaper business in the days just before the internet started to change everything.

    I say "frankly adoring" because Nora Ephron started her career working for the Post, and she is passionate about the genre, even as she shows the flaws of the men (and very few women) who drove the tabloids to new heights and lows. McAlary was a mass of contradictions - he loved police reporting and he wanted to be almost as good as Breslin, and yet his ego drove him to make enormous professional and personal missteps. In this, Ephron is indeed lucky to have Hanks as the lead in "Lucky Guy" - he's so likable that he allows you to see past the clear character flaws. And he's a stage natural. (I'm going to say it right here - someone should cast Hanks as Willy Loman in "Death of a Salesman." I'd be willing to bet that he'd be wonderful. And I'd buy that ticket right now.)

    If you find yourself in New York between now and July, try to get a ticket to "Lucky Guy." You'll be glad you did.

    Speaking of Nora Ephron...

    There was a piece in the New York Times the other day that I found enormously affecting, writing about how some writers deal with the final days and weeks and months of their lives.

    Noting that Ephron was diagnosed with a rare and fatal blood disorder, the story says that "the existential sniper’s bullet, aimed at her, was no longer spiraling in slow motion. She decided to sprint toward her final deadline. In her last six years she wrote two books, two plays and 100 blog posts, and directed a movie.

    "Roger Ebert, the beloved film critic who died from cancer earlier this month, raced death to the finish line, too. He delivered more than 300 film reviews and many other bits of writing in his last full year on earth. Christopher Hitchens went out the same way, essentially dying at his laptop, churning out essays, reviews, introductions and 'Mortality,' a last book.

    "One begins to wonder: Has it become obligatory for people with terminal illnesses to work like dogs during their final months or years? Is this how we define a 'good death' now? Is one a slacker to perform otherwise? Is this kind of determination healthy for sick people? Is it healthy for anyone?"

    I'd recommend that you read the whole piece, which you can see here.

    I was reminded, when reading it, that Robert B. Parker, who apparently suffered from heart disease, died at his computer, working on a novel.

    And I was glad to see that the story does not criticize these people for focusing on work when death comes calling. it isn't like they ignored their families and friends - people like Ebert and Ephron and Parker, from all reports, had happy and robust marriages, families they loved, and private lives that were full and rewarding.

    But they were lucky enough to have work that they also found to be fulfilling, that was intrinsic to who they were. And so working to the end was like challenging death, sort of like saying, "I will be who I am until my last breath, and create work that, hopefully, will survive me."

    I think that's important. And I just thought I'd share the piece with you.

    The Company You Keep is a new movie directed by and starring Robert Redford as a former sixties radical living under an assumed name, who is forced to go on the run when the fBI starts to close in on him. Redford's character isn;t running because he's guilty of the bank robbery with which he is charged; rather, he is trying to clear his name, which forces him to seek out and visit a series of aging, former revolutionaries with whom he shares a radical past.

    The cast is terrific - Susan Sarandon, Julie Christie, Nick Nolte, Chris Cooper, Stanley Tucci, Richard Jenkins, Brendan Gleeson, Shia LaBeouf, Anna Kendrick and Sam Elliott all manage to create rounded characters, even though most of them have just a few minutes of screen time. And it is wonderful to see some of these folks onscreen - many of them are the movie stars of my youth, and it is great fun to see them working and as vital as ever.

    The movie has some plot holes one could drive a truck through, but the cast and Redford's steady directorial hand keep it from going off the rails. you don't get flash with Redford - he is a linear director who believes in taking his time. There are no fast cuts, no fancy editing, and he likes to let shots play out, believing that truth can be found in the quiet moments.

    I'll also say this. The people who have said that The Company You Keep is a way of justifying the violent revolutionaries of the sixties are nuts. In fact, the movie has a kind of sadness about it, about lives unfilled, of bad choices made, and about how, in the end, love is more important than war. Any kind of war.

    I have two wines and a beer to recommend this week.

    The beer, appropriately enough considering my movie review, is Flower Power IPA from the Ithaca Beer Co., a big body beer that is really, really good.

    And the wines are a couple of whites that are bright and thirst quenching and perfect with pasta and seafood ... the 2011 Basilicata Re Manfredi Bianco ... and the 2011 Mar de Vinas Albarino.


    By the way, can I say something here that is entirely self-congratulatory?

    This week, Michael Sansolo wrote about his USA Today experience. Last week, Kate McMahon wrote about Roger Ebert, based on when she served as his editor. And I should point out here that Kate was at the Daily News when McAlary was.

    And I am just so lucky to have people like Michael and Kate writing for MNB, because they bring a depth of experience and insight that you can't get in other places. I am so much better for being in their company.

    That's it for this week. Have a great weekend, and I'll see you on Monday.

    KC's View: