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    Published on: May 29, 2013

    by Kate McMahon

    "Kate's Take" is brought to you by Wholesome Sweeteners, Making The World a Sweeter Place.

    A shocking racist rant by a Papa John’s deliveryman, and the company CEO’s immediate response, illustrate once again the lightning quick speed and power of social media.

    Papa John’s founder and chairman John Schnatter took to Facebook and Twitter Monday after firing the two employees involved and personally apologizing to the maligned customer in Sanford, Fla.

    The Papa John’s delivery person “butt dialed” the customer after the delivery and inadvertently left a voicemail message laced with reprehensible racist slurs and complaints about his $5 tip on a $15.26 check. Another Papa John’s employee is heard laughing during the four-minute tirade, which includes a hackneyed song substituting the “N-word” for Figaro from the famed aria from the opera “The Barber of Seville.”

    The customer posted the offensive voicemail on YouTube, including video confirmation of the telephone number and his receipt. “This is highly offensive, derogatory, and ignorant,” he said. “As an African-American in this community and also someone who has always tipped their Delivery Drivers 21%+, I am disgusted entirely by this conversation. Instead of focusing on ‘better ingredients’ and ‘better pizza,’ they should prioritize ‘better integrity’ and ‘better people’ on the top of their ‘to-do list.’ “

    The video ended with a shot of the Papa John's pizza box with CEO Schnatter's face on it. It went viral with more than 500,000 views by last night. It also comes at a time of heightened racial tension in Sanford, where neighborhood watch captain George Zimmerman awaits trial on charges he fatally shot unarmed African-American teenager Trayvon Martin last year.

    Schnatter, who founded Papa John’s in 1984, responded immediately. "Friends, I am extremely concerned to learn about the reprehensible language used by two former employees in one of our restaurants," the Facebook post stated. "Their thinking and actions defy both my personal and the company's values, and everything for which this company stands.”

    The overwhelming majority of the comments on Facebook were supportive of Schnatter’s apology. But, this is not the first public relations black eye for Papa John’s, the third largest pizza delivery chain in the nation. Earlier this month, a Papa John’s deliveryman was accused of selling more than $45,000 in cocaine, hidden among pizza boxes, to undercover agents in New York. And back in January 2012, a customer was described on a paper receipt as "Lady Chink Eyes" by a Papa John's employee in New York City, which was then sent out on Twitter.

    Schnatter also found himself on the defensive last year over his comments about the price tag of the Affordable Care Act, which were referenced in many Facebook posts.

    What remains to be seen is how long this incident will play out on Facebook, YouTube and Twitter, whether Schnatter’s apology is sufficient and if it will have an impact on sales or a franchise’s standing in a community.

    In the end, the buck stops with founder/CEO Schnatter. He literally is the face of the company with his picture on the pizza box. Every black eye the brand gets is one that he wears as well.


    Comments? Send me an email at kate@morningnewsbeat.com .
    KC's View:

    Published on: May 29, 2013

    Delhaize Group announced yesterday that it will sell its Sweetbay, Harveys and Reid's supermarket chains to Bi-Lo Holdings for $265 million in cash.

    Bi-Lo is the parent company to both the Bi-Lo and Winn-Dixie chains.

    According to the announcement, "Subject to regulatory review and approval, Bi-Lo Holdings will acquire 72 Sweetbay stores, plus leases for 10 prior Sweetbay locations, 72 Harveys stores and 11 Reid’s stores, totaling 165 stores with approximately 10,000 employees throughout the southeastern United States."

    Randall Onstead, president/CEO of Bi-Lo Holdings, said in a prepared statement that the deal would allow the company would strengthen the company's penetration in the geographic areas where the company already operates.

    According to the Reuters coverage, "Delhaize will retain its largest U.S. business, Food Lion, with more than 1,000 stores in the southeast and mid-Atlantic states as well as its smaller Bottom Dollar and up-market northeastern Hannaford chains ... Chief Executive Pierre-Oliver Beckers, who is set to retire at the end of the year, said the deal would help to simplify its U.S. operations and focus its efforts and money on its remaining businesses there."

    The transaction is anticipated to close in the fourth quarter of 2013.
    KC's View:
    Yikes. That happened fast. It was just a few days ago that the reports came out that Delhaize was considering a sale of the chains. (Though I'm sure the strategic decision-making and negotiations have been going on for months.)

    Assuming this deal goes through, there are a couple of things we know about it. We know that it will make Delhaize America smaller, and will make Bi-Lo Holdings bigger.

    But we don't really know whether it will make either entity stronger over the long-term.

    Both companies still are facing tough competition, shifting demographics, and a marketplace that only gets more crowded. Delhaize clearly believes it can be more competitive getting smaller and more focused, while Bi-Lo thinks the key is being bigger and more spread out.

    To be honest, I have no clue which approach makes the most sense. Though I'd be willing to bet that there will be compelling arguments for and against both positions.

    In the end, both companies have to persuade people to change their ingrained shopping habits ... to stop going to Harris Teeter or Publix or Walmart or Amazon or whatever. Which means that in the end, both companies have to be more efficient, more effective, more persuasive, more nimble, and more relevant - and that means more than they are now, and more than the competition.

    Published on: May 29, 2013

    The Associated Press reports that Walmart has admitted its guilt in a criminal case that charged it with "improperly disposing of fertilizer, pesticides and other hazardous products that were pulled from stores in California and Missouri because of damaged packaging and other problems." Walmart will pay an $81.6 million fine.

    According to the story, "The retail giant entered the plea in federal court in San Francisco to misdemeanor counts of violating the Clean Water Act and another environmental law regulating pesticides. The fine also settled Environmental Protection Agency allegations.

    "In Kansas City, Mo., the company pleaded guilty to improperly handling pesticides.
    The plea agreements ended a nearly decade-old investigation involving more than 20 prosecutors and 32 environmental groups that has cost Wal-Mart a total of $110 million."
    KC's View:
    I don't mean to be cynical here, but when I saw this story the thing that really surprised me was the guilty plea. Because these things usually get settled by the company in question writing a big check but not admitting any guilt. (The same way that when people get fired or resign, they say they want to spend more time with their families ... which ignores the question of whether their families really want to spend more time with them.)

    Not this time.

    Published on: May 29, 2013

    USA Today reports this morning on a new Pew Research Center study saying that four out of 10 US households with children have what are called "breadwinner moms" - defined as "the sole or primary source of income for households with children younger than 18."

    In 1960, that number was 11 percent.

    According to the story, "These moms include two groups: 5.1 million (37%) are married mothers who have a higher income than their husbands, and 8.6 million (63%) are single mothers. The median family income for the first group was $79,800 in 2011, compared with $23,000 for the single mothers.

    "The growth of breadwinner moms is tied to women's increased employment rate and rising education levels ... In the new survey, 28% say they agree it is generally better for a marriage if a husband earns more than his wife. In 1997, 40% said so."

    The story goes on to say that "the public has mixed feelings about women working for pay outside the home, according to a Pew Research Center survey of 1,003 U.S. adults in April. About 67% say it has made it easier for families to earn enough to live comfortably. About 50% say it makes it harder for marriages to be successful; about 74% say it makes it harder for parents to raise children."
    KC's View:
    While the survey doesn't go into this, it is a pretty good bet that while more families may depend on breadwinner moms, many of whom are earning more than their spouses, those same moms may not be earning as much as their male counterparts at work in identical or comparable jobs. If women are taking on a great earning role, in part it is because men got hit harder by the recession, and many companies upped the number of women they were hiring or keeping simply because they could pay them less. Which is a shame.

    I have to admit that it is amazing to me that there are still 28 percent of people who think that it is a better for a marriage if men are the breadwinners in a relationship, and that half of Americans think that marriages are threatened by female breadwinners, and that three-quarters of Americans think that breadwinner moms make it harder to raise children.

    I sure hope that in coming generations, these numbers change. Because I've always felt that my marriage and family are best served by being able to love our children, feed them, house them, clothe them, and raise them in a climate of mutual respect and tolerance. At the end of the day, it doesn't really matter who contributes most to the bank account, or which one of us shows up for parents' night at school, or coaches the little league team, or cooks the meals or reads to the kids at night. (At various times, we've both done each of these things.)

    But sometimes things change more slowly than they should. Take, for example, that bozo billionaire, Paul Tudor Jones, who told an audience at the University of Virginia recently that, as National Public Radio put it, "motherhood causes women to lose the necessary focus to be successful traders," because they lose their desire, focus and mental capacities once they give birth and begin breast feeding.

    "As soon as that baby's lips touched that girl's bosom, forget it," he said, adding, "Every single investment idea ... every desire to understand what is going to make this go up or go down is going to be overwhelmed by the most beautiful experience ... which a man will never share, about a mode of connection between that mother and that baby ... And I've just seen it happen over and over."

    I find those remarks to be incredibly offensive, and reflective of a sensibility that has not kept pace with the times. I can only imagine how the thousands of female traders in the financial services industry feel about it. And I would hope that my daughter would be outraged by them.

    C'mon, man! This is the 21st century. Guys have to get over their own egos and realize that testicles only make them better at one thing. (Maybe two.)

    To be fair, Jones has since apologized for his remarks, saying that they were "off the cuff" and not reflective of his real feelings: "Much of my adult life has been spent fighting for equal opportunity, and the idea that I would support limiting opportunity for any segment of society, particularly women, is antithetical to who I am and what I have done," he said. "My remarks offended, and I am sorry."

    Better late than never. (Though I have to wonder if he is sorry he said it, or sorry he got caught saying it.)

    Published on: May 29, 2013

    The Wall Street Journal this morning reports that Shuanghui Group, described as a "Chinese meat producer," is on the verge of acquiring Smithfield Foods, the world's largest pork producer and processor.

    The cost of the acquisition, if it goes through, is expected to be between $4.5 and $5 billion.

    The Journal writes that the sale would occur "on the heels of agitation from a large shareholder to split up the company." It would be subject to review by the Committee on Foreign Investment in the United States (CFIUS), an inter-agency US government committee that examines the national security implications of foreign investments in and/or acquisitions of US companies.
    KC's View:
    Get ready for the jokes - many of them not very funny - about China's reputation as a place where tainted and inaccurately labeled meat has been sold, and where hundreds of people have been arrested for food safety violations.

    I hate the idea of Smithfield being acquired by a foreign company. There may be no better option, but if so, that's a shame.

    Published on: May 29, 2013

    No turning the other cheek here.

    Bloomberg Businessweek reports that Visa and MasterCard, having seen a $7.25 billion proposed settlement of a price fixing suit get rejected by a number of retailers and trade associations, are now suing those entities, asking a court "to rule that the card companies’ fee practices weren’t illegal."

    Here's how the story is framed:

    "The settlement, described by plaintiffs in that case as the largest in an antitrust lawsuit, would end an eight-year legal battle over the swipe, or interchange, fees charged to merchants when customers use credit cards to pay. The plaintiffs accused Visa and MasterCard, the two largest U.S. payment-card firms, of illegally fixing the fees.

    "Visa, MasterCard and several banks said in a complaint filed yesterday in federal court in Brooklyn, New York, that their suit is 'necessary to prevent the continuation of endless, wasteful litigation.' They seek to bar the trade groups and retailers from seeking antitrust damages for the fee practices.

    "Under the proposed settlement agreement, Visa, MasterCard and major banks can back out of the deal if retailers dropping out make up more than 25 percent of the companies’ total credit card payment volume. The top 100 merchants in the U.S. represent about 25 percent of the total volume, according to a July analysis by Keefe, Bruyette & Woods. Of those, about 15 have already agreed to their own settlement with Visa, based in Foster City, California, and Purchase, New York-based MasterCard."

    The retailers and trade associations rejecting the settlement and suing Visa and MasterCard have maintained that it will not only not fix a broken system that allows the card companies to exploit retailers and consumers, but also prevents them from ever again suing the card companies and banks.
    KC's View:
    Has there ever been a settlement that has been less settled? (Actually, I'm sure there has been ... but this is got to be way up there on the charts.)

    Here's the deal. Visa and MasterCard are used to being able to do pretty much whatever they wanted, charge whatever they wanted, never get questioned or challenged, and prevent consumers from knowing what their usurious charges were costing them.

    And even when they settled, it was only because they believed that it made sense to do so with an agreement that prevented any future lawsuits. So they were willing to take a short-term hit in exchange for long-term security.

    Now, I'm not saying that all retailers will pass any savings realized by putting the screws to the credit/debit card companies along to consumers. But they should ... and if they don't, shame on them.

    I've said it before and I'll say it again. I cannot imagine any circumstances under which this settlement gets final approval from the courts. There's just too much controversy, too many arguments, and too little agreement.

    Published on: May 29, 2013

    Bloomberg Businessweek reports that the union-backed activist group OUR Walmart is planning to stage a protest in Bentonville, Arkansas, on the day of Walmart's annual shareholders' meeting.

    According to the story, " OUR Walmart says about 100 members from the Bay Area, Los Angeles, Denver, Chicago, Washington, Miami, and a dozen other cities will head to Bentonville this week in a bus caravan they’re calling the “Ride for Respect.” The organization is seeking more full-time jobs and predictable schedules that it says would provide their families with a better standard of living.

    Walmart spokeswoman Brooke Buchanan, however, says that OUR Walmart "is comprised of a few number of people, most of whom aren’t even Walmart associates and don’t represent the views of our associates. This latest publicity stunt by the unions to generate attention for their fleeting cause won’t impact the festivities."
    KC's View:

    Published on: May 29, 2013

    Point of personal privilege...

    My newest Forbes.com column has been posted.

    The subject: A&P CEO Sam Martin.

    The title: Leadership Lessons From The Retailing Precipice

    The description: It isn't easy being Sam Martin, the CEO of A&P. The first thing for him to remember? That he isn't the most important person in the company.

    The link is here.

    I'll be interested to hear what you think.
    KC's View:

    Published on: May 29, 2013

    The Conference Board says that its consumer confidence index rose to 76.2 in May, up from 69.0 in April and the highest level since February 2008. The Associated Press notes that the index was "lifted by a better outlook for hiring, rising home prices and more optimism about business conditions."
    KC's View:
    No time for any victory laps. The stock market may be doing great, the housing market may be improving, but there still is a fundamental weakness in the jobs market that speaks to the tenuousness of the recovery. Yes, things are getting better ... but let's not confuse Main Street with Wall Street.

    Published on: May 29, 2013

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

    Newsweek, which was sold by the Washington Post for $1 in 2010 and merged with IAC's The Daily Beast, only to have its print edition eliminated late last year, reportedly is on the sales block again.

    According to Variety, owner "IAC is sending out inquiries to prospective buyers who may be interested in purchasing the 80-year-old title ... As with the first sale of Newsweek, the price is expected to be negligible; what will matter more is the assumption of liabilities, although Newsweek is a much pared-down operation."

    IAC CEO Barry Diller had recently said it was a mistake to buy Newsweek ... never a good sign. As a writer with a background in print, it always hurts a little bit to see a venerable title like Newsweek in so much trouble, but the simple fact is that it has turned into an utterly irrelevant product. The question is not so much who or what will but it. Rather, it is what will they do with damned thing?


    • Kellogg Co. has agreed to write a $4 million check to settle a class action lawsuit that accused the company of making false marketing claims for its Frosted Mini-Wheats cereal - saying that it was good for children's cognitive functions. The company said that the campaign ran four years ago, and has been replaced by a message that adheres to Federal Trade Commission (FTC) guidelines.
    KC's View:

    Published on: May 29, 2013

    • The Kroger Co. announced the retirement of Quintin Frey, president of its Turkey Hill Dairy. Frey began his career with Kroger at Turkey Hill Dairy in 1980 as a management trainee, becoming president in 1991. The company noted that since then, Turkey Hill tripled in size and profitability and now sells products in 49 states, a dozen countries and three continents.


    • Published reports say that PJ Clarke, formerly CEO for Tesco's business in the Czech Republic and CEO of Tesco Japan, has been named CEO of Tesco Ireland.

    He succeeds Tony Keohane, who will move into the chairman role there after seven years as CEO.
    KC's View:

    Published on: May 29, 2013

    ...will return.
    KC's View: