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    Published on: June 13, 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.

    Hi, I'm Kevin Coupe & this is FaceTime with the Content Guy.

    I often take advantage of this forum to use movie metaphors to make points about how retailers can be better at doing business. Today, I'd like to suggest that this can cut both ways.

    Google is out with a new study entitled called "Quantifying Move Magic with Google Search," and it makes the entirely reasonable case that you can figure out how successful a movie is going to be based on how often people search for information about it before the movie opens, and especially how often they look at the movie's trailer.

    No kidding. In the retail business - especially the food retail business - this is called "sampling."

    In a food store, one of the best ways to sell products is to sample them. If an item looks good and smells good and tastes good, the odds are a lot better that the customer is going to buy it.

    The thing about the movie business is that until a relatively few years ago, the only place you could see a trailer was in a movie theater, before watching the feature. With the advent of the internet, there now are thousands of places to watch trailers. Good news for us movie buffs.

    That's something that great food stores - or even mediocre food stores with a little bit of attitude - are able to do in every aisle and throughout the perimeter. Give customers lots of products to taste, with lots of reason to stop.

    Not a hard concept to grasp.

    Except that, to be perfectly honest, not enough food retailers do it with anywhere near enough frequency and enthusiasm.

    I go to a lot of stores, and a time when there is competition coming from all directions and even an increasing number of ways to avoid going to the store by ordering online, there simply are way too few that are using sampling as much as they can and should.

    The aromas and tastes of food can be a wonderful differentiator. And great food ... well that can be transcendent. And yet, in a lot of food stores, if you went in with a blindfold on, you'd never know from the smells and sounds that it is actually a food store.

    So, if you're a retailer, go into your store or stores. Look around for the magic sampling moments. And take advantage of them. Or lose one of the great advantages that you have.

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

    KC's View:

    Published on: June 13, 2013

    Nova Scotia-based Sobeys said yesterday that it will acquire Safeway's Canadian business for $5.8 billion, a move that will make it the largest grocery chain in western Canada and the second largest chain in the country overall, led only by Loblaws.

    The purchases adds 213 supermarkets to the Sobeys stable, including 199 instore pharmacies, 62 gas stations, 10 liquor stores and four warehouses, all comprising some nine million square feet of retail space primarily in Vancouver, Calgary, Edmonton and Winnipeg.

    Reuters reports that "the deal was unsolicited and Safeway did not conduct an auction for the assets."

    According to the New York Times, "During a conference call with investors, executives from Sobeys and the Empire Company, the publicly traded holding company that owns the grocer and is controlled by the Sobey family, declined to discuss how the deal was reached with Safeway, which is based in Pleasanton, Calf. But they were quick to dismiss analysts’ suggestions that Sobeys might find itself in a bidding war for the 213 Canada Safeway stores."

    As for the future of the Safeway stores, the Times writes that "in eastern Canada, Sobeys has followed store acquisitions with extensive renovations, rebranding and the construction of efficient and highly automated food distribution warehouses. Like Loblaw and Safeway, it has also focused heavily on the development of private-label brands, particularly those with high margins. During the conference call, it outlined similar plans for the Canada Safeway properties.

    "While Sobeys does operate stores in western Canada, it has lagged behind Safeway and Loblaws in the region, particularly oil-rich Alberta. With the acquisition, Sobey estimated that it would generate annual revenue of about $24 billion and would run about 1,500 stores nationwide."
    KC's View:
    In reading some of the analysis of this story, there seems to be a feeling in some quarters that while this is very good for Sobeys, it may not be good in the long run for Safeway, which is seen as losing assets that helped its bottom line.

    There also seems to be a sense that this is just the first in what could be a series of moves by Safeway.

    Published on: June 13, 2013

    by Kevin Coupe

    The Associated Press reports that Coop supermarket employees in Denmark got a surprise the other day when they opened a box of what was supposed to be bananas that had been shipped from Colombia in South America, and found instead more than 200 pounds of white powder believed to be cocaine.

    Yet another case, I would argue, for country of origin labeling.

    Coop reportedly has contacted its banana supplier. Police are investigating.

    And, no doubt, some low level drug dealer in Colombia is going to be found in pieces, with his body parts scattered all over the jungle.
    KC's View:

    Published on: June 13, 2013

    MarketWatch has a story saying that Walmart is apparently sourcing product from factories that it said it would not do business with because of questions about how those facilities handle issues of worker safety.

    The story says that "a ProPublica report Wednesday, citing interviews and U.S. custom records, said Wal-Mart’s U.S. stores have been receiving shipments of sports bras and other garments from at least two of the factories on a list of more than 200 plants it’s supposed to have banned from further business."

    The story goes on:

    "Wal-Mart spokesman Kevin Gardner, in response to MarketWatch, said it’s taken a number of actions the past few months that meet or exceed other factory safety proposals. He said that includes Wal-Mart enforcing a zero-tolerance policy for unauthorized subcontracting.

    "Gardner told ProPublica that shipments from one of the banned factories were allowed because of confusion over whether Walmart’s standards applied because the garments were made for its supplier Fruit of the Loom. He said in the article Walmart accepted orders from the other factory to minimize the impact on workers."
    KC's View:
    It seems to me that there are a couple of possibilities here.

    One is that because the supply chain is complex and sometimes impenetrable, it is hard to make back-and-white decisions with 100 percent assurance that even the best intentions are being implemented effectively.

    The other is that Walmart is behaving in a cynical manner, saying one thing and then behaving in another, figuring that at the end of the day, the most important thing is cheap goods, and that the safety of workers in places like Bangladesh is less important than the price of sports bras in Ash Flat, Arkansas.

    Published on: June 13, 2013

    Bloomberg Businessweek reports that Ron Burkle, often referred to as a "billionaire supermarket magnate" and the founder of the Yucaipa private equity group, is in negotiations to acquire Tesco's troubled Fresh & Easy Neighborhood Markets chain in the western US.

    According to the story, "Jim Keyes, the former CEO of 7-Eleven Inc. and Blockbuster Inc., owns the Wild Oats name and will serve as chief executive officer of a new grocery retail venture with the billionaire."

    Officials from Yucaipa and Tesco are not commenting on the story.

    Bloomberg writes that "Burkle has sought investments and stakes in troubled companies, including a partnership to take over Barneys New York last year. He was also interested in buying part of grocery chain Supervalu Inc. (SVU), people familiar with the matter have said." Burkle also invested in A&P, which has been the very definition of "troubled retailer."
    KC's View:
    I've always rejected the idea that Amazon should buy Fresh & Easy, simply because it would saddle the internet company with legacy issues it does not need or want. But wouldn't it be interesting if Burkle buys Fresh & Easy, converts them to the Wild Oats banner, and then makes a deal with Amazon in Los Angeles to use its Amazon Fresh capabilities as a way of jump-starting a new chain of small-scale healthy food stores.

    Just a thought. Probably worth what you're paying for it.

    Published on: June 13, 2013

    Reuters reports that it has conducted a survey of 52 Walmart stores around the country and discovered that "27 were hiring only temps, 20 were hiring a combination of regular full, part-time and temp jobs, and five were not hiring at all. The survey was based on interviews with managers, sales staff and human resource department employees at the stores."

    The company said that this is not a broad mandate - less that 10 percent of its workforce is made up of temporary employees - but rather a way of creating a more flexible system where staffing levels are "appropriate" as opposed to being a strictly cost-cutting move.

    The story notes that "the hiring strategy could save Wal-Mart money by trimming labor costs at a time when its margins remain under pressure. Many consumers are still struggling given a high jobless rate and lack of income growth, leaving retailers of everyday goods with little pricing power, according to other company CEOs and benefits experts. Competition from dollar stores, other big box discount chains and grocery stores is also intense."
    KC's View:
    I always think you can tell a lot about a retailer by the extent to which they view their own employees as being ambassadors for their brand ... and hiring temps, as opposed to full-time and part-time workers, speaks volumes about Walmart's priorities these days.

    Published on: June 13, 2013

    • The Huffington Post reports that a New York State appeals court panel "had few sweet words Tuesday for a city health regulation that would fight diabetes and obesity by setting a size limit on sugary beverages sold in restaurants.

    "The four justices peppered a city lawyer with tough questions during a Manhattan court session aimed at determining whether health officials exceeded their authority in placing a 16-ounce limit on most sweetened beverages at city-licensed eateries."

    The New York City Health Department imposed the limit, which only applied to certain retail formats, as a way of addressing the childhood obesity crisis. However, the American Beverage Association and a coalition of other groups has challenged the ban as an example of " overreach."

    • On National Public Radio, The Salt reports that the US Department of Agriculture (USDA) "has proposed a new rule that would require new labels for mechanically tenderized meats, so that consumers know what they are purchasing. The thinking is that if you know your cut of meat has been mechanically tenderized, you'll be inclined to cook it a little longer."

    The proposal was prompted by five foodborne illness outbreaks over the past decade that have been linked to mechanically tenderized beef, which have a statistically "higher risk of surface bacteria making their way into the cut of meat."
    KC's View:

    Published on: June 13, 2013

    Responding to our calls here for mandated labeling of products with genetically modified ingredients, and a new study reported on here that showed negative impact on pigs that eat GMOs, MNB user Ernie Monschein wrote:

    I certainly agree that, at the very least, GMO products need to be clearly labeled, so shoppers have a choice to buy them or not. Anything else is strictly an attempt to avoid transparency and makes you think there is something else going on. All along I’ve felt that GMO products were probably safe for consumption and that the real risk was environmental. Their potential impact on bees and non GMO crops and seeds is a cause for concern…But, this article gives me pause. If GMO feed even has this small effect on pigs fed this diet, then it tells us that there may be much more we don’t know about their impact on humans. These questions need to be thoroughly examined and answered before the GMO train completely leaves the station. Perhaps, the EU and Japan have a point. Now it’s time to find out the facts.

    We had a piece the other day about how United Airlines is now selling annual subscriptions to customers that allow them, for a fee, to buy the advantages normally reserved for frequent fliers who have earned them. I objected to that, suggesting that such moves diminish the value of loyalty shown by customers.

    One MNB user responded:

    What’s more annoying than United’s inability to run a cost efficient airline is that the “global” services offer they concocted pertains to certain Star Alliance partners & not others. For example, Lufthansa will sometimes follow what United Airlines offers its customers but South African Airways will not (as the most polarizing example).

    For being a global airline and one of the leaders in the Star Alliance, United is fast & loose in their marketing of their “global” product & service suite… all of which leads often leads this lifetime 1K “holding the bag”  (Pun, regrettably, intended).  I’d rather United focus on getting the basics right but unfortunately there is faster money chasing ancillary revenue than fixing their own internal cost structures.

    MNB user Monte Stowell wrote:

    Simple solution for me. I have not and will not fly United Airlines. I am a multi-million flyer on Delta Airlines and 500K+ on Alaska Airlines, which is the best airline in America.

    MNB user Jim Van Gorkom wrote:

    After many years of reading Morning News Beat and having several personal conversations with you at conventions and conferences, you’ve finally touched on something that prompted me to write in.
    I have flown almost two million revenue miles on United Airlines during my career and feel that I’ve earned the privilege of having a (slightly) better seat and to board before the overhead bins have filled up. It has really annoyed me to see the loyalty that I have shown them devalued by United offering anyone access to these same perks just by signing up for an expensive credit card or other payment. It just doesn’t seem right…

    When a business pays attention to its own bottom line at the expense of its best customers, eventually it will hurt that bottom line.

    On another subject, one MNB user wrote:

    I definitely agree with you that treating supermarket in-store prepared foods the same as menu offerings from a fast food chain such as Wendy’s or Pizza Hut is rather absurd; however, I take issue with Kroger’s claim that the cost of compliance with such a requirement would put it at a competitive disadvantage.  Kroger isn’t being singled out—their competitors who offer prepared foods would also be faced with similar costs of compliance.  In fact, one could argue that Kroger’s sheer size could enable greater resource-sharing across banners and across geographies that would actually yield cost savings that could put them at a greater competitive advantage compared to smaller chains and independents against which Kroger competes.
    Perhaps it might put them at a cost disadvantage against “non-traditional” competition like Amazon and Walmart, but then offering prepared foods is itself a differential advantage over many of the non-traditionals.  When Amazon can deliver a hot rotisserie chicken to me at the moment I need it, I will be VERY impressed.  (Maybe they’ll start off small—like a cup of tea.  Earl Gray.  Hot.)

    Extra credit for the Star Trek reference.

    From another:

    Should we exempt supermarkets? What makes that channel different from restaurants? Both channels sell prepared and portioned foods, beverages, etc.

    Supermarket deli and prepared foods departments compete for the same meal or snack occasions. Either all prepared foods sellers are "in" or "out" of the labeling structure. Not just certain channel segments.

    Of course there will be incremental costs for supermarkets to comply. Please do not think that restaurants and other foodservice operations were able to assemble and post the nutritional postings for "free." Small foodservice chains (20 stores/locations) will be subject to the rules. Proportionately the cost impact for a small company will have a bigger bottom line impact versus really big companies - no matter what channel it is.

    And another:

    Doesn't exempting supermarkets place restaurants and fast food joints at a competitive disadvantage and force them to raise prices?.  Supermarkets seem to be increasing their ready-to-eat carryout offerings to maximize their "share of stomach" by taking business away from restaurants and fast food joints. Many supermarkets even have tables and chairs where customers can consume these foods in-store.  [What about GMO's?  Will you be in favor of exempting supermarkets from any future required label disclosure of those?]

    Frankly I think the whole idea is nuts as 95% of us will be paying the cost to provide that information to the 5% that want it.   I suspect that the 5% that want it probably have internet access where large restaurant chains and fast food joints already post much of that information.

    And still another:

    I disagree with your point that Supermarkets should be treated differently than fast food places.   As you have often highlighted on MNB, supermarkets are in a frenetic competition for share of stomach.  All one has to do is walk past the “Deli” case at most supermarkets and look at the array of prepared meals ready to take home, reheat and eat.  In essence, supermarkets are crossing into the restaurant category.   Fast food is just the first domino that will fall in the nutritional transparency game.  We have all read articles about the insane amount of calories and fat in some of our favorite dishes at chain restaurants.  Do you know how much fat and calories are in your favorite pack and go meal from your local supermarket?  Are there hidden fat and calories that we don’t know about?
    Today, supermarket chains employ chefs and nutritionists to help develop offerings to their customers.  Food manufacturers also employ nutritionists and food scientists that could easily develop nutritional information for their products.  My concern is for the small independent grocer who wants to offer a good prepared food program.  It is here that the wholesalers and buying groups would need to get together to develop programs and strategies to help the independent grocer compete.  Sounds like a great business opportunity.
    You constantly highlight (and I believe rightly so) the need for transparency in food labeling.  This seems to be a logical step as more dollars continue to move from center store to perimeter sales.  McDonalds had to post their dirty laundry right on the menu board…I am wondering what Kroger doesn’t want us to know.

    Regarding the efforts by Whole Foods to change perceptions that it is too expensive, one MNB user wrote:

    I've always been fascinated by Mackey and his management team's continuing obsession with the perception that Whole Foods is "expensive."

    Well yes. A lot of their stuff does cost more than the stuff in other stores. Whole Foods seems expensive. But who really cares?

    Apparently their customers don't. Their profits last quarter soared 20% and the stock is at record high after a 25% jump in May. Financially speaking, they have never done better.

    It's always puzzled me that when a company seems to have a winning formula that's proven sound for several decades, management always feels the constant need to mess with everything.

    Don't get me wrong. I'm not suggesting that any company should just set themselves on cruise control and rest on their laurels. It just seems that they would benefit from a healthy skepticism of efforts to reposition their image.

    And Kevin, is it really the case that "you can't afford to buy a lot there"? Or is it more about "I feel guilty dropping $100 there" Because I can certainly attest to the latter even though I keep going back. Likewise, I suspect that if their customer base "couldn't afford to buy a lot there" and actually followed through on that sentiment, Whole Foods wouldn't be nearly as successful as they are.

    From one Detroit MNB reader:

    I'm headed down to the new Whole Foods store here in a few minutes (I live in the metro area...) and am curious to see how the value equation plays out. As Im sure you know - the simple fact they are opening in "The D" is a big deal, better prices or not.

    The notion that "If you know how to cook..." is more complex than most folks want to realize. Sure  - you and me know our way around the kitchen - and that simple fact is a HUGE money saver vs eating out or buying prepared meals at the store.

    But I suspect most folks don't know or haven't been taught how to cook even a simple meal from scratch. Its intimidating and pressure laden (when you have limited time and a hungry family to feed). When I was in school "Home Ec" was considered taboo and a class for the less smart kids when the rest of us were taking AP Calculus. Personally I haven't used one lick of Calculus since the 12th grade - but I sure do cook a a lot (not to mention manage cash-flow / balance check books!)

    We need to find a way to teach these important, basic life skills to our kids. Its a major part of independent living and adulthood.

    MNB user Mark Heckman wrote:

    Two terms that are not likely to be used in the same sentence are cheap and Whole Foods.  While Whole Foods is "gently" modifying their pricing approach in smaller, urban stores where they feel they need to, I doubt if their pricing modifications will be significant enough to really make them a viable option for budget minded shoppers.  Further, when stores attempt to be all things for all shoppers, they run the risk of diminishing the strength of their core brand, which in the case of Whole Foods is antithetical to "price".

    Regarding our various pieces this week about Tim Tebow, two very different perspectives...

    MNB user Glenn Cantor wrote:

    I can’t wait until the game in which Tim Tebow beats the Jets.

    But another reader offered:

    Wow, what are the Pat’s thinking? This is the second stupid move they have made. Got to know that Tom Brady is not pleased with either of them...
    KC's View:

    Published on: June 13, 2013

    Joan Parker, the widow of the mystery novelist Robert B. Parker, died yesterday. She was 80, and had diagnosed with inoperable lung cancer in August 2011.
    KC's View:
    This piece of sad news just came across my computer. I'll have some thoughts about this tomorrow.