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    Published on: July 23, 2013

    by Michael Sansolo

    Ordinarily, there would be nothing interesting to say about a car cutting me off in Washington, DC, traffic. Heck, it would be an occasion if someone didn’t try. Yet this time was different.

    The red car that bolted in front of me was a model I had never seen before - the Tesla. In that second the future had arrived and the driver didn’t even bother with a courtesy wave to apologize.

    Now I’m no expert on cars and I have no idea if the Tesla has a prayer of making it. But motivated by my near accident on K Street I decided to do some digging and found some managerial attitudes that are worth sharing.

    The Tesla is Silicon Valley’s attempt to get into the car business. The electric powered vehicle is the first to use lithium-ion batteries that give it a range of more than 200 miles. Oh, and it carries a price tag well above $50,000. Even glaring at it from behind I could see the touches of an unusual luxury car. In other words, this is no Prius, and I drive a Prius.

    There were two comments I found about the Tesla that spoke to business realities - and again, these are realities whether or not the car actually succeeds. The first came in 2007 from Robert Lutz, then chairman of General Motors, when the Tesla was first introduced. Lutz told The New Yorker:

    "All the geniuses here at General Motors kept saying lithium-ion technology is 10 years away, and Toyota agreed with us - and boom, along comes Tesla. So I said, 'How come some tiny little California startup, run by guys who know nothing about the car business, can do this, and we can't?' That was the crowbar that helped break up the log jam."

    The crowbar got Lutz behind the development of the Chevy Volt - another car with an uncertain future. The story nonetheless is clear: all the experts said something was impossible, until it was done. And the worldwide leaders in automotive engineering were caught by surprise.

    GM hasn’t exactly torn up the world since 2007, but based on an article in the Washington Post this weekend, the company is still trying to figure out the future. And yes, the Tesla remains the catalyst.

    Dan Akerson, GM’s current CEO, sees the Tesla as having the potential to disrupt the entire world of car making. So Akerson has assigned a special team to yet again study the Tesla.

    It would be easy to crack a smile at that last sentence. After all, GM, Ford and Chrysler have written the textbook on how to miss trends. I’m old enough to remember a time when American cars dominated. That was before the domestic automakers ignored threats that grew into market dominance for Toyota, Lexus, Nissan, Mazda and…well, the list gets quite long. Ignoring disruptors of change seems like a great motto for the American car industry.

    However, Akerson deserves kudos for daring to tackle the uncertain, knowing that only six years ago his company’s leadership said all the right things yet clearly failed to solve the problem. Lutz may have done everything right, but the culture of GM defeated him. Or maybe he did everything wrong and Akerson is a fool for trying again.

    At least he’s trying.

    Disruptors always look strange until they work. In just the past few weeks there have been reports on how phone companies are abandoning copper wire, which once was the only way phone lines were offered. Today, they are an expensive anachronism. Likewise, Microsoft, once the company that simply couldn’t be stopped, had to announce negative financial results for yet another failed attempt at getting ahead of the tech world.

    There was a time many thought Walmart couldn’t sell food just as there was no doubt a time when supermarkets seemed like a silly idea. And that’s why today we still need to understand Amazon and Aldi and whoever else comes along. We don’t know today what product is the next Greek yogurt, or what retailer is the next Whole Foods. The future doesn’t provide clues.

    “Things are only impossible until they are not,” is the great line from Star Trek that we love using here at MNB. We love it because it keeps getting proven correct.

    So, what do you think is impossible today and what are you doing about it?

    Michael Sansolo can be reached via email at . 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: July 23, 2013

    Reuters reports that Spartan Stores will acquire Nash Finch Co. in a stock deal both companies valued at about $1.3 billion, that will "help expand Spartan's distribution presence beyond Michigan, Indiana and Ohio to 37 states and the District of Columbia. It also makes Spartan the largest food distributor to U.S. military commissaries and exchanges at home and abroad."

    The announcement notes that "together, Spartan Stores and Nash Finch will have 22 distribution centers covering 37 states (and) 177 retail stores."

    According to the Reuters story, "The offer of 1.2 Spartan shares for each Nash Finch share did not provide a premium to Nash Finch shareholders based on Friday closings, but has risen in value after Spartan shares rose on Monday. Spartan will also assume about $380 million in long-term Nash Finch debt. Nash Finch shareholders will end up owning 42.3 percent of the combined entity."

    Spartan CEO Dennis Eidson will be president/CEO of the new company, while Nash Finch CEO Alec Covington will serve in an advisory role "to help ensure a smooth transition."

    The official announcement maintains that "the combined company will have significant scale and geographic reach to provide value-added distribution services to a diversified customer base and drive new growth opportunities through increased customer penetration, new customer additions and expansion into new market segments. The combined company will also have a comprehensive portfolio of strong private brands including Spartan Stores' Spartan® brand and Nash Finch's Our Family® and Nash Brothers Trading Company® brands."
    KC's View:
    The new company, assuming the deal is approved by regulators, would seem to provide a lot of synergies and the potential to be more effective, not just more efficient, with the potential to grab a lot of market share in the wholesale business.

    Experts in these matters seem to be feel that this is by no means the end of the mergers and acquisition activity in the retail/wholesale segments. I have no reason to disagree with that ... the question seems to be when, not whether, the next deal will take place.

    Published on: July 23, 2013

    The Arizona Republic reports that Phoenix-based Sprouts Farmers Market announced yesterday that it plans an initial public offering (IPO) that is designed to raise between $259 million to $296 million.

    According to the story, Sprouts said "that it plans to repay a $247.6 million loan with proceeds from the public stock offering and use any remaining funds for general corporate purposes."

    A preliminary prospectus has been filed with the US Securities and Exchange Commission (SEC), but no date for the IPO has been set.

    The story notes that "Sprouts, a natural foods market founded in 2002, has 13,000 employees and more than 163 stores in eight states, including 24 in Arizona. It opened 23 stores between May 2009 and October 2010. Sprouts merged with Sunflower Farmers Market in May 2012 and Henry’s Farmers Markets/Sun Harvest Farm in April 2011."
    KC's View:

    Published on: July 23, 2013

    The Los Angeles Times reports that Dr. Pepper Snapple Group has "agreed to stop adding vitamin E to some of its drinks and halt claims that the product has antioxidants as part of a settlement with a health advocacy group."

    According to the story, "The company had been infusing small amounts of vitamin E into some varieties of 7-Up -- regular and diet Cherry Antioxidant, Mixed Berry Antioxidant and Pomegranate Antioxidant -- when the firm was sued in November in U.S. District Court in California on behalf of a Sherman Oaks man.

    "The Center for Science in the Public Interest also took issue with the images of berries and pomegranates on the soda's labels, saying it gave the impression that the antioxidants came from fruit instead of the added vitamin E ... The drink company also agreed to pay $5,000 to the Center for Science in the Public Interest and $237,500 in attorney’s fees."

    The story quotes Steve Gardner, litigation director at CSPI, as saying: “Soda is not a health food, and should not be marketed as a healthy source of antioxidants or other nutrients."
    KC's View:
    guess that soft drink manufacturers will have to be satisfied with being tasty and refreshing. Being "healthy" seems to be out...

    It was just last week, by the way, that a study was released by Purdue University suggesting that "the artificial sweeteners in diet soda can cause weight gain, metabolic syndrome, diabetes, and heart disease, adding to mounting research about the potential health risks of diet soft drinks."


    Published on: July 23, 2013

    Kantar Retail is out with its semi-annual pricing study of Walmart and Target, concluding that Walmart continues to lead in this area, though the gap is narrowing.

    "With an overall branded basket 2.4% less expensive than Target’s," the study says, "Walmart’s overall price gap has still remained within a few percentage points of Target’s, although its lead has narrowed since the last iteration of the study. Importantly, Target’s edible basket was within cents of Walmart’s. 'Though bolstered by TPCs, Target’s ability to match Walmart’s pricing in a department where Walmart has focused its price leadership efforts is most impressive,' notes Robin Sherk, Director of Retail Insights for Kantar Retail and leading contributor to the study.

    Among the conclusions:

    • "Driven by non-edible grocery, Walmart’s overall branded basket was 2.4% less expensive than Target’s, with only Target’s HBA sub-basket leading Walmart’s in price."

    • "Only 19% of the items in the two retailers’ baskets were more than 10% more expensive at Target this iteration."

    • "Walmart maintained its lead through everyday low prices (EDLP), with its basket recording only one Rollback.  Target increased its use of TPCs to a total of 10, an increase from 7 in January 2013."
    KC's View:

    Published on: July 23, 2013

    Yahoo! Finance reports that a new survey is out - based on employee reviews examined by - determining the nine worst companies to work for in the United States. The losing companies were, from the bottom, Dish Network, Express Scripts, Dillard's, Dollar General, RadioShack, ADT (the security company), Sears Holdings, NCR, and Fiserv.

    The analysis says that "not surprisingly, employees most often complained about low wages and poor benefits. Many noted that they were paid even less than the already-low industry average for their job. Benefits, if the company provided any, were either difficult to afford or inadequate.

    "While some employees at all levels were unhappy, complaints at these companies were disproportionately from sales representatives, customer service agents and technicians. These were generally lower-paid, front-line workers dealing directly with customers.

    "Issues with middle management were universal among the employees of these companies, but the types of complaints varied. Depending on the company, employees felt they were micromanaged, treated unfairly or like children, or asked to meet extreme demands."
    KC's View:
    The good news is that MNB didn't make the list. Whew!

    I think it is interesting that one thing these companies seem to share is a philosophy that the people on the front lines are not all that important, that the people who deal with customers are somehow not as critical to a business's success as the people at the top. Probably not a smart way to go...

    Published on: July 23, 2013

    • In the UK, the Guardian reports that Tesco has been raising the prices of "its most affordable water and fizzy drinks amid a surge in sales as thirsty shoppers try to cool down during the hot spell.

    "The UK's biggest supermarket raised the price of its two-litre bottles of Everyday Value water and cola by 41% to 24p last week, putting it well ahead of rivals Asda, Sainsbury's and Morrisons ... The price rise came amid fears of bottled water shortages, with sales in overdrive as the nation tries to cope with temperatures soaring above 30C in parts of the country."

    While critics pounced on Tesco for exploiting the heat wave for profit, the retailer maintained that it was just keeping up with the cost of production.
    KC's View:
    Gee, it was just yesterday tat Tesco CEO Philip Clarke was quoted as saying that the era of cheap food in the UK was over, because of the basic laws of supply and demand.

    Not sure that this is exactly what he meant, but he's certainly being consistent.

    It is kind of extraordinary to watch a great company like Tesco suffer from so many PR black eyes, over and over and over. It is like they can't get out of their own way.

    Published on: July 23, 2013

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

    • The Charlotte Observer reports that "Publix Super Markets Inc. revealed plans Monday for a new store in Mint Hill, marking the fifth time in less than two years that the privately held supermarket has announced expansion plans in the Charlotte area ... Publix expects the new location to open in late 2014."

    The story notes that "The planned 49,000-square-foot store ... again suggests Florida-based Publix is serious about expanding into Charlotte ... Publix comes to the area as competition in the Charlotte grocery market stiffens, at both high-end and low-end segments. Walmart Neighborhood Market and Whole Foods have opened Charlotte locations, while Target and Family Dollar have renovated their stores to offer more food selections. The new store also comes on the heels of news earlier this month that Matthews-based Harris Teeter is being acquired by Kroger. Competition from rival grocers such as Publix was said to have influenced Harris Teeter’s decision to sell."

    • Taco Bell said yesterday that it will stop offering kids' meals and toys at all of its US restaurants, saying that the items were inconsistent with the brand image it is trying to communicate.

    “As we continue our journey of being a better, more relevant Taco Bell, kids' meals and toys simply no longer make sense for us to put resources behind,” CEO Greg Creed said in a prepared statement.

    Taco Bell also said that the kids' meals and toys had an “insignificant impact on system sales.”

    And it is this last part - that kids meal sales were insignificant - that really propelled this decision. No matter what they say.
    KC's View:

    Published on: July 23, 2013

    • Dennis Farina, the former Chicago police officer who had an illustrious career as a movie and television character actor, lending a certain street credibility to projects as varied as "Law & Order," "Crime Story," Thief, Get Shorty, Midnight Run, Bottle Shock, Saving Private Ryan, Manhunter and Out Of Sight, died yesterday after suffering a blood clot in his lung. He was 69.
    KC's View:

    Published on: July 23, 2013

    ...will return.
    KC's View:

    Published on: July 23, 2013

    Ryan Braun, the 2011 Major League Baseball MVP in the National League who avoided a suspension that same year for using performance enhancing drugs because of a technicality in the testing procedures, yesterday was suspended for the rest of the season for multiple unspecified "violations" of baseball's drug program. He will lose about $3 million of his $8.5 million salary.

    The New York Times reports that "this time, he was ensnared in Major League Baseball’s sweeping investigation of an anti-aging clinic in South Florida that baseball officials believe distributed performance-enhancing drugs. His punishment raises the specter of suspensions for more than a dozen other players who have been connected to the clinic, including Alex Rodriguez of the Yankees."
    KC's View: