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    Published on: July 30, 2013

    by Michael Sansolo

    We’re fond of running eye-openers here at MNB to talk about things that catch our eyes and seem to have some relevance to share or consider. Every now and again we find a story that’s really an eye-closer; something we wish simply wasn’t true or that we could avoid reading.

    But those are the stories we need to consider the most.

    The Associated Press is out with a study that paints a truly unhappy picture of America in 2013, where four out of five people live in fear of falling into poverty or actually in poverty at some point in their lives.

    It’s an article filled with countless details that I wish were somehow untrue, such as the incredible rates of out-of-wedlock births, failed marriage or simply the general collapse of optimism and families. Plus, it also paints a picture of poverty in this new global economy that just makes you pause, with its impact across the spectrum of races and ethnicities that make up the US population.

    Here’s why it’s a story I think the food industry needs to consider. The simple reality is that it is a business that serves the entire population, which means the economic realities of the masses quickly become the economic realities of the industry. There are simple reasons why value shopping has become so important. There are simple reasons why discount operators and products are growing.

    Economic insecurity leads people toward frugality. And since food shopping is so important and options are available, it’s a prime place for bargain hunting behavior. (It’s also an interesting follow up to the article MNB ran on Monday about the stark food choices faced by many Americans that quickly explain why eating healthier isn’t the top priority in many cases.)

    There’s little the food industry can do to change this dreadful situation. As the AP article makes clear, the issues involved require a serious and extensive discussion of many elements of economic policies in the country.

    Good luck with that.

    So the food industry faces a growing challenge in understanding the value-based shopper and the insecurities driving their most important need every day: having enough to eat. I’ve got a sad feeling this is an issue we’ll be discussing and following for years to come.

    Certainly, it’s something we need to keep viewing with open eyes. Even if we wish we could shut them.

    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 30, 2013

    by Kevin Coupe

    No question that the Apple Store has been enormously influential in the retail sector.

    Even the Microsoft Store has copied it.

    And now, so has the state of Connecticut.

    The Associated Press reports that AccessHealth CT, the state's insurance marketplace designed to help implement the changes in the nation's health care system called Obamacare, has decided to "set up insurance stores modeled after computer giant Apple’s establishments. They will be complete with a 'genius bar' to help guide customers through the maze of health insurance and sign them up for coverage ... The stores are a highlight of a multipronged approach to marketing what’s also known as an exchange, essentially a health insurance marketplace. Open enrollment begins Oct. 1.

    "Jason Madrak, the exchange’s chief marketing officer, said there are plans to possibly open stores in New Britain, Hartford, New Haven and Waterbury. The first store should be open in mid-August. The goal is to open about five more stores after the first is fully operational."

    And, Madrak adds: ‘‘We want to make sure it is in the spirit of the Apple store. A clean, well-lit, friendly place where you can come in ... We really need to make sure we have a direct, community-based presence."

    Here's to the crazy ones....the ones who see things differently...
    KC's View:

    Published on: July 30, 2013

    The Wall Street Journal reports that the bankruptcy filing by California value retailer Mi Pueblo appears to be at least partially related to a federal immigration audits that led to the company being ordered to replace a number of its 3,260 employees with questionable documentation.

    According to the story, Mi Pueblo said "in court papers that the federal audit led the company to struggle with higher payroll costs and training expenses as new workers have been brought on board."

    Those higher costs led to Mi Pueblo encountering problems with its banker, Wells Fargo, which then resulted in the bankruptcy filing.

    This reportedly isn't the first time that a federal immigration audit led to a retailer filing for bankruptcy protection. Essentially the same thing happened to Arizona's Pro's Ranch Market, while filed for bankruptcy when it had to "lay off 300 workers - roughly 20% of its workers - in 2010 following an agency investigation that found some employees to be working in the country illegally."

    The story notes that "companies face fines for knowingly hiring and continuing to employ workers that can’t produce valid work papers."
    KC's View:
    It is hard to work up too much sympathy for what seems to be blatant violation of the law, though it has to be said that we certainly have to do something about an immigration system that appears to be completely broken. I feel bad about the bankruptcies, but they knew what the law was, and what the penalties were.

    Published on: July 30, 2013

    The Idaho Statesman has a piece about WinCo, the value-driven supermarket chain, noting that retail expert Burt Flickinger III describes it variously as "the best retailer in the Western US," "unstoppable," and "Wal-Mart’s worst nightmare."

    The story notes that "Flickinger is far from the only fan of the Boise-based company. Its lack of a membership fee for access to lower-priced goods made it popular enough to grow from a single store on Overland Road east of Orchard Street in 1967 into a regional chain with about $5.5 billion in sales last year, making it one of Idaho’s largest for-profit companies.

    "WinCo has almost 15,000 employees and close to 100 stores open or coming soon. It has two stores opening in 2014 in the Dallas-Fort Worth area and plans additional locations in Texas, its latest conquest. The company is privately held and doesn’t disclose profits."

    But ... while WinCo plays its cards close to the vest, there are some basic ways in which the company is different.

    For one thing, the company is largely owned by its employees, which means that everybody is motivated to be efficient and effective. For another, WinCo cuts out the middlemen, using its own trucks to pick up product from manufacturers and deliver it directly to stores. And, it runs on cash, not debt ... which has its own obvious advantages.
    KC's View:
    Great company. I think that Burt Flickinger is absolutely right - it appears to be unstoppable, in part because it seems to be totally focused on what its mission is, and how to best achieve it. Texas will be a test, especially because HEB is going to put up a fight ... but WinCo is going to be among the toughest competitors that HEB has faced.

    Published on: July 30, 2013

    The New York Times has a long and fascinating story about one company's case for genetic manipulation - because it believes that it will help them fight a disease "that sours oranges and leaves them half green," and that threatened Florida's orange crop. In fact, it could be the only solution.

    An excerpt:

    "Oranges are not the only crop that might benefit from genetically engineered resistance to diseases for which standard treatments have proven elusive. And advocates of the technology say it could also help provide food for a fast-growing population on a warming planet by endowing crops with more nutrients, or the ability to thrive in drought, or to resist pests. Leading scientific organizations have concluded that shuttling DNA between species carries no intrinsic risk to human health or the environment, and that such alterations can be reliably tested.

    "But the idea of eating plants and animals whose DNA has been manipulated in a laboratory — called genetically modified organisms, or G.M.O.’s — still spooks many people. Critics worry that such crops carry risks not yet detected, and distrust the big agrochemical companies that have produced the few in wide use. And hostility toward the technology, long ingrained in Europe, has deepened recently among Americans as organic food advocates, environmentalists and others have made opposition to it a pillar of a growing movement for healthier and ethical food choices."

    And yet ... there may be no choice.

    You can read the entire story here.
    KC's View:

    Published on: July 30, 2013

    The Associated Press reports that hundreds of McDonald's, Burger King and Wendy's employees in New York City yesterday staged a one-day strike "to demand better pay and the right to unionize, calling for minimum wage to more than double from $7.25 to $15 an hour and the end to what activists called 'abusive labor practices'."

    According to the story, "Similar strikes were planned across the country this week, organized by the national Fast Food Forward campaign, which was launched last year to tackle stagnating wages and the proliferation of low-wage jobs as the nation recovers from the recession, said campaign director Jonathan Westin.

    The National Restaurant Association (NRA) issued a statement saying that increasing wages as demanded would have a "significant effect on the private sector's ability to create jobs, especially those typically filled by first-time workers and teens."
    KC's View:
    It makes much more sense to me that the fair wage issue be decided within the context of the marketplace, without legislative intrusion. Let's be clear about it - this is precisely the same issue that essentially is being debated in Washington, DC, with Walmart's opposition to a "living wage" bill, and that was highlighted when McDonald's created a financial services website for its employes that showed total ignorance about what it takes to support a family.

    People who work for these fast feeders and cannot support their families have a right to wonder how come the CEOs of their companies make millions, while people on the front lines make so little. Some of them may be teens and first-time workers, but there are plenty of them who are adults that are trying to make a living, often work two jobs, and continue to struggle. There is something much bigger going on here - Michael referred to it in his column this morning - and the debate about wage equity needs to take place.

    Published on: July 30, 2013

    The New York Daily News reports that Starbucks is installing a new feature in its Silicon Valley stores - tables that allow consumers to charge their smartphones and/or tablet computers wirelessly. The move is part of an expansion of a service that was offered first by Starbucks in its Boston stores.

    "More and more customers are using Starbucks as their home base and they are looking to recharge in a number of ways," says Adam Brotman, chief digital officer, Starbucks Coffee Company. "We have seen positive customer response to wireless charging through our tests in Boston, and are pleased to now extend this experience for our customers in the Silicon Valley area."
    KC's View:

    Published on: July 30, 2013

    Both the Financial Times and the Wall Street Journal have stories about Procter & Gamble and the return of CEO AG Lafley, who two months ago replaced Robert McDonald, the man who replaced him.

    The Journal writes that "Lafley is focused on shoring up sales growth by not giving up ground where the company should be dominant and by addressing long-standing weak spots - things P&G failed to do under the CEO's predecessor. While Mr. McDonald also refocused on the company's core markets in his last year, there is a sense among some P&G employees that decisions are now being made more quickly and that there is a greater emphasis on branding than before ... Lafley appears to be coming out of the gate with a clearer focus on the performance of core products in its biggest markets, including the premium products that were long the company's bread and butter. He is also emphasizing the need to create more game-changing new products and improving the fortunes of high-margin beauty brands."

    And FT reports that one of the things that P&G is focusing on is men's grooming products - especially "manscaping" items that have become more fashionable in the past few years, though they have not necessarily been using products manufacturer by P&G-owned Gillette.

    "According to P&G research," the story says, "about 29 per cent of American men already shave below the neck while 49 per cent of British men do. In France the figure is 33 per cent and in Germany it is 56 per cent." And so the company is marketing against that trend, but also is having to adjust its traditional strategy of getting men to trade up to more expensive and sophisticated grooming products, since data suggests that many men put a ceiling on how much they will spend.
    KC's View:
    Really? Twenty-nine percent of American men shave "below the neck"? Sometimes, there are stories that make me feel so old...

    Published on: July 30, 2013

    The New York Times has an interview with Fred Hassan, CEO of Bausch & Lomb, in which he addresses a subject often discussed here on MNB - the importance of front line employees.

    An excerpt:

    "My parents sent me off to learn engineering in Britain. One company I worked for had a tiered system. I would get my paycheck out of one window, and the guys who were in lower middle management would get their paycheck at another window. We would sit in separate cafeterias. I never forgot that, and wherever I’ve been in a position to make changes, the first thing I’ve always done is to get rid of any barriers that separate people ... A very important thing I learned from my parents was to get your hands dirty. Just go in there and do a good job, always focus on the next mile, and things are usually going to break your way."
    KC's View:

    Published on: July 30, 2013

    • The Huntsville Times reports that a bankruptcy court has named the Carl Marks Advisory Group (CMAG) to take over control of Belle Foods and manage the sale of its remaining 44 stores and the payment of $42 million in debt.. CMAG partner J. Jette Campbell will serve as chief restructuring officer, taking over for Bill White and Jeff White, the father and son team that has been running the company. The Whites are scheduled to officially resign on August 8; they will be able to bid for any of the 44 stores being sold if they like, but will not get any preferential treatment.

    • The New York Times reports that drug chain Rite Aid "has introduced a new loyalty program for customers 65 and older," providing those consumers "24/7 access to a pharmacist, discounts on merchandise and other benefits."

    Ken Martindale, president and chief operating officer of Rite Aid, tells the Times that “attracting new senior customers represents a crucial growth opportunity for Rite Aid because seniors tend to be our best pharmacy patients.” Increasing the size of its senior patient base also lets Rite Aid provide services like immunization and medication therapy management “to a segment of the population that stands to benefit the most from the positive health outcomes these services provide,” Martindale says.

    Bloomberg reports that in the UK, Visa Inc. is being "sued by Walmart Stores' Asda unit, William Morrison Supermarkets Plc and Arcadia Group Plc over payment-processing fees ... MasterCard Inc. is also being sued by more than a dozen companies over the fees in the U.K., including Asda and Morrison, the U.K.’s fourth-largest grocery store chain."

    The story notes that "the European Union proposed caps this week on such levies, known as interchange fees, that banks can demand from retailers at 0.2 percent for debit card payments and 0.3 percent for credit cards."

    • The Chicago Tribune reports that PepsiCo-owned Quaker Oats and Jamba Juice are teaming up, with Jamba agreeing to sell a number of Quaker products, including oatmeal and new items such as cookies, granola bars and other baked goods. Terms of the deal were not disclosed.

    There is no suggestion at this time that the products being developed by Jamba Juice could be sold in other venues.

    • Hudson's Bay Co., Canadian owner of Lord & Taylor, said yesterday that it will acquire Saks Inc., the luxury retailer, for about $2.4 billion.

    According to the Associated Press, "The acquisition combines three department-store brands - Hudson's Bay, Lord & Taylor and Saks Fifth Avenue - and creates a North American upscale retailing behemoth with 320 stores in some of the biggest and most populous cities in the U.S. and Canada."
    KC's View:

    Published on: July 30, 2013

    Got the following email from an MNB user who wanted to chime in on the discussion about Barnes & Noble:

    I tend to buy books at Barnes & Noble and other retail book sellers because I like to just look at the books and page through them. I have been a Barnes & Noble member for decades. Mostly I buy math and science related books and magazines. To the best of my knowledge I have never bought a romance novel. Since I use my member card to get a 10% discount they can track my every purchase. Every week I get an email from Barnes & Noble. Are there ever reviews of the kind of books I actually buy? Never. Are there tons of romance novels? As far as I can tell, yes, every week. My inference is that Barnes & Noble uses this weekly email as a revenue stream from publishers rather than as a means of actually selling books.

    Every one gets one rant a day. This is mine.

    Good customer, ticked off.

    Way to go, Barnes & Noble.

    Got a lot of email yesterday responding to my piece about how Sunday was the 35th anniversary of the release of Animal House. Which, as it happens, was shot in Oregon, which is where I've been living this summer. (Coincidence? I think not.)

    One MNB reader wrote:

    It was shot in Eugene & Cottage Grove Oregon to be more specific…and many of the frat scenes were at the old Delta Tau Delta Fraternity on the UO campus…that’s why I encouraged my son to pledge the Delts at UO…also Ken Kesey, One Flew Over the Cuckoo's Nest, lived in Springfield (next to Eugene) and his family continues to own Springfield Creamery (Nancy’s Yogurt).

    From MNB user Kathleen Whelan:

    Speaking of Shama Lama Ding Dong, a couple of years after I graduated (OK, almost) from college, I was working at a Sumer Theatre in the Adirondacks called Green Mansions, in Warrensburg, NY.  We used to go to Lake George to hear live music every chance we could.  That’s where I heard ‘Otis and the Elevators’ who played as ‘Otis Day and the Knights’ in Animal House.  I loved them then, and of course in the movie!

    Many years later, I was in a local band and somehow we got to talking about Otis and the Elevators.  Turned out our brilliant sax player had spent a hideous few months touring with them.  Seems as if Otis was trying to ‘out James Brown’ James Brown as an egotistical band leader.  Sometimes you don’t want to know too much about your musical faves.
    Thanks for mentioning them – I will be humming those tunes all day long!

    As for great lines from the movie, Glenn Cantor wrote:

    "Face it, Kent, you threw up ON Dean Wormer."

    MNB user Tom Hipwell wrote:

    The Best laugh in the movie was John (Bluto) Belushi’s  facial expression when Kent (Flounder) Dorfman’s  picture was put up on the screen with the new Pledge class.  Great Movie,  still makes me laugh!  Nice Call out!

    MNB user Joe Luehrmann wrote:

    You missed the BEST line in Animal House when Bluto and the crew were expelled from college ... "Seven years of college down the drain ..."

    The thing that I remember was that I saw the movie at age 19 with a couple of my friends - and we were the OLDEST people in the theatre.

    Ah, memories...

    I listened to the soundtrack all day yesterday. Made me happy.

    Almost as happy as getting all the Animal House email did.
    KC's View: