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    Published on: August 13, 2013

    by Michael Sansolo

    Back at the dawn of the Great Depression, an employee for what was then the Kroger Company sent the CEO a letter outlining a new way of selling food in a store that was heavily based on self-service and low prices. The note was ignored. That employee, Michael Cullen, quit and essentially created the modern supermarket with King Kullen.

    A little more than 30 years later, the owner of 15 Ben Franklin stores did something similar. Frustrated with management’s reluctance to consider his ideas on cutting costs and expanding into rural communities, Sam Walton went off on his own. We know how that turned out.

    Sometimes the best ideas are those right in front of us and yet they get ignored.

    It’s possible that many of you are wondering why we’ve been spending so much time here at MNB examining the incredible tumult in the publishing industry. Think about it: In three days last week, the Washington Post, Boston Globe and Newsweek all changed hands.

    Rest assured the reasons behind our coverage are good and go way beyond our personal interests.

    Rarely do we get such a powerful example of a widely established and highly profitable industry getting torn apart and thrown into a world of chaos so quickly. But it has happened before and it will likely happen again, so attention must be paid.

    For instance, consider the stories of both Cullen and Walton, two men who possessed visions of the future that were ignored by their companies. Ross Douthat, a columnist for the New York Times offered a similar story about the Washington Post this past weekend.

    Douthat recounted the story of John Harris and Jim VandeHei, who left the Post in 2006 to form Politico, now a widely sourced Internet publication on the world of Washington politics. Douthat made the point that the pair successfully leaped to the new world of journalism, while the newspaper they left struggled.

    In fact, he says, it may be the moment that history records as the tipping point for the Post.

    Let’s be very straightforward about these three stories. First, these are the exceptions not the rule. No doubt the higher ups at Kroger, Ben Franklin and the Post heard thousands of suggestions through the years and wisely passed on most of them.

    It’s never that easy to know which is the brilliant idea. The brilliant ideas, the earth-shattering ideas only look obvious in retrospect.

    But even with that said, we can’t ignore these lessons. We’re aware that we live in a chaotic time when the pace of change seems as juiced up on steroids as certain baseball players.

    More than ever we need to listen to these ideas and even build an environment where out-of-the-box thinking is encouraged. Then we need to consider the possibilities and ask the really hard question: could this work?

    Ask yourself what happened the last time you were in a meeting and someone presented an unusual idea. How quickly was it slammed to the ground with the reminder “that’s not how we do things”? More importantly, try to remember if it was you who offered that response. Do you try to think of reasons to say no before you consider a reason to say yes or even maybe?

    Sure, not every idea is a good one, but some are. Be open to 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:
    There's a reference I've made here and elsewhere over the years, called "The Old Fart Rule," that seems relevant here.

    Essentially, this rule says that The likelihood of an innovation succeeding increases exponentially with the number of old farts who refuse to endorse it.

    You can't ever allow old farts to determine the future of a business ... and you can't ever allow yourself to be the old fart at the table who is unable to see the future, unable to accept the possibility that the present and the future may be at odds with your own world view. (The more clinical phrase to describe this is "epistemic closure," one of my favorite terms.)

    If you allow this to happen, you run the risk of missing the moment, and missing the future.

    Published on: August 13, 2013

    by Kevin Coupe

    Normally, MNB would err on the side of being gallant and never mention a woman's age.

    (Yes, that seems sexist. But I was raised to be a gentleman.)

    But since the Los Angeles Times is taking note of this particular birthday, I think I will do the same.

    Frieda Caplan, who has done so much to revolutionize the field of specialty produce with her Frieda's Finest brand, helping to popularize items that had never been hard of by most people, much less tasted, has just celebrated her 90th birthday - though, as the story notes, she remains chairman of the company and "still comes to the office each day, and signs all the checks to produce suppliers. (Her daughter, Karen Caplan, is president of Frieda's Inc.) Her gait has slowed, but her mind, her wit, and her enthusiasm for family, business and political affairs are as effervescent as ever."

    Here's how it all started, according to the Times:

    "Frieda graduated from UCLA with a degree in political science in 1945, and started working in the office of a lawyer who was head of the CIO political action committee for Los Angeles, one of many liberal political involvements across her career. In 1951 she married Alfred Hale Caplan, president of a longshoremen’s union and a labor relations consultant.

    "Four years later she was working as a production manager for a nylon thread factory when she became pregnant, and looked for a job that would give her flexibility to take an extended leave to care for her child. She started working upstairs at the Seventh Street wholesale produce terminal in downtown Los Angeles, as a secretary for Giumarra Brothers Fruit Company’s stall, which was managed by her husband’s relatives.

    "One day when her husband’s uncle was on vacation, she filled in as a cashier downstairs on the selling floor, and started selling mushrooms, which were a minor sideline for the company. Women sales vendors were even rarer – she was the only one at the time – but with her promotion mushroom sales took off." Several years later, she opened her own specialty produce business ... and helped to change the shape of the business.

    So ... Happy Birthday, Frieda Caplan. And many more.
    KC's View:

    Published on: August 13, 2013

    Great piece in the Seattle Times about Tom Douglas, described as "Seattle's most celebrated restaurateur," who also happens to be the owner of Etta's, the bar and seafood restaurant there that I have written about numerous times over the years. (Etta's is where Morgan, who I've called one of the world's great bartenders, works.)

    Douglas is hardly a knee-jerk liberal. He opposed the mandatory sick leave law passed by the city in 2011. He lobbied against increased parking rates. And he is against the notion of a public policy that would mandate a $15-per-hour "living wage," noting that "I'm just not for government intervention in that way ... A lot of businesses that are only starting out couldn’t handle that."

    But Douglas has been in business for a long time, and so he knows exactly what he can handle.

    "Starting this pay period," the Times writes, "Douglas is raising the minimum wage for cooks and bakers in the kitchens of his 16 local restaurants to, coincidentally, $15 an hour. Previously a cook started at around $12 an hour — so this is a 25 percent boost in the kitchen base pay scale, overnight.

    "He’s also raising the minimum wage for dishwashers from $10 per hour to $12 — a 20 percent increase.

    "He calls it his 'Cooks and Chefs Minimum Wage Initiative.' It will cost, he projects, $1.3 million in its first year. (He’s not raising wages for waiters, who get paid primarily in tips.)

    “'Cooks are an undervalued, awesome profession,' Douglas enthused. 'I’ve always been in a labor-intensive business that unfortunately hasn’t paid very well. I decided after 25 years, I was in a position to try to change that.' ... Douglas had planned a major wage increase for his lowest-paid employees last year but delayed it due to the city’s sick-leave ordinance. That law was not as much of a burden as he thought it might be, though it ended up costing his company $350,000 in the first year."

    “My goal isn’t to force anyone to do this,” Douglas tells the Times. “I couldn’t have done it back when I was starting out. So no, I don’t support a $15 minimum-wage law for my industry. But take McDonald’s. It seems to me that once you can open restaurant after restaurant after restaurant, then you can start to take better care of your employees.

    "So if by raising what I pay I can hire away some of their better employees, over time maybe they’ll have to pay closer to what I pay. Same with other successful restaurants. That’s how it spreads."

    The story makes the point that "with the way the political winds are blowing, it seems his fellow capitalists around here have a choice. You can follow Tom. Or you can take your chances with the government."

    In other words, companies may be able to prevent government intervention ... if they address the issue instead of just going into defense mode.
    KC's View:

    I should point out that I'm an enormous fan of Tom Douglas. (The crab cake sandwiches at Etta's are better than almost anything, and I've never had a bad glass of wine there.) One of the things I've noticed over the years that I've eaten at his restaurants is that the faces and names of the folks who work there remain largely the same, suggesting that people are happy with the work environment and how they are treated. I've heard from a number of people I know that Douglas inspires enormous loyalty in the people who work for him, and even has invested in restaurants that have been opened by former employees.

    I find this new story fascinating, and it makes the point that I've been trying to make here on MNB. Douglas clearly recognizes that his restaurants only are as successful as the cooks who work there ... and that they need to be rewarded. Sure, it costs him money ... but he wouldn't be making money without them. He could replace them with cheaper workers, but would that mean sacrificing effectiveness for efficiency? And, at the end of the day, how much profit is enough?

    This isn't about a mandated $15-per-hour "living wage." It is about corporate mindsets and values.

    Tom Douglas, IMHO, has his in the right place.

    Published on: August 13, 2013

    The New York Times reports that Kraft Foods is launching "a major marketing blitz" that will encompass not just traditional media, bit also digital ads and social media, looking "to tap into the current mania with all things chef." And, perhaps more broadly significant, the campaign uses as its slogan a phrase with an "off-color" reference.

    According to the story, "The new line of nine meal-starters, called Kraft Recipe Makers, is being introduced with a campaign that features two celebrity chefs, Rocco DiSpirito and Carla Hall, presented in commercials as if they were a smart-aleck brother and sister critiquing their parents’ ability to come up with new and different dinner menus ... the campaign takes a cheeky tack as embodied by some mildly naughty wordplay in the theme of the ads, 'Get your chef together,' which doubles as the address of a microsite, or special Web site, devoted to the new line."

    "The Kraft campaigns," the Times writes, "are indicative of how ads from mainstream marketers are loosening up - or becoming crass and crude, depending on your perspective - to reflect changing societal mores, particularly when it comes to younger shoppers. Other recent examples include ads for Slim-Fast diet products sold by Unilever, which depict women thinking, 'I want to show off my new ass,' and commercials for the Kmart division of Sears Holdings in which shoppers utter provocative-sounding phrases like 'Ship my pants' and 'Big gas savings'."
    KC's View:
    As long as such wordplay works, it is fine ... and frankly, most people are going to find it even remotely scandalous. The problem is that because it works a couple of times, everybody is going to get into the act, and it may become tedious.

    Published on: August 13, 2013

    William Ackman, who owns 18 percent of JC Penney through his Pershing Square Capital Management company, has resigned from the retailer's board, effective immediately.

    He will be succeeded by Ronald Tysoe, the former CFO of Federated Department Stores and CEO of Campeau Corp. JC Penney said that it will name another new member of the board shortly.

    Ackman has been engaged in an internal debate at JC Penney as he has been calling for the replacement of CEO Myron Ullman, who was the CEO replaced by Ron Johnson, formerly of the Apple Stores, who was brought in - at Ackman's behest - to reinvent the department store chain and move it away from its discounts-and-promotions approach to marketing. When that didn't work out - sales, traffic and profits plummeted - Johnson was fired and Ullman was rehired. Ackman released a letter to the media last week in which he said that a new leader should be found within a matter of months, but that a search committee and headhunter firm hired by the board "have barely begun their work."
    KC's View:
    JCP needs two things in a new board member. They need someone who is a great merchant. And they need someone who needs to cut through all the political crap inside the company. The company doesn't have a big window in which to fix its problems, and they need to do something with the board that will actually help give the company some sort of direction.

    Published on: August 13, 2013

    Bloomberg reports that Chipotle Mexican Grill, which long has bragged that it does not sell beef treated with antibiotics, is changing its tune a bit and now will sell "meat from cattle treated with antibiotics because of an illness," though it still will not "use beef from animals that had been given antibiotics to prevent disease and promote weight gain."

    “The change was really rooted in the belief that it’s not the use of antibiotics for the treatment of illness that is the problem,” says company spokesman Chris Arnold. “The problem is the copious amount of antibiotics that are used to promote growth.”

    According to the story, "While Arnold said the motivation for the change isn’t to increase its supply of steak, Chipotle hasn’t been able to get enough naturally raised beef to meet customer demand. This year, about 80 percent to 85 percent of the beef sold at Chipotle’s more than 1,500 stores has been naturally raised, compared with almost 100 percent last year, Arnold said."
    KC's View:
    I think that Chipotle is doing a good job of making the case that this adjustment of standards is sensible, and not a violation of core values.

    Published on: August 13, 2013

    • Naivas, a Kenyan retailer, said today that it is negotiating a sale of a majority of the company to Massmart, the South African retailer that is majority owned by Walmart.

    Rumors first broke over the weekend about Walmart looking for a way into the Kenyan market, with three chains defined as possible targets.

    According to Reuters, Naivas Chairman Simon Mukuha said that "the deal is in the pipeline," and that he plans to sell 50 percent of the company, plus one share, to Massmart.
    KC's View:

    Published on: August 13, 2013

    • The Associated Press reports that Pinnacle Foods, which owns such brands as Vlasic, Duncan Hines, and Birds Eye, is buying Wish-Bone salad dressings from Unilever for $580 million. According to the story, "Unilever PLC will continue to produce the brands for an undetermined period of time under a third-party manufacturing agreement."

    • The Associated Press reports this morning that David Murdock, chairman/CEO of Dole Food, is taking the company private in a deal that values the company at $1.2 billion.

    According to the story, "Dole has gone through a number of major changes recently. It sold its packaged foods and Asia fresh business for $1.69 billion in a deal that closed in April. That allowed Dole to become solely an international commodity produce company, with a narrower focus that also makes its earnings more volatile."

    The deal is expected to close in the fourth quarter.

    • The Associated Press reports that Campbell Soup is in "final negotiations to sell its European business to private equity firm CVC Capital Partners for an undisclosed sum, the latest move by CEO Denise Morrison to reshape the company.

    "The proposed sale includes the company's soups, sauces and other products that are sold under a variety of names in Belgium, Finland, France, Germany and Sweden. The deal, which is not yet final, doesn't include products in the United Kingdom, Ireland, the Middle East or Africa, or the export of its Pepperidge Farm baked goods."
    KC's View:

    Published on: August 13, 2013

    • Stephane Gonthier, COO of Montreal-based Dollarama, reportedly is moving to California to become president/CEO of 99-cents Only Stores.
    KC's View:

    Published on: August 13, 2013

    ...will return.
    KC's View: