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    Published on: February 19, 2014

    by Kate McMahon

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

    Hell hath no fury like a crusading blogger named Food Babe and thousands of social media supporters. Just ask Subway and Chick-fil-A. Facing consumer pressure, these fast food chains this month announced changes in their signature ingredients.

    Chick-fil-A said it would use chicken raised without antibiotics in all of its 1,700-plus restaurants within five years. And Subway agreed to eliminate an FDA-approved food additive – azodicarbonamide – from the bread served in its more than 40,000 sandwich shops.

    The heat was generated by health food activist Vani Hari, who writes the Food Babe blog. Noting that azodicarbonamide was used in yoga mats and shoe rubber as well as bread, she started an online petition titled “Subway: Stop Using Dangerous Chemicals in Your Bread.” The petition garnered 50,000 signatures within 24 hours and her “Food Babe Army” stormed Subway’s social media platforms. A photo of Hari holding a bright blue rolled yoga mat in front of Subway got plenty of play and mainstream media attention, and even inspired a Jimmy Fallon joke.

    Hari has long been after Chick-fil-A for its ingredients, and one blog post showed a picture of the classic sandwich with the headline “Chick-fil-A or Chemical-fil-A?” Company execs invited her to a four-hour summit to discuss nutritional concerns in 2012, and she said her No. 1 request was that it go antibiotic free.

    Similar scenarios? At first glance, yes. But I think the most interesting business lesson here is the difference in the way each chain acknowledged consumer input and leveraged that in social media.

    Chick-fil-A said its patrons clearly expressed a concern for antibiotic free poultry and “When the people who matter to you most ask you to do something important – you listen.”

    The announcement was posted on Facebook, prompting some 28,000 likes and appreciative comments (plus calls for no MSG). It distilled the message for Twitter to “You asked. We listened. Our journey to serve antibiotic-free chicken has begun.” And Hari gleefully announced it on her blog, trumpeting “We did it again!”

    On the other hand Subway, clearly under the most social media pressure, did not acknowledge consumer input at all and said the change was part of an “ongoing effort to improve its recipes.”

    A representative told the Associated Press that the process was underway before the petition was launched, but did not provide to any media outlets details on when it actually started or when it would be complete.

    So instead of basking in positive publicity, Subway is facing continued criticism on Food Babe for not being more forthcoming. And it made no mention of the change on its Facebook or Twitter platforms, where foes are still making derisive comments such as: “Can I bring my own bread – I mean yoga mat?”

    I think Chick-fil-A made a smart play, generating immediate good will even though the changeover will take five years and turning an enemy into an advocate. I question whether Subway’s unwillingness to acknowledge consumer opinion was motivated by ego, stupidity or both. Such a lost opportunity.

    We’ve seen similar pressures brought to bear online on Kraft Macaroni and Cheese (foodbabe.com, again) and Gatorade (a 15-year-old girl from Mississippi), and no doubt this will escalate as consumers demand more “free-from” products.

    There are those who say that the reason companies do not acknowledge consumer pressure is because they feel it will bring the crazies out of the woodwork, but I would argue this is old-world thinking. Sure there are crazies on social media, but their numbers are dwarfed by the articulate, educated consumers who fill their grocery baskets and have come to demand accountability and real-time response. In this new world order, Chick-fil-A definitely showed how to turn lemons into lemonade.


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

    Published on: February 19, 2014

    by Kevin Coupe

    Interesting story on Slate.com that poses the following question:

    What percentage of grocery products sold by Walmart would not be allowed in a Whole Foods store because of its "banned ingredient" list?

    The answer: "When all 78 ingredients banned by Whole Foods are taken into account, roughly 54 percent of food items sold at a Walmart would be prohibited at Whole Foods."

    Yikes.

    According to the story, Whole Foods' "blacklist is 78 ingredients long and contains many well-known villains in the eyes of health-conscious eaters - aspartame, MSG, and high fructose corn syrup, to name a few … Of course, it’s important to remember that, while Whole Foods has attached a stigma to the ingredients it’s declared “unacceptable,” all of these ingredients are approved by the Food and Drug Administration. Whole Foods doesn’t offer much of an explanation on its website for why it has banned these ingredients. A representative from the company explained by email that the decision to prohibit an ingredient comes from 'many factors including safety, necessity, manufacturing methods and compatibility with our overall core values'."

    You can check out the story, the explanations, and an interactive list here.

    It is an Eye-Opener.
    KC's View:

    Published on: February 19, 2014

    The law firm of Robbins Arroyo LLP, which specializes in shareholder rights cases, has filed a class action lawsuit against Fairway Group, charging that the company misrepresented its financial situation during its IPO last year.

    Specifically, the complaint alleges that "Fairway Group made materially false and misleading statements regarding the company's business, operational, and compliance policies. Specifically, Fairway failed to disclose that: (i) the company's same store sales were declining; and (ii) its direct store expenses were increasing; (iii) Fairway's financial forecasts were wholly unrealistic."

    As reported here on MNB about a week ago, Fairway - which was predicting at the time of its IPO that it could challenge Whole Foods nationally and eventually open as many as 300 stores, has been suffering from same-store sales declines and quarterly losses of more than $30 million. The company lost its CEO, Herb Ruetsch to retirement; he was replaced by the company's president, William Sanford, who has almost no retail marketing experience, having previously served as operating partner at the private equity group that bought Fairway in 2007 and took it public last year.
    KC's View:
    I have no idea if the lawsuit will stand up to scrutiny, or if the plaintiffs will be able to prove any sort of willful deception on the part of Fairway's owners. (I also have no sense about the credibility of Robbins Arroyo, a firm that seems to thrive on investigating a suing corporate entities and putting out press releases about it.)

    However … I would point out that anyone surprised by Fairway's travails clearly was not reading MNB, because I've been skeptical about the whole construct almost from the beginning of the company's efforts to generate lots of money with big talk and little else. I've been saying all along that it seemed to me that much of what Fairway was doing seemed geared to satisfying Wall Street rather than Main Street, and I'm pretty sure that I used the actual phrase, "Investors beware."

    Not that I deserve too much credit for this. After all, even a broken clock is right twice a day.

    But the Fairway promises just seemed too good to be true.

    Published on: February 19, 2014

    The Associated Press reports that US olive oil producers are pushing government regulators to do a better and more extensive job testing olive oil imports, claiming that "European olive oil filling U.S. shelves often is mislabeled and lower-grade oil."

    According to the story, "the domestic industry has mounted an aggressive push in Washington, holding olive oil tastings for members of Congress and lobbying them to put stricter standards on imports. The strategy almost worked last year when industry-proposed language became part of a massive farm bill passed out of the House Agriculture Committee.

    "The provision backed by California lawmakers would have allowed the Agriculture Department to extend mandatory quality controls for the domestic industry to imports. The bill's language would have allowed government testing of domestic and imported olive oil to ensure that it was labeled correctly … But the language was stripped from the bill when it reached the House floor, an effort led by lawmakers from New York, where many of the country's olive oil importers are based. They had the backing of food companies and grocery stores that use and sell olive oil."

    The story says that domestic olive oil producers plan to keep pushing the USDA for stricter regulations and more extensive testing.
    KC's View:
    I'd agree that the USDA ought to have as part of its standard operating procedures making sure that products are what the manufacturers say they are … and if there is any evidence that foreign olive oil suppliers are selling sub-standard or mislabeled products, they ought to come down on these suppliers like a ton of bricks. The importers and suppliers are far less important than the ultimate consumers, who need to be able to believe the labels on products of every kind.

    Published on: February 19, 2014

    Instacart, the personal grocery shopping service with operations in San Francisco, Chicago, Boston, and Washington, DC., said yesterday that it is expanding to Philadelphia, where it will be sending shoppers to local Whole Foods stores on customers' behalf.

    In other markets, Instacart has served stores that include Safeway, Shaw's, Harris Teeter and Costco. The basic model has Instacart being paid by consumers to shop at these units; one-hour delivery is available at an extra charge.

    In a related story in USA Today, Instacart founder Apoorva Mehta says that he believes that Instacart can be a formidable competitor to Amazon because it is a relatively low-cost model in terms of infrastructure. While it can take months or longer for Amazon Fresh to expand into a new market, it costs Instacart just $30,000 to launch in a new city, three weeks to get set up, and roughly six months to get profitable.

    Mehta says that he has received calls from companies looking to acquire Instacart - the "usual suspects," he calls them - but that he's interested only in expanding, not in selling. And that doesn't just mean geographic expansion: Mehta says, ""We're starting with the ability to deliver groceries but we are a software company and have a lot of avenues to grow into other verticals."
    KC's View:
    I continue to believe that in the long run, Instacart is probably going to have to work as an arm of the retailers, rather than as a "personal shopper" for consumers … it just seems to me that the current process may be cheap and disruptive in the short term, but may not be sustainable … especially if the retailers it is accessing decide to aggressively push their own e-shopping programs.

    I also tend to think that to some degree, Mehta is playing hard to get. This is not a long-term play for him … as he says, Instacart is a software company. When the time is right, he'll sell this puppy and move on.

    Published on: February 19, 2014

    Iowa-based Hy-Vee Inc. said this week that it is acquiring Nebraska-based Amber Pharmacy, described as "a specialty pharmacy solutions provider."

    According to the Business Record, "The two companies  have  been partners in Hy-Vee Pharmacy Solutions since 2010, and the acquisition will allow Hy-Vee to expand its current specialty pharmacy business, providing customers with increased specialty options, access and affordability."

    Terms of the deal were not disclosed.
    KC's View:

    Published on: February 19, 2014

    • The Tampa Tribune reports that robotics technology appears to be a major component of Amazon's new warehouse, a one-million-square-foot facility being built in Florida's Hillsborough County.

    The story says that documents filed with local regulators suggest that "hundreds of 'autonomous mobile robots' will scurry around the warehouse floor and deliver entire shelves to stationary human pickers … Amazon deployed nearly 1,400 such robots in three undisclosed warehouses last year. Amazon bought the company that makes the robots, Kiva Systems of Massachusetts, in 2012."

    The trend is seen as having a human impact: while the facility is expected to hire as many as 1,000 full-time employees, the majority of them will be low-skilled picking and sorting jobs. However, the deal that Amazon signed with the county - giving it incentives for building there - requires it to create at least 375 jobs that pay at least $47,581 a year.
    KC's View:

    Published on: February 19, 2014

    • The Los Angeles Times reports that the US Department of Agriculture (USDA) has shut down Central Valley Meat Co. in Hanford, Calif., described as "a troubled Central California slaughterhouse," for "failing to meet cleanliness standards." The closing is effective immediately, and remains in place until management "produces a corrective plan," the story says.

    The facility has a history of food safety and animal cruelty offenses.


    • The Associated Press reports that "Nestle is voluntarily recalling two of its Hot Pockets products as part of a larger meat recall," saying that "the products may have been affected by a meat recall by Rancho Feeding Corp. that was announced last week. Rancho is recalling more than 8.7 million pounds of beef products after regulators said that it processed diseased and unhealthy animals without a full inspection. The USDA says the products were unfit for human consumption."

    The affected products are ‘‘Philly Steak’’ and ‘‘Croissant Crust Philly Steak and Cheese’’ Hot Pockets in certain sizes.


    Bloomberg Businessweek reports that Kellogg Co. "has agreed to buy palm oil only from suppliers who can prove they don’t damage rain forests, the strongest move yet by a public food manufacturer to stop the practice, according an environmental group that pressured the maker of Corn Flakes and Rice Krispies.

    "Starting in 2016, palm oil -- a vegetable oil used to cook Pop-Tarts to Pringles -- will be sourced through supply chains that are deemed 'environmentally appropriate,' states a new policy posted on the Battle Creek, Michigan-based company’s website. Suppliers must trace the oil to plantations that are independently verified as legally compliant, Kellogg’s Chief Sustainability Officer Diane Holdorf said in an e-mail."


    • In Colorado's Daily Camera, there is a story about how Lucky's Farmers Market, a Boulder-based grocery chain, is being sued by Albertsons LLC and Save Mart Supermarket for trademark infringement." The two chains allege that Lucky's "is infringing on the trademark of Lucky Supermarkets" - including a "virtually identical" logo.

    According to the story, "Albertsons LLC retained ownership of the Lucky trademarks after the acquisition and divestment of the Albertsons chain in 2006. Save Mart Supermarket, which acquired Albertsons stores in California and Nevada, subsequently licensed the Lucky trademarks from Albertsons LLC for use in those two states."

    Lucky's Farmers Market says that it is in "congenial" discussions with Albertsons and Save Mart, and hopes to have to issue resolved shortly.
    KC's View:

    Published on: February 19, 2014

    • NACS, the c-store trade association, said that Dana Langley Birdsong has joined the organization as its political relations director. According to the announcement, Birdsong "comes to NACS after several years of running her own consulting business working with former members of Congress, federal candidates and nonprofits on fund-raising and grassroots initiatives. Prior to consulting she was director for advocacy, grassroots & political action committee development at the American College of Cardiology."
    KC's View:

    Published on: February 19, 2014

    Roger Angell has been writing for The New Yorker for decades, and is best known for his essays about baseball, as well as for being the magazine's longtime fiction editor. (Angell is the son of Katherine Sergeant Angell White, the first fiction editor for The New Yorker, as well as the stepson of E.B.White, author of, among other things, "Charlotte's Web" and "Stuart Little.")

    He's also 93 years old, and has just written a wonderfully frank and funny piece about aging for the current edition of the magazine.

    This has nothing to do with business, but has everything to do with life. And death, I suppose, a subject that has been on my mind lately because of recent events.

    If you have the time and the interest, I'd suggest you settle in and give it a read. It is entitled "This Old Man," and you can read it here.
    KC's View:

    Published on: February 19, 2014

    We had a story yesterday about how The Container Store has announced that it is contributing $100,000 to the launch of an Employee First Fund, described as "an employee assistance fund that will provide grants to employees experiencing unforeseen emergencies, a major medical situation, are suffering from a catastrophic event, or facing other challenges in life which they are not financially prepared to handle."

    My comment, in part:

    This sort of thing might not be for every company, but it does speak volumes about a corporate culture that says that the people on the front lines are the most important people in the organization.

    One MNB reader from Walmart responded:

    Just for the record, Walmart started a program called Associate in Critical Need Trust (ACNT) in 2001. All associates have the opportunity to donate, but management associates are encouraged to as a payroll deduction and Walmart will match contributions up to a certain amount.

    There are instances where associates sometimes run short on money, or have something catastrophic happen, like a house fire or a car accident that effects their ability to work again.  I have seen these happen, and have seen the people around them in the store and office rally to their side and make sure they were taken care of.


    From another reader:

    The Kroger Co. has offered a similar program for probably a decade or more, called “Helping Hands.” Like Costco’s fund, we help our associates during catastrophic events that are financially burdensome. The company provides some corporate funds, but the majority of the money is raised by each of us during Helping Hands fund drives, such as bake sales and raffles. Simple stuff that’s a win at the moment (who doesn’t love a yummy cupcake!) and a win when we may REALLY need a “helping hand.” What’s also great is we keep money local within each of our divisions, so when we donate (or receive), we feel particularly connected to the people who will receive the assistance. I’m extremely proud to work for a truly generous company – not just from a big corporate perspective, but from a generous group of associates. We may be big in numbers, but we also have big hearts. Kudos to Container Store for catching on to Kroger’s best practices. ;o)

    And from MNB reader Jim McConnell:

    This is a good move and one that more companies should make.  Here at Whole Foods Market we have had a Team Member Emergency Fund for years.  It’s one of the many things we do to promote team member happiness.  We also have an annual Team Member Appreciation Week every April to celebrate our great team members.  Whole Foods Market has also been on the Fortune Best Places to Work list since its inception.




    Responding to the passing of Bill Davila, MNB reader Bob Anderson wrote:

    As someone who worked for Bill, I would agree that Vons under his leadership was the first retailer in the US to recognized the growth of the Hispanic population in California. Bill did a lot to help and lead Vons and the industry in this area.

    Vons was blessed to have so many great leaders, Dick London, Les Lorge, Dick Risher, Sonny King just to mention a few.

    Bill will be missed by all of us.


    MNB reader Wayne Redfearn wrote:

    Bill Davila was one of the finest people in the food industry. In 1980 I had just started my private label food brokerage business. I made a presentation on generics to Vons and was fortunate to work closely with Bill and his team in developing the Vons generic program, Slim Price. Bill went beyond the call of duty to support the program and make sure I was treated fairly for my efforts.

    He never forgot his modest roots and was loved by all that knew him.

    RIP my friend.


    MNB reader Nancy Zeidenberg wrote:

    I am saddened to read of the passing of Bill Davila of Vons.

    In the 80's I worked in Sales in So Cal and I fondly remember seeing him in the Vons TV commercials and appreciated his earnestness and sincerity.

    I also enjoyed taking several visitors from my Co HQ who would come to LA as part of an effort to create Hispanic Marketing programs, and take them into a Tianguis - which as you note, catered to a predominantly Hispanic clientele.  These stores were bright, and bustling and as result of Mr Davila's influence, knew exactly what their Shoppers wanted - from the in-store tortilla making to the more unusual cuts of meat available at the Butcher shop.  The latter was always an eye opener for those unaccustomed to anything not saran wrapped...

    As you suggested, a man ahead of his time.





    Chiming in on the question of how Amazon could best position a price increase for Prime memberships, one MNB reader wrote:

    Just a thought ... in line with the free movie streaming for Prime members, what would happen if, as part of a Prime price increase, AMZ offered a free on-line subscription to the Washington Post? High perceived value. Low marginal cost. Increased readership. Higher ad rates. Powerful competitive positioning against other subscription-based newspapers (NYT, Times, Telegraph, etc). Such would add to the strengthening of the AMZ Prime "Club" just like, as you say, Costco is doing. Result: Strengthening the "tribe".




    And, on another subject, MNB reader Bob Lewis offered:

    While Netflix has done a great job positioning itself for the future, I think their business model is at serious risk without legislative assistance. Netflix requires cooperation from their competitors to deliver content. It would not be surprising if, in the near future, Comcast and other internet providers choke off delivery of Netflix to force consumers to use their cable services. Netflix has the potential to disrupt the cable business like nobody else. I really hope Congress steps in to keep Netflix in business before the cable companies choke off the Internet pipeline.



    And finally, in what may be one of my favorite emails in the history of MNB, Mark Boyer had a thought about the first two stories that ran on MNB yesterday:

    From MNB today I learned that a guy can use an app to find a willing mate to join the Mile High Club, and then stuff her panties into his blazer pocket as a fashion statement. I am not getting this kind of insight anywhere else. Keep up the good work.
    KC's View: