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    Published on: August 4, 2014

    by Kevin Coupe

    The Wall Street Journal has a story about how "a federal law that aims to curb childhood obesity means that, in dozens of states, bake sales must adhere to nutrition requirements that could replace cupcakes and brownies with fruit cups and granola bars … the restrictions that took effect in July stem from the 2010 Healthy, Hunger-Free Kids Act championed by first lady Michelle Obama and her 'Let's Move!' campaign. The law overhauled nutrition standards affecting more than 30 million children. Among the changes: fatty french fries were out, while baked sweet potato fries were deemed to be fine."

    The story goes on to say that the law requires the US Department of Agriculture (USDA) "to set standards for all food and beverages sold during the school day, which includes vending machines, snack carts and daytime fundraisers. It allowed for 'infrequent' fundraisers, and states were allowed to decide how many bake sales they would have that didn't meet nutrition standards. Without state-approved exemptions, any treats sold would have to meet calorie, sodium, fat and other requirements. The law permits states to fine schools that don't comply."

    The Obama administration says that states have flexibility, and are being encouraged to make appropriate decisions related to bake sales and other fund raisers.

    While I respect the goals and aspirations of the "Let's Move" effort, and think that anything that can be done to improve the slop that is served in many school cafeterias is a good one, I also think that these kinds of absolutes actually work against the entire notion of education and making intelligent choices.

    I have no problem with the idea that school lunches - which are, after all, funded by taxpayer dollars - ought to be healthy and nutritious, designed to help educate kids about how to eat intelligently. There are people a lot smarter than I who think that childhood obesity is a national security issue, and so it strikes me as sensible to address this in the cafeteria as well as in the classroom.

    But totally outlawing things like cupcakes from in-class birthday parties, and sweets from school fundraisers, assumes that such things have no role in kids' lives, and that there is no such thing as appropriate indulgence. Which, of course, is inaccurate.

    There is room in kids' lives for both fresh fruit and cupcakes. Part of the schools' role ought to be to help them understand that and to help them make smart and informed decisions. Retailers, if they are smart, ought to be able to carve out a piece of the debate for themselves.

    At least IMHO.
    KC's View:

    Published on: August 4, 2014

    The Associated Press reports that Walmart "is making changes to its website to personalize the online shopping experience of each customer … rolling out a feature that will enable its website to show shoppers more products that they may like, based on their previous purchases. It also will customize Wal-Mart's home page for each shopper based on where that customer lives, showing local weather and events, as well as the customer's search and purchase histories."

    The change, the story says, is part of Walmart's continuing efforts to be competitive with Amazon's offerings, which is scheduled to culminate in a total site redesign and and re-launch early next year.

    The AP story notes that Walmart's "e-commerce sales increased by 30 percent to over $10 billion in its fiscal year that ended Jan. 31. By comparison, Wal-Mart's U.S. discount division has had five straight quarters of sales declines at stores opened at least a year. Wal-Mart sees big growth opportunity in the online business: Online sales still are only a fraction of the $473 billion Wal-Mart generated in overall annual revenue, dwarfed by Amazon's $60.9 billion in annual sales."
    KC's View:
    There's no question that Walmart is arming itself for the ultimate battle with Amazon, just as Amazon is playing hardball with suppliers and investing heavily in a wide variety of initiatives as a way of making sure that it does not lose the e-commerce advantage it has established.

    I keep wondering about the collateral damage will result from this expected epic battle. Because I think there potentially could be a lot of it.

    Published on: August 4, 2014

    The Boston Globe reports that Arthur T. Demoulas, the deposed CEO of Market Basket, has offered to return to run the company while his side of the family negotiates with the Arthur S. Demoulas side of the company to buy the 50.5 percent of the company that it does not own. Such a move, he says, would allow him to "stabilize and begin to restore the business," which has been roiled by employee protests and customer boycotts since his firing.

    The formal statement by Arthur T. Demoulas's spokesman read as follows:

    Arthur T. Demoulas and his side of the family have been working around the clock to pursue their offer to buy the 50.5% of shares in DSM they do not own for a full and fair price. As part of his proposal, Arthur T. has also offered to move immediately to return to work in advance of the completion of the stock purchase and work to bring back his full team to stabilize and begin to restore the business. He offered to do so starting as soon as midnight tonight. These steps are critical at this point and are in the best interests of Associates, customers, vendors and shareholders. Time is of the essence. Arthur T. is hopeful but resolution depends on the response of the other shareholders in order for an agreement to be reached.

    The formal response from the Market Basket board of directors read:

    Demoulas Market Basket is considering strategic alternatives directly with parties in private conversations. We encourage the B shareholders, including Arthur T. Demoulas, to continue providing constructive proposals. Following the Board’s evaluation of all of offers, it will convey its recommendations to the Company’s shareholders who have the final decision as to which strategic alternative, if any, to accept. The Board fully supports the current management team in their efforts to ensure that Market Basket’s normal business operations resume immediately for the benefit of its customers, associates, vendors and communities.

    In other words, no thanks…and by the way, we have other options, so don;t get ahead of yourself.

    Meanwhile, employees are scheduled to hold yet another mass rally in support of Arthur T. Demoulas on Tuesday … management is holding job fairs this week to line up potential replacement for employees it intends to hire if they don't show up for work … senior level employees have been told via letter that they will not be paid for August if they don't show up for work today … and management-level employees fired last month are claiming that they were "wrongfully terminated."

    (In case you've forgotten … The longtime family feud boiled over with the move by Arthur S. Demoulas, to oust CEO Arthur T. Demoulas due to a conflict over the company’s finances. The fight is characterized differently by the two sides. The Arthur S. Demoulas faction argues that Arthur T. Demoulas spends money irresponsibly and refuses to take direction from the board. The Arthur T. Demoulas side maintains that his cousin is fueled by greed, only interested in raising prices, cutting employee compensation, and threatening the formula that has built the company to a New England success story. To be fair, though, this is a battle that goes back decades, and that is beginning to resemble the Hatfields and the McCoys.)
    KC's View:
    Hard to imagine that the value of Market Basket isn't declining with every passing day …

    Published on: August 4, 2014

    Reuters has a profile of Dave Lewis, the longtime Unilever executive who has been chosen by Tesco's board to replace Philip Clarke as the troubled retailer's new CEO. According to the story, Lewis spent more than a quarter-century at Unilever, where he "turned around a string of operations including the consumer giant's British business, cutting costs and energising staff with innovative marketing campaigns." Lewis also is described as someone adept at creating a strong management team, something else that Tesco is seen as needing, since many top executives left during Clarke's tenure.

    While Lewis has no direct retail experience, Reuters writes, "Interviews with several people who know Lewis describe him as 'very bright,' 'tough as old boots' and 'entrepreneurial,' yet 'unpretentious' and 'self effacing.' At dinners with analysts, he seeks their views instead of doing all the talking. 'The fact that he's not a shopkeeper and he hasn't got a history of being in retail will partly be to his advantage and partly will be his challenge. He will be a breath of fresh air,'" one former Tesco board member tells the news service.
    KC's View:
    There seem to be a lot of organizational changes on which Lewis needs to focus, not to mention improving morale at a company where Clarke was perceived as being imperious. But the big decision he faces - and the Reuters story alludes to this - is strategic - does Tesco take on thriving discounters such as Aldi and Lidl in an all-out price war, or should the company instead stake out a competitive position that establishes it as an alternative without making price the be-all and end-all?

    Published on: August 4, 2014

    Advertising Age reports that "Procter & Gamble Co. plans to divest, discontinue or merge more than half of its brands globally as it restructures to focus on its top 70 to 80 brands."

    CEO AG Lafley, who returned to the company about 14 months ago, said on a conference call last week that the move is "an important strategic step forward that will significantly streamline and simplify the company's business and brand portfolio … We will become a much more focused, much more streamlined company of 70 to 80 brands."

    According to the story, "That move will mean divesting, discontinuing or finding partners for another 90 to 100 brands in P&G's current portfolio, which also implies major consolidations of agency and other marketing-services brand assignments in the future."

    The Wall Street Journal writes that "the move is a major strategy shift for a company that expanded aggressively for years. It reflects concerns among investors and top management that P&G has become too bloated to navigate an increasingly competitive market."

    No timeline has been established for the divesting process, but expectations are that it could take a year or more, "governed by our ability to create value," CFO Jon Moeller says.
    KC's View:

    Published on: August 4, 2014

    • The Wall Street Journal reports that the dispute between Amazon and Hachette may go on longer than many people expect, judging by the 18 months of negotiations that took place between Amazon and Kensington Publishing Corp., a small New York book publisher,, in order to reach a 12-month deal.

    According to the story, the final agreement required both sides to give some on "list prices, payment terms, and promotional funding." And the Journal reports that similar negotiations may be taking place between Amazon and other publishers.

    As previously reported here on MNB, the Amazon-Hachette dispute boiled over when the e-tailer decided to play hardball by severely limiting the availability of Hachette-published books. Hachette has claimed that Amazon is asking for unfair financial terms, while Amazon has said that it is looking for a financial structure that accurately reflects the diminished role that traditional publishers play in a digital world.
    KC's View:

    Published on: August 4, 2014

    The New York Times over the weekend had an op-ed column by Cornell University labor professor Louis Hyman, who argues against the deal announced last week that will have Dollar Tree acquiring Family Dollar for $8.5 billion.

    "While hedge funds stand to make millions of dollars from the deal, the millions of Americans on limited budgets who rely on such stores will unfortunately be left behind," Hyman writes, adding, "My concern with this merger is that in the zealous quest for profit-generating 'synergies,' the Family Dollar stores, which provide an affordable alternative to relatively expensive corner stores, may have to be closed."

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

    Published on: August 4, 2014

    • The Wall Street Journal has an interesting nugget of information - that former Pepsi/Walmart/Safeway executive Brian Cornell, before he was offered and accepted the CEO job at Target, was offered the same job at JC Penney, which he declined because he did not think that retailer had much of a future.

    According to the piece, JC Penney has been looking for a successor to current CEO Myron Ullman since he was hired back to replace Ron Johnson, the former Apple Store executive, who himself replaced Ullman.

    • The National Retail Federation (NRF) is out with its annual listing of the fastest-growing retailers in the country, based on data compiled by Kantar Retail, and it shows that Albertsons - fueled by a "reassemblage of a supermarket empire that stretched from coast to coast in the early part of this century," especially by its acquisition of stores previously owned by Supervalu - is at the top of the list

    SpartanNash was in the fifth spot, described as "an aggressively expanding group of traditional supermarkets centered in and around Michigan, (which) moved from gobbling up local grocers to taking over Nash Finch, a Minnesota-based grocery wholesaler and retailer."

    CNN reports that things may only get worse for troubled electronics retailer RadioShack, which only has $62 million in the bank and could run out of money a year from now unless it is somehow able to restructure its business.

    RadioShack executives have been looking to close stores, but creditors have rebuffed those efforts, and simultaneous moves to rehabilitate what may people see as an irrelevant brand have not gained needed traction.

    • The New York Times reported over the weekend on how some entrepreneurs "believe protein-rich insects, and crickets in particular, are poised to ignite a quinoa-like food craze … (they) also think crickets could appeal to people concerned with environmental sustainability. The insects take just six to eight weeks to reach maturity and, because they don’t require much food, water or land and produce low levels of greenhouse gas emissions, they have a smaller carbon footprint than, say, a cow."
    KC's View:

    Published on: August 4, 2014

    Advertising Age>/i> reports that Mary Beth West, the top marketing executive at Mondelez International, carrying the title of executive VP-Chief Category and Marketing Officer, "is leaving the company as part of a C-suite reorganization at the snack and candy giant. Marketing will now be overseen by Mark Clouse, Mondelez's North American president, who will assume the newly created role of chief growth officer. That role will have responsibility over corporate strategy and global marketing, sales and research and development."

    West is said to be leaving the company "to pursue other interests."
    KC's View:

    Published on: August 4, 2014

    We had a story the other day that took note of a Reuters report that five food writers have been issued subpoenas by Beef Products Inc. which wants to see any and all communications they may have had with ABC News regarding so-called "pink slime." The story said that "Beef Products Inc. sued the network in 2012 seeking $1.2 billion in damages for the coverage of the meat product the industry calls 'lean, finely textured beef,' which critics dubbed 'pink slime.' BPI said ABC's coverage misled consumers into believing the product was unsafe and led to the closure of three plants and roughly 700 layoffs."

    Attorneys have responded to the suit by saying that ABC always said in its stories that pink slime had been declared safe to consume by the US Department of Agriculture (USDA) and, besides, since pink slime is actually pink and slimy, the suit is "overreaching."

    Which led one MNB reader to write:

    Perhaps this is business as usual…when the truth surfaces and hurts a business…then sue everybody…perhaps not to retain or regain business reputation…but to keep people from reporting on the next business-related social scam…

    P.S. Just because the USDA says it’s healthy doesn’t make it so…

    All true.

    I did a piece recently suggesting that Zipcar is losing some of its brand equity, which prompted one MNB reader to write:

    Regarding ZipCar - and the mention of another option - I am intrigued by Getaround, the car rental service similar to Airbnb. Though a completely different model, I would think these guys would be on rental car company radar like Airbnb is to the hotel industry. Getaround isn’t for most business travelers but as my kids start driving, they are going to earn money by renting out our old clunkers in the Getaround world.

    Responding to the hiring of Brian Cornell to run Target, MNB reader John Franklin wrote:

    As I had commented previously following Gregg Steinhafel's departure from Target and the search for his successor, I wanted to follow up. I think Brian Cornell is a solid pick. He's got retail and manufacturer background, including Club, Grocery and Specialty - great perspective for a multi-category retailer like Target, and you have to believe he picked up some valuable Walmart insights by osmosis, even though he was on the Sam's Club side. Not much buzz here in Minneapolis as yet, but my sense is that the reception will be warm. He'll want to be sure that Kathee Tesija, EVP-Merchandising, is solidly on his team, although I suspect that the Board has made very sure that Cornell passed muster with her before casting their votes. I'll be very interested to see what his first big moves are as CEO.

    Another MNB reader chimed in:

    Sure they got caught with their pants down…yes they are enduring the pain of their mistake, but the team members at Target should get a big boost in morale (not to mention strategy)  from Brian Cornell.  This selection shows just how impressive the decision making at Target is exactly where it needs to be.  I’m not saying that the current group isn’t motivated or doing what they need to do, but right off the top…Target’s got GAME…welcome back!!!

    We reported the other day that Amazon is offering Prime members a $1 credit for Prime Video if they are willing to accept slower shipping speeds, which is seen as a way of cutting costs.

    I commented:

    So let me get this straight. I pay Amazon for the privilege of Prime membership, which will get me products faster, and they're willing to then pay me to get my products slower? Do I have this right? Because if this is what is happening, while it may reduce costs, I'm not sure how it makes sense from a customer service point of view. We all want things faster, not slower … and part of the reason is because Amazon helped condition us to think that way.

    One MNB reader responded:

    Oh my, you read my mind!  I’ve become so accustomed to Prime shipping that I hate shopping elsewhere!  5-7 days is an eternity compared to 2, and $1 credit on videos I don’t download is definitely not going to sway me.  What’s more ridiculous is the 5-7 day shipping is free with a $25 order anyway for non-Prime members.  A better idea would be to offer two levels of Prime Membership.  Keep the current one, but offer a Prime “Lite” version that offers 3-4 day shipping for a reduced price annually.  The 5-7 day option should remain free as always. I hope they don’t annoy Prime customers or ruin their business model with this malarkey.
    KC's View: