From The MNB Archives

The Chicago City Council voted yesterday 35-14 in favor of legislation that will require big box retailers such as Wal-Mart to pay their employees a minimum wage of $10 per hour plus $3 an hour in added benefits. The vote followed a debate that ran for more than three hours, and the margin of victory ensures that the council could override any veto by Mayor Richard Daley, who has opposed the measure.

The measure applies to any retail store that is at least 90,000 square feet that is owned by a company generating $1 billion or more in annual sales. According to Crain’s Chicago Business, minimum pay at those stores will immediately rise to $9.25 an hour with $1.50 an hour in benefits, climbing to $10 an hour in wages and $3 in benefits by 2010.

The Chicago Sun-Times noted earlier this week that a number of Chicago retailers other than Wal-Mart will be affected, including Carson Pirie Scott & Co., Costco, Home Depot, Kmart, Lord & Taylor, Marshall Field’s (soon to be Macy’s), Nordstrom, Sears and Target.

Organized labor, looking to score a victory against non-union retailers, has been pushing for passage of the ordinance and was predictably happy about the vote.

“The City Council did what was right for the benefit of working men and women,” said Dennis Gannon, president of the Chicago Federation of Labor. “It’s nice to have a City Council that can stand up.”

However, Sandy Kennedy, president of the Retail Industry Leaders Association (RILA) issued a prepared statement mourning the city council decision:

"We are disappointed in the City Council's actions. We believe it is a setback for the City of Chicago, its citizens, and area retailers (and) a clear disincentive for more than a dozen retailers impacted by this ordinance to locate or expand their operations in the City of Chicago."

The Illinois Retail Merchants Association has said that if Mayor Daley does not veto the legislation, it will file a lawsuit to prevent its implementation.

Wal-Mart has said it will respond to the legislation by “ringing Chicago” with supercenters that can cater to the population without being subject to the minimum wage law. If this happens, it also will ensure that the city of Chicago will not get any of the sales tax revenue generated by the supercenters.

Birds Eye Foods has announced it intention to get out of the non-branded and private label frozen food business during the next year to 18 months, selling off five production facilities, and making its sole focus branded businesses with a renewed emphasis on the creation and marketing of new products.

The company said it will continue supplying retailers with non-branded items for up to 18 months.

"We believe there is tremendous potential and trust in the Birds Eye brand and our other brands that we have yet to tap fully," said Neil Harrison, Birds Eye Foods chairman/president/CEO. "Our non-branded frozen business, with its lower margins, utilized resources which now can be freed up to drive brand growth and to compete more aggressively with competitors who are not producing non-branded lines."

The company said in a prepared statement that it is the only frozen food company that has maintained both a branded and private label presence. It also said that it already has received inquiries about the businesses and facilities it plans to sell.

At the risk of sounding like a broken record (a metaphor that only makes sense for MNB users old enough to remember what a record is) “Content Guy” Kevin Coupe offers an example of how the US Department of Agriculture (USDA) deals with consumers concerned about mad cow disease testing in the US.

To listen, either click on the “MNB Radio” icon on the left hand side of the home page, or just go to:

http://www.morningnewsbeat.com/Radio/Radio_Listen_S.las

Advertising Age reports that a new Gallup poll suggests that 41 percent of American adults say that beer is their beverage of choice, compared to 33 percent who preferred wine. Just a year ago, in a similar poll, 39 percent pointed to wine as their beverage of choice compared to 36 percent who preferred beer.

Ad Age concedes, however, that there is no actually sales data to support what essentially is anecdotal evidence to this point.

Beer marketers and manufacturers see the shift as evidence that a number of advertising programs seeking to rebuild beer’s image among consumers have been working.

The New York Times reports that “for Americans who spend each summer wrestling with temptation, there is fresh hope in the freezer case. New industrial processes, including one that involves a protein cloned from the blood of an Arctic Ocean fish, have allowed manufacturers to produce very creamy, dense, reduced-fat ice creams with fewer additives. The new products appeal to those who have acquired a taste for superpremium high-fat ice cream but cannot stomach its fat content.”

However, such processes tend to generate controversy because, as the Times notes, they tend to get caught up in the debate about genetically modified foods.

A perfect example is a somewhat different process developed by Unilever, which actually developed a way of mimicking a fish protein through genetic manipulation, which allows ice cream to be creamier and colder. As reported on MNB recently, this even created controversy within the Unilever family when one of the companies that it owns, Ben & Jerry’s, announced that it would never use such a process in its products - leaving at least the impression that such genetic manipulation was below its standards.

• Fortune reports on Wal-Mart’s professed interest in saving the earth by embracing the environmental movement, as illustrated by the fact that it recently invited former vice president Al Gore to show his hit documentary about global warming, ‘An Inconvenient Truth,” to a recent company meeting. (While CEO Lee Scott concedes that there were some folks both inside and outside the company who questioned him embracing a liberal Democrat and his cause, he also notes that Gore got a standing ovation from the audience.)

"To me," Scott tells Fortune, "there can't be anything good about putting all these chemicals in the air. There can't be anything good about the smog you see in cities. There can't be anything good about putting chemicals in these rivers in Third World countries so that somebody can buy an item for less money in a developed country. Those things are just inherently wrong, whether you are an environmentalist or not."

And while Scott admits that the company’s embrace of environmentalism could have positive public relations impact at a time when the company desperately needs it, he also seems to believe in Gore’s comment that “there need not be any conflict between the environment and the economy,” and that environmentally-conscious business practices will, in the long-term, be good for business.

Scott also is clear about wanting to get ahead of the curve, as opposed to being reactive and eventually being judged as not having lived up to the responsibility that the world’s biggest company has.

“We will not be measured by our aspirations,” he says. “We will be measured by our actions.”

• CNBC reports that Wal-Mart’s Sam’[s Club membership clubs are making a big push into the wine business, trying to carve out some business on an area that Costco has successfully nurtured for a number of years. One way that Sam’s is taking a different approach, according to the story, is by ensuring that no two Sam’s clubs have the same selection.

• CBC reports that a Canadian court has ruled that the Saskatchewan Labour Relations Board is not inherently biased against Wal-Mart, refusing the retailer’s request that the board be prohibited from getting involved in its labor matters there.

Wal-Mart has been fighting unionization initiatives in Canada, and claimed that the board’s pro-union makeup made it impossible to get a fair shake in cases going before it.

Studies in the UK say that in the quarter ending July 16, Tesco’s market share in the UK grew to 31.5 percent, up a bit from 31.4 percent during the previous quarter and 30.3 percent during the same period a year ago. Asda also saw a tiny increase, to 16.6 percent compared to 16.5 percent both a quarter earlier and a year ago.

The UK’s number three food retailer, Sainsbury, remained at 16 percent quarter-to-quarter, and up from 15.8 percent a year ago. And William Morrison supermarkets also was unchanged at 11.3 percent quarter-to-quarter, down a bit from 11.5 percent a year ago.

• In a conference call with analysts yesterday, Supervalu chairman/president/CEO Jeff Noddle said yesterday that the company would close about two dozen of the Albertsons stores that it recently acquired (though he did not identify them), would make its Shaws banner in New England less driven by price promotions than in the recent past, and would convert some Southern California stores back to the Lucky banner that was abandoned by the old Albertsons regime.

This last strategy certainly puts a new spin on the court battle currently taking place over the Lucky name, which Grocery Outlet started to use in northern California – saying that Albertsons had lost its rights to the tradename because it essentially abandoned it for more than three years.

• Kroger-owned Ralphs Grocery Co. pleaded guilty yesterday to charges that it rehired hundreds of employees during the 2003 lockout/strike and then paid them under false names. As reported on MNB earlier this month, Ralphs has agreed to pay $70 million in restitution and fines...but the judge delayed sentencing while deciding whether to accept the plea arrangement.

• The Seattle Times reports that bankrupt Larry’s Markets had found a buyer and reached an agreement in principle that will allow its six stores to remain open and operating as supermarkets.

• A new study by Harris Interactive suggests that 27 percent of US adults are shopping from home – via the Internet, catalog or television – because of time constraints that make shopping at brick-and-mortar stores inconvenient, while another 25 percent of adults say they are shopping from home because of rising gas prices.

The issue of rising fuel prices also means that, according to the adults surveyed by Harris Interactive, 85 percent are cooking at home instead of going out and 55 percent are renting movies instead of going to theaters. More than eight out of ten say that convenience is a prime motivator in shopping from home, while about six out of ten say cost savings and fewer privacy concerns are prompting them to shop from home.

Barriers to at-home shopping include the inability to touch merchandise (according to 79 percent of respondents) and shipping costs (according to 71 percent of those surveyed).

In addition, the study says that more than nine out of 10 US adults say that the ability to return merchandise from home – as opposed to, say, going to the post office – is critical in choosing to shop online or via catalogs.

• A new study conducted by eMarketer suggests that companies will spend as much as 4280 million this year to advertise in online social networks such as MySpace.com and its competitors.

Projections are that why such targeted spending will only account for less than two percent of total ad spending this year, it is likely to more than triple by 2010.

• Supervalu Inc. reported that its first quarter profit was $87 million, down from $91 million during the same period a year ago.

The results do not include operating results from the Albertsons operations that Supervalu acquired in early June.

• Spartan Stores reported that its first quarter sales increased 15 percent compared to a year ago, to $528.0 million from $459.3 million. First quarter net earnings remained even at $2.7 million.

Neat piece in USA Today about 18-year-old Oregonian Alesha Coleman, who recently won a Maggie Moo’s ice cream franchise when she wrote a business plan for a contest sponsored by Maggie Moo's and Future Business Leaders of America-Phi Beta Lambda.

Coleman actually had the choice between the franchise and a $10,000 college scholarship, but chose the franchise because she thought it was the better business decision.

“Maggie Moo's will waive the $30,000 franchise fee and send her to Moo University, a two-week course on everything ice cream,” USA today writes.. “Coleman, who hopes to open the franchise in downtown Portland, must then have Maggie Moo's approve her store's location. The company will expect Coleman to hire and train a staff, manage the store and lead local marketing projects.”

She’ll also be a full-time freshman this fall at Pacific University, but she says she likes having her plate full.

MNB reported yesterday that Fresh Direct, the New York-based online grocery service that specializes in fresh foods, has launched “FreshDirect One-Click Recipes, allowing customers to choose from top recipes, buy the freshest ingredients, and receive their delivery without ever leaving home.” Partnering with Workman Publishing, Fresh Direct offers 400 recipes from 53 well-known cookbooks, and “allows customers to search and sort using criteria such as main ingredient, level of difficulty, theme, number served, type of cuisine, cooking method, and more. When a recipe has been selected, the ingredient list easily becomes a virtual shopping list.”

To which MNB user Glen Terbeek responded:

Fresh DIrect's One-Click Recipes is a great example of moving back to the logical shopping experience, built around meal planning, not logistics.

In the old "pre-self service" stores, the housewife would go to the store (often daily) thinking about what she might prepare for dinner that night. The clerk would collect the ingredients for her, and maybe suggest alternatives. She thought meal; he did logistics.

When the self service store became popular because of its lower prices (since the shopper now provides the logistics labor), the stores had to be organized into categories (better called picking slots), so the shopper could find the ingredients for her meal. A good shopper would plan her meals, and then re-sort the ingredient list according to the "slot" locations in the store for "easy" picking. Now the shopper has to think meals, and think (do) logistics as well. The early stores were only 15,000 square feet so this wasn't too bad, and worth the savings. After all, food was a major portion of the family weekly expenditures then.

However, today the current stores are 4 times larger, have 5 times more products, have 1000's times more deals at any one time, while the shoppers have much less time to shop or think about meal preparation. And food is not as an important part of the family budget as it was. Let's face it, supermarkets are not meal logical and not even good for logistics either.

The Internet has the potential of moving back to the corner store shopping experience, making it "meal logical" and removing most of the shoppers' logistics activities. The same items can be presented in many different ways, since their physical location isn't important to the shopper. Coupled with a "moment of value" real store, it can be the perfect shopping experience continuum, maybe like what Tesco Express might become. The manufacturers would find this very interesting. And there are many false economics in today's business model to make it work.

Isn't it interesting that new ideas come from outside the industry? It's time to rethink the current business model.




We referenced a story in the Wall Street Journal the other day about companies bringing out new, pre-packaged ice cubes made from bottled spring water. We mentioned one of the companies involved in this new category, and, to be honest, made a little fun of the whole venture.

This captured the attention of MNB user Mike Schall, president/CEO of aquaICE. And while we normally don’t run these sorts of self-promotional emails (reserving the self-promotion allowed on MNB to ourselves!), we thought it fair to do so now because a) we didn’t mention his company, and b) because we sort of disparaged the whole enterprise.

Schall wrote:

aquaICE was the other brand featured in the Wall Street Journal article that you failed to mention. It has been a nine year journey to the marketplace, including our efforts in securing a United States patent for the product--granted back in 2000.

Our focus is to offer consumers of bottled water and other beverages ice “as pure as the beverage they’re drinking”. According to our consumer research, most people currently purchase bagged ice for cooling and not for “consumption”, so we think there’s a great opportunity to market aquaICE as well as Lemon Essence and Lime Essence aquaICE for those who want a squeeze of lemon or lime in their water. And even households with automatic ice makers in refrigerators responded with very high purchase intent as a result of home use tests. Flavor contamination and off notes, among other things with tap water ice, are real issues for consumers.

The packaged ice business is roughly $2B at retail in the U.S. Bottled water is $10B and climbing. If aquaICE is successful in capturing 10% of the packaged ice business, that’s a $200M niche we’re excited to have. And as for interest at the retail level, when was the last time you saw a really new item on the bottled water shelf—a true incremental purchase. We think aquaICE is just the tip of the iceberg!

Good luck to you.




We had a story the other day about a study from SuperTarget suggesting that American adults put a premium on the family dinner, and in fact say they have dinner together a lot more often that we think they do.

One MNB user wrote:

I agree with your assessment that the study was probably conducted in a manner that caught wishes and aspirations rather than reality. Target would have been better off spending the same amount of money on the study and changed the methodology to a shadow format where they hung out with the PGS and meal maker from 4-7 five days to get a real picture. With two teenaged daughters and a working spouse, we would LIKE to eat together more often, but it only happens a couple of times a week at best, not including meals away from home (i.e. two or three of us go to CPK, La Madeline, or Café Express, or grab the rotisserie chicken dinner at Tom Thumb).

MNB user Carol Edinger wrote:

Missing: One pair of rose colored glasses I lost somewhere in reality. This sounds more like a project to gather data to support an opinion than a study to discover what's happening at mealtime in America's homes. Perhaps the sample in the study was made up of families interviewed while they were shopping at SuperTarget stores...families with kids in tow and carts full of obvious to-be-cooked meal components. Come to think of it, to get the results reported, the people targeted to survey must also have been heard talking about going home to cook together and then sit down to dinner together. There is plenty of data to support that Americans are increasingly aware of the health risks of high fat diets and lack of exercise. There are studies that claim Americans are exercising more. Yet, childhood obesity and diabetes continue to skyrocket and deaths tied to diet and exercise continue to escalate. The study reported here should remind us that we must be sure of the credibility and reliability of a study before we believe the results. Just because it appears in print does not make it so.

And another MNB user wrote:

People will tell you exactly what you want to hear. As I read this article I chuckled thinking that there is absolutely no way these numbers are correct. The primary consumer at Target is the same consumer that is keeping our restaurants in business. I don't know one person shopping at Target that eats dinner as a family unit (at home) more than 2 times/week. I would love to know how they collected their information and how they honestly believed it to reflect what is going on in America at the dinner table.




finally, we got a number of emails concerning our “Snakes In A Discount store” piece, which said that a Wal-Mart customer in Florida got bitten by a snake when he was shopping in the store’s garden center. We noted that the snake was not identified by species but was killed, that the shopper was okay, and joked that it would soon be a movie starring Samuel L. Jackson.

The emails we received noted that subsequent press reports identified the snake as a rattlesnake.

Which suggests to us that maybe Wal-Mart needs to start installing those in-store health clinics down in Florida…and make anti-venom treatments part of the offering.