business news in context, analysis with attitude

Published on: July 3, 2012

by Michael Sansolo

"Tragedy is when I cut my finger," Mel Brooks once said. "Comedy is when you walk into an open sewer and die."

Today I’m writing about a tragedy. Late Friday, a stunning windstorm, called a “Derecho” for its incredibly straight and destructive path, exploded from Illinois to the Atlantic Ocean, including right through my neighborhood. It left a trail of damage, power problems and death. In one of those strange realities of storms, some streets near mine sustained only minor damage. My street and my house got clobbered.

I want to keep this in context. All the houses on the street are still standing and no one is homeless, so I shouldn’t be too dramatic. No one was injured or died. But, century-old trees snapped like twigs falling on cars, homes and yards. We were left with a sea of downed limbs, roof damage, water restrictions, spoiled food and 100-degree heat without any hope of relief.

There I was, trying to clean up the debris and cope with the heat - and doing so with a shoulder still recovering from surgery - and what was I doing? Mostly, looking for business lessons. (After all, that's what we do here at MNB...)

First of all - and this won't come as a shock to you - I really missed the local supermarket when it has no power for days on end. Our nice suburban lifestyle suddenly seemed a little fragile when we didn't know where our food was coming from.

On the other hand, supermarkets do a great job helping. Although the closest Giant store was left dark, the next closest Harris-Teeter and Safeway both came through. Ice and water were plentiful and welcome, and the shelves stayed wonderfully stocked through it all. (To be fair, news reports said open Giants were doing the same.)

Interestingly though, the list of basic necessities has clearly changed. On Sunday morning as the heat rose, my wife and I were struck by the number of people sitting outside Safeway with laptops, iPads and cell phones plugged into the store’s exterior outlets. The Safeway associate I chatted with was incredibly pleasant and even made a point to come get me when the next ice delivery rolled in. (By the way, ice still came at a special bargain price. Even though I would have paid more, I got a discount. I’ll remember that, Safeway!)

The same rush for power outlets was also evident at our closest shopping mall, where iPad-wielding refugees huddled on the floor as they juiced up. The food court, the outlets and the nail salons were packed beyond Christmas-time levels. There seems to be a real lesson in priorities at times like these. (I know how important power was to me - I had a column due!) People need food, clothing and shelter, plus a way to talk about what happened on Facebook. Oh and they need pedicures, which I don’t really understand, but I’ll let that go for the moment.

Compare those levels of community awareness to the Professional Golfers Tour, which was playing in our area. (You might have seen the Saturday coverage when no fans were allowed on the course.) I’m not sure why they decided to keep playing in the middle of a declared disaster area. After all, the Sunday traffic tied up police and streets at a time when both were needed for other purposes. Also, local news radio stations kept telling us to check various websites for assistance. That’s little help when there’s no power.

But let’s get to the best lesson of customer service...

When we discovered damage to our roof and realized another rainstorm was in the forecast, my wife and I worried about the leaks to come. Luckily, our insurance company, AMICA, had other ideas. AMICA is frequently rated as a top choice for service by Consumer Reports and we saw why. They quickly dispatched a roofing crew to our house for the sole purpose of making sure the roof didn’t leak again - which not only helped us, but also reduced their potential exposure and liability.

In the process, everyone on my street came by and asked for the phone number of my insurance company. (A day later, as we dumped the spoiled contents of our refrigerator, AMICA called to say a check to replace the food was already on the way.)

Sometimes, it takes a crisis to make one see things in a new light. I've never quite appreciated my local supermarkets and my longtime insurance company in quite the same way that I do today.

Now, if only the damn lights and air conditioning would go back on...

Michael Sansolo can be reached via email at msansolo@mnb.grocerywebsite.com . His book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available by clicking here .

Published on: July 3, 2012

by Kevin Coupe

Perhaps you saw the recent story about how Baltimore officials are considering the sale of advertisement space on the side of fire trucks as a way of generating cash that can be used to solve the city's budget problems?

Well, that's nothing ... at least not when compared to this story that I read in the Washington Post:

"Two years into Europe’s financial crisis, which has governments slashing spending in a bid to tame runaway debts, the region is facing a cultural calamity for which there is no emergency bailout fund. Historical buildings, churches, monuments, bridges, barracks, archaeological ruins and other sites are disintegrating from neglect. Local governments, desperate to find a way to preserve these sites before it is too late, are making up for budget shortfalls by hanging ads, selling usage rights and, in some cases, putting the structures themselves on the market.

"In France, the caretakers of Versailles have agreed to let two hotels open on the palace grounds and have proposed ­licensing the image of the building for use on luxury watches. In Spain, planners eager for more tax revenue approved the construction of an office tower in the historic city center of Seville near the Gothic cathedral where Christopher Columbus is buried, ignoring threats from the U.N. Educational, Scientific and Cultural Organization to disqualify the city as a World Heritage site if the project proceeded. And in Greece, the government voted this year to open sites such as the Parthenon, the Poseidon Temple and Delphi to cinematographers willing to pay per-minute fees."

In Venice, a city that is in perpetual restoration, the economic situation is so bad that "a compromise was struck to allow billboard-size advertisements on scaffoldings, but only while restoration work was being done. Money raised from the ads would be used to fund the restoration, and any left over would go to the region’s general budget." Similar agreements have been reached in Rome, where they allow the ads to cover only 20 percent of the scaffolding, and in Milan, where the limit is 50 percent.

Ads on fire trucks? That seems like small potatoes when compared to what is happening in the great cities of Europe.

It reminds me of the scene in Network, when the broadcasting company CEO, played by Ned Beatty, tells Howard Beale:

There are no nations. There are no peoples. There are no Russians. There are no Arabs. There are no third worlds. There is no West. There is only one holistic system of systems, one vast and immune, interwoven, interacting, multivariate, multinational dominion of dollars. Petro-dollars, electro-dollars, multi-dollars, reichmarks, rins, rubles, pounds, and shekels. It is the international system of currency which determines the totality of life on this planet. That is the natural order of things today.

And that's the way it seems to be going...

Hold on....

Just heard a story on NPR about a high school in Langhorne, Pennsylvania, that is in such tough financial shape that the school district is auctioning it off. Whoever comes up with the most cash won't actually own the school, but will get naming rights, plus free tickets to football games, a coffee mug, and the right to give the commencement address at graduation.

It seems just like yesterday that high schools were debating whether or not it was appropriate to allow a soft drink company to sponsor the scoreboard.

Talk about innocence lost...

Published on: July 3, 2012

The New York Times reports that the nation's major soft drink companies have hired lobbyists to represent them in their battle with NYC Mayor Michael Bloomberg, who is pushing the city's Board of Health - the members of which he appointed - to ban the sale of jumbo sugared sodas by restaurants and some other formats.

The lobbyists reportedly are meeting with potential candidates to succeed Bloomberg (who cannot run again because of term limits) as well as members of the City Council as they make their case - that the debate needs to be about consumer freedom of choice, not obesity ... Soda executives are vague about their long-term strategy, saying they are focused for now on recruiting local businesses, unions and lawmakers to join their cause. But the City Council speaker, Christine C. Quinn, and Gov. Andrew M. Cuomo, seemingly closing the door on city or state legislative action, have said they do not wish to get involved. The industry said it was also considering a court challenge, but only after the regulatory process was completed."

According to the story, "The charge is being led by the industry’s leading trade group, the Washington-based American Beverage Association, which has retained several powerhouse political consultants for the cause, including the strategists responsible for the 'Harry and Louise' television advertisements that helped defeat President Bill Clinton’s health care plan in the 1990s."

Published on: July 3, 2012

Reuters reports that the World Trade Organization (WTO) has ruled that a US Country of Origin Labeling (COOL) program "unfairly discriminated against Mexico and Canada, putting pressure on the United States to bring the scheme in line with global trade rules.

"The WTO Appellate Body said the U.S. country-of-origin labeling rules, commonly known as COOL, were wrong because they gave less favorable treatment to beef and pork imported from Mexico and Canada, the countries that brought the case, than to U.S. meat."

According to the story, "U.S. officials said the ruling allows the United States to continue to require country-of-origin labels, but Washington will have to change the way it runs the program to ensure it is not an impermissible trade barrier."

COOL became mandatory in the US in 2009, with some consumer advocates and agriculture interests saying that they would help shoppers make more informed decisions. Major meat processors, however, opposed the rules because of what they said would be increased costs and free trade issues.

In the wake of the decision, Erik Lieberman, regulatory counsel at the Food Marketing Institute (FMI), released the following statement: “COOL has forced the industry to spend tens millions of dollars each year on unnecessary regulatory burdens – all for little-to-no benefit  to consumers – which make it more expensive and difficult for supermarkets to provide customers with the consistent, high quality and affordable imported products they deserve.

“With the appeals process exhausted, it’s now time for Congress and the U.S. Department of Agriculture to address the wastefulness of the program and create a less burdensome system.  In light of the ruling, FMI will be assessing changes to COOL so our nation can meet its obligations under global trade agreements.  In cooperation with our supply chain partners, FMI will make the case to the government that our solution works best for consumers, the industry, farmers and our trading partners.” 

Published on: July 3, 2012

United Press International reports that the American Heart Association is out with new research showing that "in-store promotion and nutrition information on the front label of food packaging helps shoppers make healthier choices ... when a tag was put on the grocery store shelf showing that a product had the Heart Check mark indicating a heart-healthy food, sales increased 1.5 percent to 6.7 percent, depending on the group of shoppers.

"The sales increase was highest in the group considered 'struggling dieters,' who have a high interest in nutrition but tend to struggle with weight loss and their ability to eat healthy -- while it was lowest in those who already follow a strict heart-healthy diet."

Published on: July 3, 2012

In Minnesota, the Star Tribune reports that Best Buy is testing a new store concept - a 45,000 square foot unit called a Connected Store that has "some notable additions aimed to engage customers: a Genius Bar-like tech support center, employees with advice on pricey stoves, and rooms where home theater geeks can design their ultimate man caves."

According to the story, "Connected Stores form the heart of Best Buy's strategy to reduce its square footage in favor of smaller stores that emphasize high-end service. Best Buy plans to close 50 big boxes across the country by the end of the year and open 100 smaller-format Best Buy Mobile and 50 Connected stores. The scaled-down concepts typically range from 30,000 to 45,000 square feet compared with 58,000 square feet for the traditional big box.

"Best Buy, which is now testing Connected Stores in the Twin Cities and San Antonio, expects the format not only to retain the shoppers but to attract new customers, especially ones willing to go premium. In doing so, the company can offset some of the lost sales and profits from the traditional big boxes that will close."

The goal, Best Buy says, is to create an environment that demonstrates to shoppers how technology intersects with and can change their lives, creating a contextual experience in which to showcase high-end gadgets ... which, the company hopes, will help to fight the "showrooming" trend of people looking at products in brick-and-mortar stores and then buying them online.

Published on: July 3, 2012

• The Network of Executive Women has launched what it is calling The NEW Legacy Project, described as "an online contest that will honor the consumer products and retail industry’s most inspirational leaders and gather legacies that members are living and leaving to others.

"The most inspiring legacy statements and photos will be shared at the NEW Executive Leaders Forum, July 21 to Aug. 2 in Los Angeles. Industry members who contribute by July 20 can win $500 or 50 other prizes. Contributions may be signed or anonymous ... The NEW Legacy Project asks industry members to describe the legacy they would like to leave; honor someone who changed their life; honor a leader who has left a lasting legacy to the industry; vote for an inspirational female figure who has inspired them; or submit a photo."

“The NEW Legacy Project is about the legacies you’ve been given, the ones you live today and the ones you'll pass on to the next generation,” said NEW President and CEO Joan Toth. “The Network will share the industry’s responses to help our members and others create a vision for themselves and inspire their colleagues in the CPG/retail industry.”

• In Minnesota, the Pioneer Press reports that Supervalu has eliminated 39 marketing jobs "across the country" as part of its broader effort "to restructure and streamline its marketing team."

• In Montana, the Independent Record reports that about the United Food and Commercial Workers (UFCW), representing some 1,700 people employed at Albertsons, Safeway and Van’s stores across the state, have reached a tentative agreement for two and three year deals (depending on the job) that will give them a "roughly 2.5 percent pay increase and added contributions to health and pension plans."

Published on: July 3, 2012

• Weis Markets today announced the promotion of Kurt Schertle, the company's Senior Vice President, Sales and Merchandising, to the post of Executive Vice President.

Published on: July 3, 2012

As is my custom at this point in the calendar, I'm going to take a little time off.

There's a bit of a difference this year. I'm going to spend the entire month of July in the Pacific Northwest, where I'll be team-teaching a class with in retail marketing at Portland State University. This is the fulfillment of a longtime dream, and I'm over the moon to have the opportunity. Life is full of promise...

I'm not taking the whole month off, though. MNB will be on hiatus beginning tomorrow, but will return on Monday, July 16. This will give me a bit of time to get my teaching sea legs, as well as some vacation with Mrs. Content Guy. We're going to explore Portland as well as the Oregon wine country and coastline, and also will be venturing to Seattle for a visit. (This is the first time in 26 years that we've spent two weeks alone. Wish us luck.)

Between now and the 16th, the MNB archives will, of course, be open. I may post the occasional note or picture on Facebook if something catches my fancy, but for the most part, I'm going to go off the radar until the 16th. I hope you'll wish me well, and will welcome me back with open arms when I return.

Have a great July 4th, a terrific beginning of the summer, and I'll see you soon.

Slainte! And Fins Up!

Published on: July 3, 2012

Yesterday, we had an email from an MNB user who talked about the importance of paying people enough money so they could afford to spend it in ways that would help drive the economy. In part, that email said:

“Doing the simple math, if more people made a livable wage, there would be less need for government assistance programs and more people paying their taxes.  Even our most conservative friends can't argue with this logic!"

Which led another MNB user to write:

This is the kind of “simple math” that keeps me awake at night worried about where this country is going and where our priorities lie. Let’s put this into proper perspective. We’re talking about Apple Store. This is a job meant for TEENAGERS. Someone please explain to me what exactly is a livable wage for someone who has no real financial obligations in the world??? And if you’re complaining about how little Apple pays you, I better dang well not see you carrying around an iPod or iPad, which are total luxury items and not needed to live a life in this country.

Please don’t give me that argument that people are trying to support families. If you have three kids to support and you are working at an Apple Store (or comparable retail outlet) that’s a YOU problem, not a ME problem. You could be in dire straights because your real day job let you go, and that’s legitimate, but far more likely is that you’ve made some horrible personal decisions in your life which has led to your poor position in life.

I have a real problem with this point of view. As far as I am concerned, there is very little that is proper about this perspective.

First of all, it suggests that the writer has never been in an Apple Store, or did not pay attention while in one. At most of the Apple Stores where I've been, there is a real mix of employees. My daughter got a new laptop when she graduated from high school, and the fellow who took care of us was named Mac, and he had to be several years older than me. When I recently was at the Genius Bar, I was taken care of by a guy in his thirties who is married with three kids. (He also has another job.)

I'm not saying that the Apple Store has to pay its employees enough so that they can live in the lap of luxury. (By the way, the get discounts on iPods and iPads, so let's not be too harsh about judging them for owning one or both. Besides, if they are in the business of selling them, shouldn't they also be owners so they can be better at their jobs?) But I do think it is a fair point to suggest that if the average Apple Store employee is generating around a half-million dollars a year in sales - and some of them probably much more than that - then they ought to be paid in a way that reflect their contribution to the organization.

You write about Apple Store employees as if they are behind a counter saying, "Do you want fries with that?"

Wait a minute. Let me go back for a second ... because, in fact, here is no shame in having a job in which one says, "Do you want fries with that?"

What is contemptible, in my humble opinion, is to hold such people in low esteem.

Despite what you say about how a person trying to support himself or herself by working in the Apple Store probably has made bad life decisions, I'd like to suggest that there is nothing further from the truth. Since when did working in retail become synonymous with having a poor position in life? I grew up working in a small men's clothing store where most of the employees were guys supporting families, raising children, being productive workers and members of the community. They weren't getting rich, but they were making a living and being paid a decent wage - and were the public faces of the company that owned the store. They were on the front lines. They were the people responsible of making sure that the clothes fit, that they were correctly altered, delivered on time, and that the customers had a positive shopping experience.

In a retail business, this is the most important job. And hardly deserving of contempt and relegation to the "made poor personal decisions" file.

We can have a legitimate discussion about what is fair and commensurate pay. That seems entirely reasonable to me. We can also talk about whether Apple - or any other retailing entity, for that matter - puts enough emphasis on its front line personnel, versus the folks back at headquarters. (I still love Feargal Quinn's decision to refer to this building as the "support office," reasoning that the people there were charged with supporting the stores, not the other way around. And, if you called it headquarters, you paid a small fine.)

But holding people who work in retail in such low esteem is something that I find extremely troubling. (You really got my Irish up on this one...)




MNB took note yesterday of a Wall Street Journal report that the nation's senior corporate executives are ready to do battle with a provision of the 2010 Dodd-Frank financial legislation requiring public companies "to disclose the gap between what they pay their CEO and their median pay for employees, a potentially embarrassing figure that many companies would like to keep private."

I observed, in part:

I have no doubt that such information will be used as a political cudgel, but that doesn't mean that it won't be a useful tool for investors. On the contrary, this is a piece of information that could be hugely persuasive to some investors. Not all, but some. And I think that coming after a time when a lot of highly paid executives managed to walk away from failing companies with huge pay packages, even as a lot of people who worked for them lost their jobs, this seems like a reasonable piece of information to put front and center.

Not to say that every company should have the same metrics, nor that I would never invest in a company with a big disparity. But I'd like to know. It would tell me something.

MNB user Bobby Martyna responded:

I think there are a few people who would invest (or not) based on the pay ratio alone. What would be much more interesting to investors is the correlation between the pay ratio and performance.  If it turns out that companies with a higher pay ratio (CEOs make much more than the average worker) perform better (using some standard metric like EPS or FCF), then investors will take note, and place their money accordingly.  In that scenario, the rule backfires on the Dodd/Frank supporters.  On the other hand, if companies with a lower pay ratio perform better, then firms with a higher pay ratio could be pressured into reducing the difference.  In the latter case, it would be interesting to see if these companies would lower the CEO pay, increase the average pay, or both -- and then to observe the changes in company performance over time.

And MNB user Chris Weisert wrote:

Another way to consider the implications of publishing this type of information is how it will impact a bright young up and comers’ decision when looking to go to work for a company. I would imagine those with the larger disparity might not get the highest quality applicants for any given position.

Damn right.

This actually is an extension of the Apple Store pay discussion.

There are too many companies out there where the folks in the executive suites think they walk on water, and don't worry about whether the people on the front lines are sinking or not. They have an exaggerated sense of their own worth ... and whether I were going to be an employee or an investor, I'd want to know if the company is one where the top execs think about and treat their front line personnel in such a way.

(Someone told me the other day about how a certain former CEO of a major supermarket company - his initials were Larry Johnston - used to park his brightly colored Hummer in a no-parking zone close to company headquarters as if to just let people know that he could. Consider this exhibit A ... and the "A" stands for a word I can't use on MNB...)

Those are not the leaders I'd want to follow. That's not the kind of company for which I would want to work. And that is not the kind of corporation in which I would want to put my money.

Which seems like a good sentiment - and appropriate high dudgeon - to go out on as I depart for vacation...

 See you on the 16th.