business news in context, analysis with attitude

Published on: February 27, 2013

The Boston Globe has an interesting piece about the New York Times Co., which has announced that it is selling the New England Media Group, which has properties that include the Globe and the Worcester Telegram & Gazette.

But what was most intriguing about the story was the comment by Times CEO Mark Thompson, who met with Globe employees yesterday and spoke about how the media world is changing ... and drew an interesting parallel.

Thompson, the story says, "talked about a shifting model for the Times where subscribers account for more revenue than advertisers, as advertising continues to shift away from print. In the future, he said subscribers would be 'our most important set of customers,' in a model more like HBO or Netflix than a traditional newspaper."

This is interesting, because it points to how long-accepted business models are being shaken, with fundamental changes being forced by shifting realities.

It also points to a fundamental problem with how guys like Thompson think. I've been subscribing to the Times for more than three decades, and reading it for probably close to 50. I thought we always were the paper's most important customers...

Published on: February 27, 2013

The Los Angeles Times reports that Anheuser-Busch InBev is being sued by beer drinkers in three states who are saying that the brewer is watering down ten of its brands - bringing its alcohol content down from eight percent to three percent - as a way of cutting costs.

According to the story, "The lawsuits, filed in the last week in California, Pennsylvania and New Jersey, said the brewing giant cheated consumers by listing a higher alcohol content than the beers actually contained.

"Ten Anheuser-Busch products were named in the lawsuits: Budweiser, Michelob, Michelob Ultra, Bud Ice, Bud Light Platinum, Hurricane High Gravity Lager, King Cobra, Busch Ice, Natural Ice and Bud Light Lime.

"Former employees at the company’s 13 breweries -- including some in high-level positions -- are cooperating with the plaintiffs, said San Rafael, Calif., lawyer Josh Boxer, the lead attorney in the case."

A-B says the charges are "groundless" and that it is not mislabeling its beers as having a higher alcohol content than they actually do.

Published on: February 27, 2013

There are a couple of new developments in the horse meat scandal that has roiled the European food industry...

• The Associated Press reports that Portuguese authorities have seized 87 tons - that would be 174,000 pounds, if my limited math skills are correct - of beef products that contain traces of horse meat. The products include items that already were on store shelves, such as meatballs, lasagnas and hamburgers.

• The Guardian reports that "South African food scientists say there is water buffalo, donkey and goat meat in mislabelled South African foods including beef burgers and sausages.

"A study published by three professors at Stellenbosch University found that 99 of 139 samples contained species not declared on the product label, with the highest incidence in sausages, burgers and deli meats."

The good news - no horsemeat was found in the beef.

Published on: February 27, 2013

The Conference Board is out with its monthly assessment of consumer confidence, and the February index stands at 69.6, up from 58.4 in January.

Lynn Franco, Director of Economic Indicators at The Conference Board, released the following statement:

"Consumer Confidence rebounded in February as the shock effect caused by the fiscal cliff uncertainty and payroll tax cuts appears to have abated. Consumers’ assessment of current business and labor market conditions is more positive than last month. Looking ahead, consumers are cautiously optimistic about the outlook for business and labor market conditions. Income expectations, which had turned rather negative last month, have improved modestly."

The Conference Board report continues:

"Consumers’ assessment of present day conditions improved in February. Those claiming business conditions are 'good' rose to 18.1 percent from 16.1 percent, while those stating business conditions are 'bad' decreased to 27.8 percent from 28.4 percent ... Those expecting business conditions to improve over the next six months increased to 18.9 percent from 15.6 percent, while those expecting business conditions to worsen declined to 16.5 percent from 20.4 percent."

Published on: February 27, 2013

The Food Marketing Institute (FMI) and the American Meat Institute (AMI) are out with their annual "Power of Meat" survey, revealing that while "price and value continue to lead meat purchasing decisions ... the focus on price is no longer as strong as it has been in the past two years, as high income shoppers ease up on money-saving measures."

Excerpts:

• "For the first time in eight years, the number of meals grocery shoppers prepared that featured a portion of protein declined from 4.1 to 3.6 meals per week, but the share of shoppers eating meat and poultry at least once a week remained stable at 93 percent. Portion control, driven by the quest to save money and protein diversity, is the primary catalyst for change."

• "While shoppers continue to display a great degree of flexibility, switching between brands, species and cuts, a greater share of shoppers reported preferring national brands outright. Despite that trend, shoppers preferring private-brand meat and poultry held steady. Higher income households, in particular, reported a return to an outright preference for national brands."

• "The share of shoppers who have purchased natural and/or organic meat and poultry rose to 26 percent, with a particularly high penetration among higher-income shoppers. Most notably, 73 percent of supermarket shoppers purchase organic/natural meat at their primary store, the highest level in eight years ­– moving the natural/organic purchase from the specialty channels to supermarkets, warehouse clubs and supercenters."

• "While 'mom' was the leading resource for how to best prepare meat and poultry in 2012, she was edged out by digital resources (websites, apps, blogs) this year. Twenty-seven percent of survey respondents said they would consult online resources compared to 23 percent who prefer to ask family members.  In addition, the report also explores nutrition tools and how shoppers are making more educated decisions in the meat department. Indeed, consensus among shoppers was that the industry provides adequate tools to help them make informed decisions, jumping from 57 percent in 2009 to 72 percent in 2013."

Published on: February 27, 2013

• Bloomberg News reports that Walmart is being sued by five Wisconsin women "who claim the company denied them and other female employees equal pay and equal opportunities ... Their complaint, on behalf of workers at stores in parts of Wisconsin, Illinois, Indiana and Michigan, was filed in federal court in Madison, Wisconsin, on Feb. 20." ironically, this was the same day that "a federal judge in Nashville, Tennessee, dismissed a similar case as untimely."

As Bloomberg notes, "Those cases and two more like them were filed after a 2011 U.S. Supreme Court decision rejecting a national gender- discrimination class action, or group lawsuit. The high court’s majority in that case found 'no convincing proof' of a companywide discriminatory pay and promotion policy." However, the Supreme Court left room for the suits to be filed on a more localized basis.

Published on: February 27, 2013

There is a long and detailed story in the Wall Street Journal about the ongoing travails at JC Penney, and CEO Ron Johnson's efforts to change the culture, turn the company's financial results around, and create a new and sustainable department store model.

The piece is hardly laudatory, suggesting that there seem to be few signs that things are working ... and there is a sense that the ice under Johnson's feet may be getting thinner with every passing day.

However, there also is the clear indication that JC Penney was in drastic need of some sort of overhaul - that things were not working the way they were. So, it becomes a question of balance, and how much pain the company can endure before it sees the light at the end of the tunnel.

I found it to be instructive ... with implications for a lot of other retailers ... and you can read the entire thing here.

Published on: February 27, 2013

• Bloomberg News reports that in the wake of the ongoing investigation of Walmart, which is accused of bribing Mexican officials as a way of greasing the wheels for its expansion there, which would be a violation of the Foreign Corrupt Practices Act (FCPA), it is possible that federal watchdogs are going to get a lot tougher on this issue.

According to the story, "A just-published Bloomberg Government Study by Global Business Director Sandy Reback and Quantitative Analyst Miguel Garrido suggests that the Wal-Mart investigation may be part of a longer and larger trend in FCPA enforcement. The study details the growing number of enforcement actions and the increasing size of settlement amounts, as well as the U.S. industries and countries targeted in recent years by the DOJ and SEC. The study also highlights the measures the U.S. government says that businesses can take to prevent and mitigate FCPA liability."

• The Los Angeles Times this morning reports that Best Buy plans to cut 400 headquarters employees in the hopes that this will save the company $150 million.

Best Buy says that no store employees will be affected by the cuts, and that this is a result of the chain "enhancing the focus on the company’s core business, removing management layers and eliminating operational inefficiencies."

More cuts are expected as Best Buy tries to reverse its market share, sales and profit declines.

Published on: February 27, 2013

• Following the announcement last week that Unified Grocers CEO Al Plamann is retiring, the company has announced the company president Bob Ling will add "chief executive officer" to his title, effective May 1.

Published on: February 27, 2013

Following up on a story about a mother-daughter team that pleaded guilty to trying to defraud Coca-Cola in a bottle cap promotion, which I suggested was heartwarming because it showed how parents and children can find common ground, MNB user Mark Boyer wrote:

What do you suppose these morons could accomplish if they put their time and energy into something ethical?




We took note the other day of a Hearst-produced magazine called Delish, which is sold only at Walmart.

One MNB user commented:

Is it me or is that close to the Walgreen’s private brand?

Excellent point. "Delish," indeed, is Walgreen's private brand for food products.

I guess that it isn't a problem because the uses are different. Or, it'll just make life easier when Walmart buys Walgreen.




Yesterday, we reported on a disagreement between Michael Moss, who has written a book entitled "Salt Sugar Fat: How The Food Giants Hooked Us" that talks about how food manufacturers deliberately engineer junk foods to addict consumers, and the Grocery Manufacturers Association (GMA), which says that food manufacturers are living up to and even exceeding their social responsibilities.

My comment, in part:

I think that the mainstream food industry has much to be proud of in terms of how far it has come over the past decade or so, in terms of food composition, labeling and marketing.

But I also think it is fair to ask whether it has been pulled and pushed into these positions by changing consumer attitudes, a vigilant investigative media, and expanded scientific information that have combined to broaden the national consciousness.

Would companies have made all these moves on their own? Do they resist change much of the time, even though they known that such resistance often results in regulation, which they then complain about, even though regulation would not have been necessary if they'd gotten there first?

One MNB user responded:

Without getting into the fray of this issue…much of the information consumers, consumer groups and NGOs use to push for more simple, healthy and natural foods has only become available in the last 15 years…via the Internet…and the revelations gathered through the Internet are driving both the consumer and the food industry to do a better job. Consumers and the food industry want the same thing…but…they both have different timetables…immediate gratification versus profitable change.

And from another reader:

The GMA hasn’t even come close to recognizing some of the true causes of obesity.  Food with little to no nutrient value keeps people hungry, and over eating.   You can reduce the sugar but at the end of the day, it’s still sugar and it’s still an empty calorie food.   And I believe the food industry has totally underestimated the revolution that is  building with consumers.  GMO labeling is just one area where people are wanting to know what is in the food they eat.

As long as they keep selling products filled with corn syrup, aspartame and other toxic ingredients, nothing will change.   Let’s ask the makers of Doritos why their products are laced with MSG or why does  The National Milk Producers Federation want to add aspartame to milk???     Nope, the mainstream food industry doesn’t get it.  If they are concerned about stock prices, they should have the vision to look ahead and not only recognize where the food movement is headed but also have the guts to  really do something about it.   Those are the companies that will survive long term.

I say kudos to Michael Moss for getting the conversation rolling……and a big thank you to MNB for putting all this out there.

And another reader:

GMA wishes to present its industry as a leader in solving obesity and states it is providing the best information for consumers.  So, let’s look at some foods and some of their activities for this evidence:

PopSecret Popcorn with Butter – “You can’t go wrong with good old butter and a pinch of salt.”  Touted as the best snack for family nights, this product contains 5g of transfat per serving with 3 servings per bag.  You probably should just eat a bag on the way to the hospital.  Four of their 5 products contain at least 4.5g of transfat.  (Pop Secret does not have a direct web address to their nutrition.  I recommend you just stop by a grocery store and check out the product.  BTW, none of the other mainstream popcorn products use partially hydrogenated oils.)

Froot Loops – this product still uses partially hydrogenated oil.   What is more interesting to me is why is a different oil used for the Canadian version.  In Canada, you must report transfat amounts down to .2g while in the US, you can round .49g down to zero.  (We are one of the most liberal countries in our rounding for transfat declarations.)  Perhaps they didn’t want to declare transfat on a kid’s cereal.

Cocoa Krispies -  if you blinked you missed it, but Cocoa Krispies made a very brief claim regarding helping a child’s immunity.
 
Smart Choices – I probably don’t even need to go there.  This was a GMA sponsored industry initiative that even Michael Jacobsen had to walk away from.

There are good companies and bad companies and maybe the conversation should be about individual companies and their leaders.  I can’t get on board with GMA that all of their members have been rapid supporters of improving nutrition.  The data just do not support it.
 
Want some popcorn??

From another reader:

With all due respect to the GMA, the bigger picture provides evidence that their constituents are far from pure ... The food giants work very hard to keep their interests ahead of consumer health through buying influence with the Academy of Nutrition and Dietetics (formerly the American Dietetic Association), then one can easily connect the dots with AND and the USDA.  The AND’s response to this report was weak and full of spin and further demonstrates that “The food industry’s track record on health & wellbeing” is not so impressive if they get to help decide what is healthy!

And still another:

I think you are on the money about both the research and GMA positions being relatively correct, but I think you missed some of the causes of change in public opinion.  First, people noticed they were sicker and less able to do things they enjoyed.  But then health insurance began to reflect the costs of the epidemic and required us to participate through higher deductibles and especially health savings plans.  Once we begin to participate in making spending decisions in our own healthcare costs, it really accelerated the change in opinion.

I continue to believe that the game is rigged - at least at the moment - so that companies are incentivized not to make their products more healthful. If they do anything that does not drive consumption and sales - and let's face it, less addictive foods will decrease sales - they get hit hard by the stock market, and senior executives lose their jobs.

And I'm not sure how to best address this issue. Some - even within the industry - would say government regulation is the only real option, because it would take companies off the hook, giving them cover from Wall Street. (A former Philip Morris senior executive actually makes this point in the Michael Moss book.)




On another subject, MNB user Theresa Ruppert wrote:

Thank you for acknowledging the passing of Dr.  C. Everett Coop.  His passing gave me my own eye opener.  My brother was one of possibly thousands who was saved by his pioneering techniques in pediatric surgery  for newborns.  In 1962, a 2-day old infant was rushed to Philadelphia Children's Hospital for surgery to save him from a life threatening congenital cyst on his neck.  I have Dr. Koop to thank for my brother still being in my life.  Which brings me to my eye opener on perspective.  Every day we try to help our clients to sell more consumer package goods.  We do not think of it as saving lives as doctors do on a daily basis.  My hope is that everyone in our industry thinks about the role processed food plays in our lives. It may not kill us immediately, but it ultimately can threaten our health after years of exposure.




Regarding Safeway's Just For U program and how it is designed to weaponize consumer data so that the company may eventually be able to get away from mass print advertising, MNB user Bryan Nichols wrote:

As I read about the growing use of Just for U and similar programs, I am thankful to live in The Woodlands, TX where in addition to Safeway (Randalls) and Kroger, I have H-E-B.  At H-E-B, I get better prices than either without having to use a shopper’s card or clip electronic coupons.

Another MNB user chimed in:

A reader responded to SWY reducing the circular yesterday by saying “I remain skeptical about the death of the FSI and the print circular.  Only when brands are convinced they can get both the case sales response and the brand equity they currently enjoy with the current mass media vehicles with targeted digital will you see more than a few retailers and brands abandon their weekly mass adds and FSIs."

The case sales from an FSI are simply the echo of how our industry merchandised two generations ago.  40M circ FSI at 1% redemption is only 400,000 total units moved – incremental is less than half that.  Across 30,000 stores, an FSI is moving ½ case per store in about two weeks.  Yawn.  The larger volume comes because the stores cut price and merchandise.  As a consumer, why pay $4.00 for crackers if you can wait for an FSI, the store drops the price down to $3, and with a coupon the net price is $2.  Doesn’t sound like much of a Brand Equity benefit to me.

And from another reader:

This is a very topical issue as manufacturers, like ourselves, are moving toward electronic advertising at the expense of print media.  Facts are facts.  Print subscriptions are dying.  I suggest anyone in the business to take a poll at their next meeting and ask how many attendees still get a daily newspaper delivered to their house, do these attendees still have the same number of magazine subscriptions as they had a few years ago.  The drop-off in the past few years is dramatic.  For every newspaper not delivered, there are no fsi’s/flyers/etc in that household.
 
Actually, I don’t necessarily see just the retailers as leading on this issue although many, like Safeway, have embraced the new formats for reaching consumers.  I see the manufacturers leading as they realize the old formats for reaching their consumers are dying off.  But, it’s like pulling teeth to wrench the print ad budget money from the retailer’s hands.  We’re quite confident we can reach more consumers w/digital advertising, but this will work best when both the retailer and the manufacturer realize together the consumer of today and tomorrow can only/mostly be reached via digital methods.

Exactly.




MNB had a story yesterday about how Yahoo is eliminating the "work from home" option for its employees, saying that people who actually come into the office tend to be more innovative.

My comment, in part:

...What matters is connection, not proximity. And I also think that these things ought to be considered on a case-by-case basis. The needs of the company need to be considered, but if valuable people have reasons that they need to work elsewhere than in the office, and their jobs can be done as effectively, then I think the modern corporation has to be progressive in its thinking.

One MNB user responded:

You are spot on, you couldn’t be more correct in your comment.

It’s all about connection, and isn’t that what the internet has done best for all of us? What’s it matter where you connect, at the office, home, airport, or a beach, as long as you are connecting and collaborating with your partners.  Ironic that the YAHOO CEO doesn’t get it…yet.

In a way, she does, she gave them all new smart phones.  Watch for her retraction soon.

From MNB user Philip Herr:

Hi Kevin, we have the option of working from home up to five days per week. And some folks who live far from the office work virtually just about all the time. They come in from time to time for training session and “all-hands” meetings.
 
I work in a relatively isolated part of the office – most of my peers are at meetings, as am I, from time to time. And I have to say, I really don’t enjoy working in solitude. I am particularly extroverted which means I need to go chat with someone for a few minutes every couple of hours. This energizes me – people energize me. I could never work as you do.
 
My take on the situation is that it comes down to the individual. Introverts can probably work very productively on their own, but people like me need the company of others to keep going and be productive.

Not sure anyone would ever call me an introvert. But I'm lucky ... because while I may work by myself, I actually have 25,000+ collaborators in the MNB community, and I get hundreds of emails from them every day.

And from still another reader:

"Connection" is the secret sauce of working with others...whether at home or office"...you are spot on!

Thanks.




I had some typo issues yesterday, one of which was pointed out by MNB user Jeff Gartner:

Kevin, I know this is a typo in your MasterCard virtual wallet story … "similar to that at places like Google and eNay."

But just in case it isn't, I was wondering if eNay is an online marketplace for horse meat. 
Or perhaps it's an online repository of votes from Republican obstructionist members of Congress.

Hope you at least smiled.

Better than that, I laughed out loud. Thanks.




And finally, since yesterday's "Your Views" focused on what I view as the terminal disease of irrelevance from which mainstream print advertising suffers, I used the headline "Keep Him Off The Cart Because He's Not Yet Dead."

Which led one MNB user to write:

Although probably not intended to have this impact at all, the title instantly brought up the scene from the comedic Masterpiece “Monty Python and the Holy Grail”, with Eric Idle shouting through the village “Bring Out Your Dead”, and one of the gentlemen responding, “I’m Not Dead Yet”…….
 
That just made my day….. of course now I have to focus on work and stop reciting the rest of the movie……LOL!

Glad I made you laugh ... but just so you know, that was exactly what I intended.

Not only is the reference from Holy Grail, but it also is a line from a song in "Spamalot," which is the Broadway musical version of the Monty Python classic...

I am not dead yet
I can dance and I can sing
I am not dead yet
I can do the Highland Fling.

I am not dead yet
No need to go to bed
No need to call the doctor
Cause I'm not yet dead...