business news in context, analysis with attitude

Published on: June 26, 2013

by Kate McMahon

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

Like a dash of hot chili pepper sauce, the labeling of obesity as a disease is adding heat to the already fiery debate about our nation’s ever-increasing waistline. For the food and restaurant industries, there are looming side effects.

The American Medical Association (AMA) last week officially designated obesity as a disease that requires medical treatment and prevention. The announcement ramped up the online commentary about America’s obesity epidemic, which is the number two cause of preventable death and costs billions in health care and lost productivity each year. The AMA said recognizing obesity as a disease “will help change the way the medical community tackles this complex issue that affects approximately one in three Americans.”

Complex is an understatement. Even the definition based on Body Mass Index is challenged by many in the medical community. And clearly the psychological, genetic, cultural and socioeconomic factors that play significant roles in obesity cannot be addressed with a simple diet or prescription.

Supporters say the AMA’s policy statement, while not binding, will help promote access to prevention, treatment and insurance coverage. My initial inclination was to support this effort by responsible physicians.

The proposal was met with scorn by critics, who contend that obesity is a lifestyle choice, not a disease. Others said it was just another way for the health care industry and Big Pharma to cash in. Here’s a typical post:

“Follow the money! If obesity is a disease, the insurance companies and doctors get rich by applying diagnostic codes.”

I also read a thought-provoking Forbes Leadership Forum column by Hank Cardello, a senior fellow at the Hudson Institute and the author of "Stuffed: An Insider’s Look at Who’s (Really) Making America Fat."

Cardello argues that the policy could “ignite new wars between the food industry and its antagonists” and slow down progress made by manufacturers and restaurants to provide more healthy, lower-calorie options for consumers and diners. A recent study by the Hudson Institute for the Healthy Weight Commitment Foundation, a group of more than 230 major food, restaurant, retail, and other companies, showed that lower-calorie items drove 82% of sales growth for its CPG members between 2006 and 2011. That was four times the growth rate of higher-calorie products. And lower-cal offerings accounted for two-thirds of the new products that had sales of at least $50 million.

Numbers aside, the real hot button issue here is that of personal responsibility, and whether the “disease” designation will help or just give overweight people an excuse to stay that way rather than restrict caloric intake and exercise. Blame the disease, not the double-double cheeseburger, large fries and 64-ounce Dr Pepper. Food is no longer sustenance, but the enemy.

I find myself struggling with this from a policy standpoint. The one given is that obesity is a threat to the nation and demands our best resources to battle it.

Comments? Send me an email at kate@mnb.grocerywebsite.com .

Published on: June 26, 2013

The Wall Street Journal reports this morning that Barnes & Noble, having spent hundreds of millions of dollars on its Nook e-reader in an effort to be competitive with Amazon's Kindle and Apple's iPad, has decided to stop making the color Nook, and instead will rely on "co-branded devices made by third-party manufacturers."

The story says that "Barnes & Noble will continue to design and make its own black-and-white Nook e-readers, which account for the majority of its e-book sales. But with e-reader sales expected to decline over time, it is unclear how competitive Barnes & Noble can be long term without its own presence in the tablet market, which is forecast to keep growing."

The problem: Barnes & Noble lost so much money on the Nook that it wiped out any profits from its other businesses. The Journal reports that "Nook revenue fell 34% to $108 million, as sales of its new HD tablets fell short of forecasts. The division's loss before interest, taxes, depreciation and amortization widened to $177 million from $77 million a year earlier. The latest-period losses included $133 million of charges to write off unsold inventory."

It is an Eye-Opening conundrum in which Barnes & Noble finds itself, in part created because Apple and Amazon were able to develop for themselves a generous lead in the e-reader business. Barnes & Noble was hampered by an inability to recognize fundamental changes taking place in the market fast enough, and then was too slow to develop an alternative that would woo readers away fromKindles and iPads. (Even though the Nook got generally good reviews from critics.)

And so, Barnes & Noble has to peer into the future and figure out how to not make the same mistake again, has to decide what it is going to do to be relevant to consumers in a digital age.

Which is the same process that every bricks-and-mortar retailer has to go through.

Published on: June 26, 2013

The Los Angeles Times reports that Los Angeles "on Tuesday became the newest and by far the largest city to back a ban on plastic grocery bags, approving an ordinance that applies not just to food stores and mini marts but also big retail chains with their own line of groceries, such as Target and Wal-Mart.

"The ordinance, which has been in the works for years, would go into effect gradually, reaching large stores Jan. 1 and smaller ones July 1, 2014. Customers will either have to bring their own reusable bags or pay a 10-cent fee for each paper one requested, according to the ordinance."

The vote comes after state legislators failed to approve a similar ban, though Los Angeles vote is seen as possibly reigniting interest on a state-wide level since by the end of next year, close to a third of California's population will be covered by new plastic and paper bag regulations.

Bloomberg has a story that while the plastic bag industry is fighting the bans - albeit unsuccessfully in places like Los Angeles - trend lines suggest that "plastic shopping bags, a staple of the American retail experience for a half-century, may be going the way of lead paint and other banned products."

Published on: June 26, 2013

A couple of stories this morning suggest good news on the economic front...

• The Wall Street Journal reports that "a string of encouraging developments - improved household finances, a slowly improving job market and, perhaps most important, a rebounding housing market - are helping Americans rebuild their wealth and boosting consumer confidence to the highest levels since before the recession.

"These factors, along with subdued inflation and easing credit standards, could fuel a pickup in spending that sets in motion a 'virtuous circle,' where stronger spending begets jobs, and vice versa. Indeed, the resilience of consumer spending is a key reason the Federal Reserve expects the economy to grow between 3% and 3.5% next year, faster than the recent average of 2%."

Indeed, this is good news in an economic recovery that at times has seemed anemic: "Consumer spending has risen 9% since the end of the recession in mid-2009, after adjusting for inflation, half the average rate of increase in the seven previous recoveries since 1960. Following the recessions in 2001 and 1991, spending was up around 11%-12% by this point in the upturn."


• The Los Angeles Times reports that the Conference Board is out with its monthly Consumer Confidence Index, saying that it "unexpectedly jumped to 81.4 this month, up sharply from 74.3 in May. It was the third straight monthly increase, though the figures were compiled before the recent stock market sell-off ... The other leading gauge, from Thompson Reuters and the University of Michigan, hit a five-year high in May, but its preliminary reading for June dipped a bit."

"Expectations have also improved considerably over the past several months, suggesting that the pace of growth is unlikely to slow in the short term, and may even moderately pick up,” says Lynn Franco, the group's director of economic indicators.

And, the Times writes, "Reflecting the optimism, the percentage of consumers expecting the economy to produce more jobs in the next six months improved to 19.6% in June from 16.3% the previous month."


However...


• CNN reports on a new survey from Bankrate.com saying that "roughly three-quarters of Americans are living paycheck-to-paycheck, with little to no emergency savings ... Fewer than one in four Americans have enough money in their savings account to cover at least six months of expenses, enough to help cushion the blow of a job loss, medical emergency or some other unexpected event, according to the survey of 1,000 adults. Meanwhile, 50% of those surveyed have less than a three-month cushion and 27% had no savings at all."

Published on: June 26, 2013

The Boston Globe reports that while "Staples already sells more than $10 billion worth of products online annually, trailing only Amazon.com among the world’s top Internet retailers ... the company that invented the office superstore concept in Brighton nearly three decades ago is moving fast to reinvent the way it does business by embracing online shopping inside its stores."

The retailer seems to have concluded that its giant bricks-and-mortar stores "may be going the way of the dot matrix printer. The company plans to cut in half most of its biggest locations as leases expire. This year, 45 of them will be transformed into sleeker new 'omnichannel' stores designed to blend mobile, online, and in-store shopping ... Overall, Staples plans to reduce retail space by about 15 percent by 2015 and triple the size of its e-commerce and information technology staff this year. About 30 underperforming stores will close this year."

Here's what Staples is doing, according to the Globe:

"A Staples in Norwood, just 20 miles away from its original Brighton store, is the company’s first location to test the new retail plan.

Customers walk in and are greeted by 'The Business Lounge,' with a conference table charging station surrounded by copy and fax machines, printers, computer workstations, and a machine that serves hot Starbucks coffee. A tablet wirelessly connects to a 55-inch screen where customers can browse and buy products online. Six additional Staples.com kiosks are placed throughout the store.

"Sales associates carry tablets to check inventory and help customers buy online. And new technology automatically triggers a call for a sales associate over the store’s intercom system if a customer stands in the ink section for more than a minute and a half.

"Furniture, a top online seller, is eliminated from the store with the exception of chairs, which Staples’ research found that most people prefer to test in-store before they buy."

Published on: June 26, 2013

The Food Marketing Institute (FMI) and Rodale-published Prevention are out with their annual "Shopping For Health" study, concluding that "shoppers still need help making  healthy eating easier, with many citing cost and lack of motivation as common obstacles.

"Certain barriers to healthy eating have diminished in the past few years, with shoppers less likely  to feel confused about which foods are healthy and which foods are not (down 16 points since 2007), but many shoppers agree they do not eat as healthy as they would like because it 'costs too much to eat healthy foods' (62%). Sixty percent of shoppers also say it’s too hard to change their eating habits and are still searching for motivation to do so."

Excerpts from the report:

• "Adults can somewhat correctly gauge their own weight, but parents do not have accurate perceptions of their children’s weight. Of those surveyed, only 10 percent with children ages 6 to 18 believed any of their children to be overweight. According to the National Center for Health Statistics, Centers for Disease Control and Prevention, 33% of those ages 6 to 19 are actually overweight or obese.

This misperception is exacerbated through shopping purchases. While the vast majority of parents at least sometimes buy food for their children that is nutritious (88%), just as many buy food their children like (91%). And while nearly all parents at least sometimes buy nutritious food for their kids, only a little more than one-third of parents say they 'always' do (38%).
Shoppers’ top healthy eating strategy involves avoiding food viewed as unhealthy, rather than actively seeking out healthy food items. Consumers report achieving healthy eating by switching to healthier snacks (56%), avoiding junk food (62%), making conscious efforts not to consume too many calories at once (52%), and preparing healthy recipes at home (59%)."

• "Shoppers’ top healthy eating strategy involves avoiding food viewed as unhealthy, rather than actively seeking out healthy food items. Consumers report achieving healthy eating by switching to healthier snacks (56%), avoiding junk food (62%), making conscious efforts not to consume too many calories at once (52%), and preparing healthy recipes at home (59%)."

• "Comparing 2012 and 2011 data, consumers continued the trend of switching to healthier versions of the food they used to eat. Yogurt saw the largest rise, with 34 percent of shoppers opting for a healthier version in the past year (up 9 points from 2011). This is evident in the proliferation of Greek yogurts and probiotic varieties on the market today."

• "In comparison with last year, nearly 50 percent of shoppers are buying more whole grain foods."

Published on: June 26, 2013

After several days of taking it on the chin in the media - both traditional and social - because of its firing of founder and spokesman George Zimmer, management at Men's Wearhouse released a statement yesterday saying that "Zimmer was let go in part because he wanted to take the company private by selling it to an investment firm, while the board did not want to take on the debt required for such a transaction." The company also said that Zimmer was intransigent in his demands, and at one point even wanted to be reinstalled as CEO with absolute power over the company's direction - alternatives that the board apparently found to be less than appetizing.

In his comments since being fired, Zimmer has acknowledged deep differences with the board about the company's strategic direction, though he focused in part of what he viewed as the company's move away from a “guiding principle of servant leadership” that put a greater premium on employee satisfaction and customer service, rather than share price.

Published on: June 26, 2013

• The Chicago Tribune reports that Plum Market, the Michigan-based food retailer, is opening its first store outside Michigan with a new unit in Chicago that offers "concierge service, a profusion of organic produce and a broad selection of competitively priced wine and beer," as well as "an Intelligentsia cafe, wine bar, frozen yogurt stand and sushi made by Michelin-rated chef Takashi Yagahashi."

It is the company's fourth location overall, and ownership seems to feel that a downtown location could help it generate enough buzz - and sales - to justify expansion there.


• The Associated Press reports that "the 7-Eleven convenience store chain filed a lawsuit Friday against the franchisee of five Long Island stores, claiming he siphoned hundreds of thousands of dollars for at least four years. The complaint, filed in federal court in Brooklyn, alleges Tariq Khan, his wife, son and others have for years operated a 'business within a business"' at each of the five stores, diverting cash to buy merchandise inventory from suppliers and never reporting the invoices to 7-Eleven."

The company has ended its franchise agreement with Khan and is seeking $1 million in damages.

Published on: June 26, 2013

• Walmart announced that Raj Jain, president of its operations in India, has left the company. No reason was given for his departure.

He is being replaced, on an interim basis, by Ramnik Narsey, senior vice president for Walmart International.

The Journal writes that " Jain's departure comes as Wal-Mart is facing headwinds in its efforts to build its business in India, a cornerstone of the company's foreign expansion plans. The Indian government announced last fall it would allow foreign operators to invest in Indian supermarkets for the first time, holding up to 51% in local ventures. Wal-Mart said it planned to open a slew of new stores in the country of 1.2 billion people.

"But a number of Indian politicians have opposed liberalization of the sector, saying it will hurt Indian mom-and-pop stores." And, Walmart has been accused there "of breaking foreign-currency rules through its investment in a joint-venture wholesale business in India, which has been allowed since 2006. The Finance Ministry currently is probing the accusation."

Published on: June 26, 2013

We've been spending an inordinate amount of time talking about meatballs here on MNB the past week or so. At the risk of trying your patience, let's get into it one more time. (I have good reason for this.)

To recap (for those who have missed it)...

Last week, in my FaceTime commentary, I talked about a disappointing experience I'd had in try to track down frozen Italian meatballs made by a company called Rosina's that happen to be my teenaged daughter's favorite comfort food. Since I'm going to be out of town for all of July, I wanted to have plenty of them in the freezer. Stew Leonard's, where we've always bought them, doesn't carry them during the summer, and while they were willing to special order them for us, I also reached out to the manufacturer to find out what other local retailers might carry them. The response there bordered on the dysfunction, and if you missed it you can learn about the whole saga here. My complaint, in general, was that Rosina's risked turning an enthusiastic, long-time consumer of its products into a ticked-off shopper more than willing to share his negative experience.

I got a lot of email about this commentary last week, including from a number of retailers and manufacturers offering meatball alternatives, the one company that I never heard from - despite several phone calls and my very public scolding - was Rosina's. After having made that observation here on MNB, I heard from Rosina's; the marketing manager apologized for having dropped the (meat)ball, and said she'd like to send us some meatballs to make up for the problems. I made very clear to her (and repeated here on MNB) that ending me meatballs was not necessary. This was not about extorting meatballs out of Rosina's or anyone else. This was about using a specific customer service experience to illustrate what I suspect is a much broader problem at a number of companies.

Apparently, not everybody is buying my point of view on this.

MNB user Frederic Arnal wrote:

This meatball episode looks to me like an abuse of your bully pulpit.

Another MNB user wrote:

In order to preserve your integrity as a journalist, you should decline the meatballs! Sorry I had to give you a shot on that one!!!

MNB user Autumn May-Haras wrote:

Glad to hear that Rosina's finally responded and you will be rolling in meatballs. But how about donating some of your winnings to your local food bank?
 
Don't be a meatball : )

And, from another reader:

You wrote: “It almost doesn't matter. What matters - for Rosina's and every other company - is that the lesson is learned. And the mistake not repeated.”

And that once again you receive free product as a result of your use of the bully pulpit. Maybe your credibility would improve if you in fact turned these offers down or donated the items to a worthwhile charity. Just MHO.

First of all, I wasn't aware that my credibility was an issue, or at stake.

I'm a little surprised that anybody thinks that somehow I am using MNB as a bully pulpit with which to extort free product from people. To be clear, I've never thought of MNB that way, nor do I use MNB as a way of getting freebies. Sometimes, manufacturers send me stuff hoping that I'll write about their products. Sometimes, friends who work for retailers or manufacturers send me stuff just to say "thanks" for writing MNB each day. But I think I can say with a clear conscience that such gifts do not affect the stories and opinions expressed here on MNB.

In the case of Rosina's, I made very clear that sending meatballs was not necessary. And when they said they would anyway, I went out of my way to be transparent about it here on MNB. (If I'd accepted the meatballs and not said anything, that would have been a little sleazy on my part.)

However, I think that the folks who suggest that I should donate the meatballs being sent by Rosina's to a local food bank make an excellent point. Not only can I afford to buy my own meatballs, I've already bought two cases of the damned things from Stew Leonard's. So if and when the Rosina's shipment shows up, I will donate them to an appropriate charity.

One final point, though.

I totally disagree with the idea that I am abusing my bully pulpit.

Over the past 11 years, when I've had positive and negative consumer experiences, I've often shared them here on MNB. That includes everything from stores I've visited to wines I drank. (BTW...I pay for virtually every bottle of wine or beer reviewed here on MNB. Just in case you were wondering. I don't get cases of wine and beer from folks hoping for a decent review. Damn it.)

I think sharing those experiences - and trying to put them into a broader context from which people can learn something - is part of what I do. I try not to be mean spirited, and I try to give people the benefit of the doubt.

This story was never about meatballs. It was about customer service, and the broader power of consumers, using the internet and social media, to communicate with people about their experiences. I think it had value, and quote frankly, I'd do it again in a second. And will, next time I have either a positive or negative experience that I think is relevant to MNB's broader mission.

As always, I appreciate the input and suggestions. I'll keep them mind going forward, and I promise to be as fair and as transparent as possible.