business news in context, analysis with attitude

Published on: July 29, 2013

by Kevin Coupe

This may make you feel old. Or young. It depends on how you feel about this particular anniversary.

Thirty-five years ago yesterday - July 28, 1978 - Animal House premiered in the nation's movie theaters.

And from that day forward, a whole new set of phrases entered the lexicon. Like, "I'm a zit!" And "Fat, drunk and stupid is no way to go through life, son." And, "Double secret probation." And, "Do you mind if we dance with your dates?" And, "Was it over when the Germans bombed Pearl Harbor?"

And, of course, the immortal, "Is it supposed to be this soft?"

The list goes on and on.

Thirty-five years ago.

And here's the great thing, considering where I'm sitting right now.
Y'know where Animal House was largely filmed?

Oregon.

Published on: July 29, 2013

The Washington Post reports that the US Food and Drug Administration (FDA) has released a series of proposals, as mandated by food safety legislation passed by Congress and signed into law in 2010, that will require imported foods to meet US safety standards.

"Under the proposed rules," the story says, "domestic importers would have to vouch for the food-safety practices of their overseas suppliers. The rules also aim to improve the consistency and transparency of foreign food-safety audits, which many companies rely on to ensure the quality of their international supply chains."

The story goes on: "The rules are intended to leverage the agency’s limited resources by creating a set of standards and relying on U.S. companies and foreign governments to ensure that overseas importers abide by them.

"If adopted, they would create a 'foreign supplier verification program,' in which U.S. companies would have clear legal responsibility for making sure their overseas suppliers meet U.S. safety standards. They also would establish a system in which the FDA could authorize foreign governments and private companies to accredit third-party auditors who could inspect overseas manufacturers that have a troubled history or whose products are deemed 'high risk'."

There will be a four-month period during which the public can comment on the proposals. However, the Post notes that it remains up in the air whether the FDA will even get the funding it needs from an often deadlocked US Congress to implement these rules changes.

Published on: July 29, 2013

The Washington Post has a piece about how grocery industry consolidation could, quite literally, affect the price of beans for consumers.

"It’s not always clear what happens when markets consolidate," the Post writes. "On the one hand, they can achieve greater economies of scale, which might allow them to offer lower prices. On the other, when a lot of players aren’t scrapping it out for customers, they might allow prices to creep upwards. Meanwhile, price drivers like commodities and labor costs muddy the waters, making it hard to figure out what’s going on."

The story suggests that the lessons of the late 90s can provide some context for what may happen: "Between 1996 and 2000, nearly 3,500 stores were purchased, representing more than $67 billion in annual sales," the story says. "In 1992, the top four chains ate up 15.9 percent of total sales; in 1998 the share was 28.8 percent. It was in part a reaction to the overbearing force of Wal-Mart–the Krogers and Supervalus reasoned that only by combining forces could they compete against the supply-chain bending powers of Bentonville. At the same time, though, the Federal Trade Commission helped prevent chains from carving up whole markets amongst themselves, keeping enough players in a locality to maintain competition."

A study by researchers at South Dakota State University concluded, the Post writes, that "chains with a larger chunk of the national market did have lower prices. But they also tend to reduce the number of promotions they offer after a merger, making it harder on lower-income shoppers who might have put more effort into lowering their bills. Also, there is some evidence that fewer competitors in a given single market can drive up prices."

Published on: July 29, 2013

The Seattle Times reports on how Seattle Mayor Mike McGinn, locked in a contentious re-election battle, has decided to stake out an anti-Whole Foods position as one way of gaining and/or solidifying support, especially among organized labor.

According to the story, "McGinn sparked the Whole Foods controversy when he sided with the grocery workers union and ordered the Seattle Department of Transportation to recommend denial of a key alley vacation needed for the project to move ahead. McGinn argues the project by the nonunion store will drag down worker wages and argues the city should use its powers to force the company to boost its pay. Whole Foods says McGinn’s salary information is inaccurate."

Several of McGinn's opponents have criticized his actions, saying that they are purely political, and, in the words of one, "subverted an impartial process to pursue his own advancement." And, in fact, three days after McGinn issued his orders to the Department of Transportation, the United Food and Commercial Workers (UFCW), endorsed his re-election campaign; the UFCW says it has more than 6,000 members living in Seattle.

The story also notes that several of McGinn's opponents said the mayor was hypocritical for "singling out Whole Foods while not raising the same issue when granting recent street vacations to nonunion Amazon.com in South Lake Union."

McGinn's response: "The city is under no obligation to sell public property to a company that will depress wages and benefits for workers at existing grocery stores in the same neighborhood. This city is fortunate in that we are growing and prospering, but too many people are left out of that prosperity."

Just FYI...the Seattle Department of Transportation website says that "the term Street Vacation refers to the process where an individual (who owns property adjacent to the right-of-way) can petition the City Council to acquire public right-of-way for private use. Public right-of-way is any property where the City has a right to use the land for street purposes whether or not the right-of-way has ever been improved."

The final decision will be made by the Seattle City Council later this year.

Published on: July 29, 2013

There is a fascinating piece on Salon.com suggesting that with all the debate about food in America, about nutrition and obesity issues, and about who is to blame to the apparently sorry state of affairs, it often is a debate between elites on both sides of the issue, rarely involving the actual voices of low income and middle income people who are affected by public policies and private strategies.

An excerpt:

"The assumption is always that every person in America stands between a produce section – bustling with fresh fruits, crisp vegetables and bright herbs – and a McDonald’s parking lot. But in reality the problems with food in America are more complicated than that, and the solutions more diverse than Big Food versus Pollan ... America’s conversations about food politics are dominated by white men talking, taking pot shots at each other for fun and profit. It’s an old game, just as elitist as enjoying that $10 smoothie, just as naïve and ignorant as expecting that every neighborhood has a smoothie shop – instead of a Burger King – on every corner."

It's really worth reading here. (One caution. Some of the language is a little rough.)

Published on: July 29, 2013

• The Canadian Press reports that Walmart Canada has opened its first supercenter in the Atlantic provinces, a move seen as part of "an aggressive bid to win over customers in an increasingly competitive retail market." The company reportedly plans to build a total of nine supercenters in the region as part of a broader plan that involved the opening, remodeling or relocating of 37 stores.

It also is part of the Broader plan - as in Shelley Broader, president/CEO of Walmart Canada, who says that her focus is on creating a one-stop shopping experience. Broader also says that she's not overly concerned about the competition; Target is expanding into Canada, Sobeys acquired Safeway's Canadian stores, and Loblaws recently bout Shoppers Drug Mart.

"Our ability to grow fast is really about the demand that is driven by our customer base," she tells the Press. "We aren't competition-focused, we are really customer-focused."

Published on: July 29, 2013

• The Associated Press reports that Amazon.com says it is hiring people to fill 7,000 jobs in 13 states, "beefing up staff at the warehouses where it fills orders, and in its customer service division." Some 5,000 of the jobs will be full-time positions in its various US distribution centers, and the other 2,000 will be in customer service.

The story notes that Amazon "has been spending heavily on order fulfillment, a strategy meant to help the business grow," though those expenses have caused the e-tailer to report a loss for the last quarter.

Published on: July 29, 2013

...with brief, occasional, italicized and sometimes gratuitous commentary...

• The Austin Business Journal reports that HEB has opened "its most sustainable store ever" with a new 83,000 square foot store in the Mueller development northeast of downtown Austin.

According to the story, "After extensive collaboration with neighbors, HEB decided to create a casual restaurant in the store dubbed Cafe Mueller. The store also has a community meeting room, sushi bar, tortilleria, cheese shop and olive bar, meat market, deli, wine shop, flower boutique, pharmacy and kitchen demo area.

"HEB has registered to become LEED certified and expects that the new store will exceed the silver level. LEED stands for Leadership in Energy and Environmental Design and measures the sustainability and energy efficiency of buildings and various developments. The store also will be certified by the Austin Energy Green Building program."


• Fast Company reports that Kmart has announced that it is "adopting in-store payments for items purchased on their website. The functionality is baked into the Shop Your Way loyalty card program, which gives Kmart e-retailer-style deep analytics about their brick-and-mortar customers.

"Customers reserve their goods online and travel to their local store, where they pay in cash (or pay via card for customers averse to entering credit card numbers online) and receive their purchases. The program ... also allows them to pay in-store and have deliveries sent to their home for furniture or other big items."


• The Wall Street Journal reports that "after watching the so-called King of Beers falter badly for years, Anheuser-Busch InBev NV is trying to go where no beer maker has even come close before - creating the world's first big global beer brand.

"Already, the Belgian giant has launched the beer in Russia, Ukraine and Brazil in recent years, while deepening Bud's distribution in nearly 90 countries and doubling the number of the beer's overseas breweries. Now, the company is making a bold move into China, the largest and most elusive prize in the business, with a population that consumes a fourth of all beer and is expected to deliver more than 40% of the industry's growth this decade."


• CNBC reports that Starbucks CEO Howard Schultz, when asked if he is concerned about Dunkin' Donuts' plans to expand rapidly, especially with new stores in California, responded that he's not really worried: "We respect all of our competitors but I think Dunkin' and McDonalds, they're in another business, they're in the fast food business ... I'm not losing any sleep over Dunkin Donuts."

Schultz is taking the same position that Shelley Broader is taking in Canada. It is standard CEO-speak. And I'm reasonably sure that Schultz would love to crush Dunkin' when it starts opening stores in California. Just to show he can.

Published on: July 29, 2013

JJ Cale, the singer, songwriter and musician who wrote "After Midnight" and "Cocaine," who had his songs recorded by everyone from Eric Clapton to Johnny Cash to Lynyrd Skynyrd to the Band to Tom Petty, died Friday of a heart attack. He was 74.

Published on: July 29, 2013

We had a story last week about how studies suggest that Walmart remains less expensive than Target, though the gap is narrowing. Which led one MNB user to write:

I am glad to hear that I am saving 2.6% by shopping at Target using my "Red Card" 5% discount.  Lines are shorter, they actually have stock on the shelf, and their associates seem, on average, to be a lot more competent and helpful. Added bonuses - unlike the local Walmart I have not read any news stories of a customer getting assaulted, robbed or car jacked at my local Target; and the parking lots are lot cleaner.




Regarding another story, an email from an MNB reader:

No question that the Dr. Pepper Snapple Group was properly put in its place with the decision denying its health claims and implications (using images of berries and pomegranates on soda labels to give a false impression that these fruits were an actual part of the soda’s contents) as  to nutritional values of several of its sodas.  However, there is an easily overlooked byproduct of this decision which reflects a noticeably increasing trend of the haves gaining the system by contributing services at exorbitant rates, often at the expense of far more deserving parties.

The piece noted that, ” The drink company also agreed to pay $5,000 to the Center for Science in the Public Interest and $237,500 in attorney’s fees."   It seems to me that the offended party took on an uphill fight based on sincere feelings of right vs. wrong, which is almost heroic in my book.  I would have preferred the lawyers take a back seat here and the size of the awards be reversed.

You must be living in an alternative universe.




We continue to get emails about the Cheerios ad that showed an interracial couple, and the video in which a series of children seemed to be surprised that anyone would get upset at such a thing.

One MNB user wrote:

To point out the obvious, it confirms what I have always preached to my own kids; hate is neither intrinsic nor innate.  It is an emotion that must be taught.  It’s so good to see that either there are fewer parents teaching it (although the Haters are much more vocal), or there are more kids not listening to that particular lesson.

I’m not deluding myself.  There are too many recent happenings that show we are far from achieving Dr. King’s dream, but I do believe each generation brings us one step closer.
 
I also applaud General Mills for having the fortitude to run this ad knowing full well they were opening a Pandora’s box.  It’s a long way from the old “big G, little o”.

And from another reader:

All of  this discussion about mixed race couples and families with kids attitudes toward them made me think of a line from an old Tom T. Hall song, “Old Dogs, & Children & Watermelon Wine”,  the line is “God bless  the little children, while their still too young to hate."




And, on another oft-discussed topic, MNB reader Craig Espelien wrote:

I wanted to toss a couple of comments into the GMO fray. While I think open and honest disclosure is the best rule, I have so little interest in GMO labeling as a cause (either for or against) that I typically skip any of your stories/commentary on it as, in my mind, it has become too prevalent on MNB (this is your right – it is your blog).  It is likely you get so many pieces of input on this issue due to the continuous and overwhelming (again my opinion) amount of press you provide the issue – people may perceive you are for GMO labeling (and, if I interpret things properly, you are more for full disclosure than for GMO labeling in particular). 

Part of my challenge with the whole issue is that at our age (I am pretty close to your age if our last conversation sticks in my head properly) we grew up on some of the most interesting “preservatives” – like those found in Spaghetti O’s with sliced franks – pretty sure that was not all that good for me and I am neither overweight (okay – perhaps a bit) nor unhealthy.  I actually think I might look younger than my years due to all of the preservatives I ingested as a kid (young and college) – and am okay with that.  GMO’s to me are the “preservatives” of this time and there is probably just as little issue with how they will affect people long term.  As a society we seem to be dying at a pretty regular rate and it also seems that allergies to all things nut, gluten or flavor related continue to escalate (Conspiracy Theory – this is all due to anti-bacterial soap and computer games – kids no longer go play in the dirt and immediately throw away items that fall on the floor completely ignoring the 5 (or 15) second rule) based on things totally unrelated to preservatives or GMO’s – go figure.

GMO’s are a bit like Organic – more of a lifestyle choice.  I believe kids should have as much natural stuff as a family can afford but eating McDonald’s or GMO products is likely not going to hurt as long as it is “once in a while” (full disclosure – we have no kids and I have not eaten McDonald’s in over 15 years).  I do not adhere to that lifestyle (and do not to the Organic lifestyle either) – so the continuous rhetoric on the issue simply becomes boring.   Clearly, I am in the minority as this is another polarizing issue that I agree with you on – learn about both sides, do not try and force your side (or middle in my case) on anyone else and make choices that support your lifestyle.




Regarding a study that labeled Trader Joe's as America's favorite supermarket, MNB reader Lisa Malmarowski wrote:

I'll put more faith in a study like this when respondents are allowed to choose 'my locally owned neighborhood co-op'. With hundreds of food cooperatives across the country, we are a quiet sector with a lot of people power behind us.




We got a number of emails about our story last week about White Castle installing windows so its kitchens are more open to scrutiny.

One reader offered:

We recently had dinner at a family-owned restaurant in Cedar Falls, Iowa during a weeknight when (I perceive) business was better than had been anticipated.   In addition to being seated by the wife of the couple who own the restaurant, our table was located near an open pass-through window into the kitchen where we had a full view of the dishes being plated and prepared.

The husband-owner was working feverishly in the kitchen among some college-aged young men to ensure that everything going out of the kitchen met his standards.   In addition, we were able to hear everything that was being said and it was truly enlightening to watch the process.   It quickly became clear to us that the younger employees were making every attempt to make the owner happy and appeared to be doing a great job, in addition to getting an education on how to work in a kitchen.   While the arrival of our meal took longer than expected, the time flew by because we were able to enjoy a nice bottle of wine and conversation while we observed the "show" in front of us.

Our meal was wonderful.....and we had the ability to catch the husband and wife on our way out the door to not only tell them how much we enjoyed our dinner, but also how much we respected the way they ran their business.

P.S. White Castle is not introducing anything new to the fast food industry with their planned changes.  Anyone who lives in the Midwest and eats at Steak and Shake restaurants knows that they have had the open kitchen concept for years.  If you don't want to sit at a table, you can sit at their counter and watch your order being prepared.   On the wall of many of their restaurants is their motto......."in sight, it must be right".

From another reader:

I too enjoy watching chefs at work, but it can also work against the restaurant if they are not careful. A couple of years ago my wife and I stopped in a Carrabba’s and were told we could sit at their new kitchen seating area and watch the food be prepared. We took them up on this, ordered some wine, and watched everyone hustle around. This turned bad quickly because of two issues: 1) The guy making pizzas right in front of us was sweating like crazy, and every time he leaned over the pizza to add ingredients sweat dripped all over the pie. And 2) another worker handling ingredients (mainly cutting up vegetables) reached over a couple of times and pulled a garbage can closer to him (thumb on the outside of the can and four fingers inside) then used the same hand to continue working with the vegetables without washing his hands. Needless to say we finished our wine and left, and have not been back.




And, regarding Barnes & Noble's travails, one MNB reader wrote:

Barnes & Noble could do much better if they didn't hire haughty politically correct elitists, who turn their noses up at customers, who wish to purchase books that don't agree with their political perspective.  Some popular books are buried, rather than being promoted, or are sometimes never ordered.  Their employees' holier-than-thou attitudes will ensure that 30-40% of potential book buyers will avoid going into the store; probably shopping at Amazon, where they'll pay less, with no sales tax, and will evade the slings and arrows of outrageous snobbery.  The only problem is what do we do with the B&N gift certificate we got for our birthday?

Really? You've been able to determine the politics of the people who work at your local Barnes & Noble? And you've found that they've "buried" books that disagreed with their politics?

I'm shocked.

First of all, I've been in a lot of Barnes & Nobles in my life, and it never occurred to me to discuss politics with the employees there.

Second, it always has been my impression that very few decisions about where books are displayed are made at store level ... it all looks pretty programmed to me. Unless, of course, this is some sort of national conspiracy by Barnes & Noble ... which would be pretty dumb if indeed its leadership is driving 30-40 percent of book buyers away from a business that is being killed by the internet.

But if you're right, maybe that's the reason we couldn't get our book into Barnes & Noble. I just figured it was because we were small potatoes ... but if it is a grand political conspiracy, that's a much better story.

Published on: July 29, 2013

Thanks to the friends of MNB (some of whom are pictured at right) who stopped by Etta's in Seattle last Friday night ... the conversation was lively, the 2011 J. Albin Lorelle Horse Heaven Hills Pinot Grigio was a mouthful (and absolutely perfect), and the Dungeness Crab sandwiches, I think everyone would agree, were sublime.

A perfect night.