business news in context, analysis with attitude

Published on: October 28, 2013

by Kevin Coupe

There is a phrase - “intelligent loss of business” - that came to mind over the weekend when I was reading a story in the New York Times about how the Walt Disney Co. is dealing with the gambling issue, a problem that has presented itself since its acquisition of Marvel in 2009 for $4 billion, and has reoccured now that Disney has acquired Lucasfilm for $4 billion.

It is a problem because Marvel long has licensed its characters to a variety of gambling interests, so one can see Iron Man on slot machines, or the Avengers on state lottery tickets. The same goes for Lucasfilm, which licenses out its Star Wars and Indiana Jones characters for use in gambling establishments.

The bulk of the Times story is about how Disney continues to oppose proposed legislation in Florida that would allow for the expansion of legalized gambling: “Disney, a powerhouse in Florida because of its financial might and its sway over the tourism industry, has long led the fight against the expansion of casinos in the state, arguing successfully that gambling tarnishes Florida’s coveted family-friendly brand … But in a nation increasingly awash in various forms of gambling, Disney is finding that keeping a constantly growing entertainment conglomerate completely removed from gambling is far more challenging than it used to be.” (There are those who argue that Disney is only anti-casinos because it doesn’t want competition that could draw people away from its various theme parks.)

But what impressed me was something I did not know - that Disney “is so opposed to gambling that not even Disney cruise ships offer casinos, a mainstay of major cruise liners.”

And now, despite the revenue that comes from such ventures, Disney is working to untangle itself from all the various agreements that have characters that it now owns appearing in gambling-related venues. For the most part, that means allowing agreements to expire without renewing them, a process that can take a few years.

That’s impressive - because it means that Disney is willing to not make money when it comes to products that it sees as being inconsistent with its brand - which, in my view, is called the intelligent loss of business.

There’s no question that Disney always has been a fanatical guardian of its own brand, and I think this story highlights the kinds of questions that every business should ask itself every day. Will what we adding add to our brand equity? Or will it hurt the brand, whether in the short-term or the long-term?

Because there’s not much that is more important to a business than brand equity.

Disney’s approach is, I think, an Eye-Opener.

BTW … compare Disney’s approach to the questions raised about Southwest Airlines, as explored in “Your Views,” below…

Published on: October 28, 2013

The Olympian has a story about the continued influx of donations to both sides in the battle over mandated labeling of products containing genetically modified organisms ( GMOs) - Initiative 522, which is on the ballot on November 5.

According to the story, “The Grocery Manufacturers Association contributed $3.78 million since Thursday to the No on 522 committee, bringing the total contribution by the processed-food industry PAC's members to more than $11 million - or more than half of the record $21.46 million raised by the opponents. DuPont Pioneer, a biotech firm producing genetically engineered seeds, gave another $400,000 on Friday.” Monsanto, the chemical firm with a vested interest in preventing the initiative from becoming law, reportedly has contributed more than $5 million to the no-on-522 effort. The GMA contributions have been funded by companies that include Pepsico, Coca-Cola and Nestle, the story says.

Anti-mandated labeling forces appear to have raised less than half as much money, with public records showing that about $9.1 million has been contributed to efforts to get the initiative passed.

The Olympian reports that “a recent Elway Poll showed the GMO-labeling measure was leading by just four points after a month of heavy advertising especially by labeling opponents - including a huge swing from a month ago when Elway said I-522 was leading by 45 points. A similar GMO measure was leading in California a year ago until opponents armed with $46 million launched a late barrage of television ads that turned the tide.”

In a related note, the story also says that Washington State Attorney General Bob Ferguson intends to seek “penalties” against GMA, saying that the trade association deliberately tried to conceal the identities of companies that were funding its campaign contributions; GMA only released the names when Ferguson’s office filed a lawsuit against it, charging the association with violating state campaign finance laws.

Published on: October 28, 2013

Consumerist.com reports that Walmart has decided to shut down its subscription snack food program, called “Goodies,” about a year after launching the effort, which was seen as a response to Amazon.com’s Subscribe & Save program.

The story says that Walmart is informing subscribers that it will shut the service down after this month’s deliveries.

When Walmart launched Goodies officially - after several months of testing - in November 2012, it offered, for $7 a month gift boxes filled with five to eight food samples ranging from healthy and organic to artisan and ethnic. The concept had been developed by the company’s @WalmartLabs division.

Published on: October 28, 2013

The Los Angeles Times has a piece about how the US beef industry is working overtime to find new cuts of beef that will satisfy consumers’ desire for cheaper, lighter products.

“U.S. per capita beef consumption has been falling for decades as consumers have shifted to lighter fare,”the story says. “Pricey prime rib and filet mignon have vanished from many American tables in a sluggish economy.

“That has the beef industry scouring the animal for affordable delicacies — cuts that will fetch higher prices than burger without breaking the bank for shoppers. Now steaks with names like ranch, petite tender, Denver and Sierra are popping up in meat cases alongside familiar names like sirloin and porterhouse … Such efforts began in earnest more than a decade ago. That's when the U.S. industry's promotional arm, known as the Beef Checkoff, funded research to find cuts tasty and tender enough to turn into inexpensive steaks.

“Researchers at the University of Nebraska and the University of Florida studied more than three dozen muscles, focusing mainly on the shoulder or chuck, as well as the round, which is the back leg. They measured tenderness, trimmed the gristle and spent hours in test kitchens cooking up the results.”

But despite the efforts by the industry, the Times writes, “Getting consumers to embrace new cuts like the petite tender has been anything but a slam-dunk … Some meat experts are dubious too. They say the beef industry is trying to dress up second-tier cuts with fancy names.”

Published on: October 28, 2013

There is a piece on Motley Fool, the financial services site, that is worth taking a look at, examining how the American supermarket business has evolved and how it is perceived by the investor class. The two companies that the piece identifies at being at the core of these shifts: Whole Foods and Walmart.

Take a look by clicking here.

Published on: October 28, 2013

• Interesting statistic from Bloomberg Businessweek: “In the race for commercial solar power, Wal-Mart is killing it. The company now has almost twice as much capacity as second-place Costco. A better comparison: Wal-Mart is converting more sun into energy than 38 U.S. states.”


• In a related story, the Portland Business Journal reports on how Walmart is working with Portland State University in Oregon on “green roof research.”

According to the story, “The two-year partnership with Wal-Mart Stores Inc. will allow PSU’s Green Building Research Laboratory to study the way the roof filters rainwater, enhances energy efficiency, mitigates heat island issues and improves wildlife habitat on a 40,000-square-foot installation.

“The team will embed sensors and a weather station on Walmart’s new Hayden Island Meadows store along with vegetation. The balance of the Walmart roof will have a 52,000-square-foot white membrane roof for comparison purposes.”

Full disclosure: KC is an adjunct faculty member at Portland State University’s Center for Retail Leadership.


• Kristopher Oswald, the Michigan man who was fired by Walmart for violating company policy when he intervened in a parking lot dispute where a woman was being attacked by her boyfriend, only to be offered his job back when criticism of the firing swept through social media, has decided to say thanks, but no thanks.

“I believe my job was only offered to me because of the negative publicity they received," Oswald said, noting that he has concerns about his safety if he goes back to work there.

Walmart, for its part, says that it will provide Oswald with security if he comes back to work, and concedes that his firing was a mistake. “His position is still open to him now if he wants to come back to the store. We'd welcome him back," company spokeswoman Brooke Buchanan says.

Published on: October 28, 2013

National Public Radio had a piece the other day about how, “marketed as a healthier, more nutritious alternative, some premium dog and cat cuisine has gone the Whole Foods route.

“Nowhere is that more evident than in the new $25 million eastern Pennsylvania factory of upstart pet food maker Freshpet, where thousands of pounds of fresh meat and poultry are pasteurized, mixed with vegetables and then immediately chilled, packaged and sent to branded, refrigerated display cases in more than 10,000 stores across America.” The story says that Freshpet “is trying to establish a new category in an industry long dominated by kibbles and cans: fresh, preservative-free food that requires refrigeration.”

The Freshpet story dovetails with a piece from the Associated Press saying that the US Food and Drug Administration (FDA) is finally - six years after the almost 600 pets died because of contaminated pet food - “getting around to passing rules for pet and animal feed that would help prevent contamination before it begins … The proposed rules would require those who sell pet food and animal feed in the United States — including importers — to follow certain sanitation practices and have detailed food safety plans. All of the manufacturers would have to put individual procedures in place to prevent their food from becoming contaminated.”

Published on: October 28, 2013

• Kroger employees in the company’s Dallas/Fort Worth division have ratified a new labor agreement that covers more than nine thousand employees in 92 stores.


• The Lakeland Ledger reports that Publix Super Markets “is experimenting with a new service to reinforce its motto of giving shoppers a pleasurable experience.

“Three stores … are wired as part of a pilot program to help the hearing impaired converse easier with cashiers, the help desk and pharmaceutical staff …. All three have in place a loop system, which is nothing more than a wire, usually positioned on the floor, that circles a room or a small counter space, creating a closed-circuit broadcast fed via microphone to hearing aids outfitted with a telecoil. Most newer hearing aids are equipped with such a device that works with the loop system to reduce reverberation in large spaces, muffles extraneous background noise and boosts clarity of speech.”


• The San Diego Union-Tribune reports that the San Diego City Council’s Rules and Economic Development Committee has passed unanimously a proposed ban on the handing out of free single-use plastic shopping bags by retailers. “The ordinance would ban plastic bags at most stores, mandate a 10 cent per bag charge for customers who ask for paper bags, and require shopkeepers to maintain records for three years,” the story says,

The Union-Tribune reports that “the next steps are an environmental review and a tweaking of the language of the proposed law by the City Attorney's Office, so it might not reach the full City Council for adoption for nine months to one year from now, according to staff.”

Published on: October 28, 2013

• Lou Reed, the influential singer/songwriter guitarist who brought a gritty and dark lyricism to his work with the Velvet Underground in the 1960s and then to his long career as a solo artist, passed away yesterday of complications related to liver disease. He was 71.


• Marcia Wallace, known most recently as the voice of Edna Krabappel, Bart Simpson’s fourth grade teacher on “The Simpsons,” and to an earlier generation as receptionist Carol Kester on the classic sitcom, “The Bob Newhart Show,” has passed away of complications from pneumonia. She was 70.


• Hal Needham, the Hollywood stuntman (who reportedly broke 56 bones over the course of his career) turned director with Smokey and the Bandit and The Cannonball Run, has died at age 82. Within the Hollywood community, Needham was even better known for inventing various pieces of equipment that facilitated the filming of complicated stunts, inventions for which he won an honorary Academy Award.

Published on: October 28, 2013

Got a number of emails reaction to last week’s story about how Southwest Airlines is considering the possibility of imposing baggage fees - if that’s what consumers say they prefer - after years of saying that its no-fee approach is what makes it different.

MNB reader Sharese Alston wrote:

If SW wants to start charging baggage fees, they better go back to the $79 one way strategy, and being the cheapest airline again.  Right now, their prices are the same as everyone else’s, but they win because people save $50-100 for their luggage roundtrip.  I’m just not sure what will set them apart if that changes.  Well, they still don’t have cancellation fees I guess.  It will be interesting to see what happens.  For sure, people hate their train-style boarding so that’s not a winning attribute that will help maintain their profits either.

MNB reader Steven Ritchey wrote:

When Southwest starting airing the commercials about no baggage fees, I said to myself, I hope they never start charging fees after shouting from the rooftops, “no baggage fees”.  Some of us  have rather long memories.

From MNB reader Matt Karpinko:

Having been a flier on Southwest Airlines for many years, I’ve always appreciated their no-nonsense approach to the business.  Top notch customer service, well trained and motivated employees (I once witnessed flight attendants conduct a singing contest at the front of the plane to give away tickets to a Vegas show), and cheeky ad campaigns.  I don’t fault a company for looking at what’s right for long-term profitability, but at the same time it will be an awkward moment when the day comes they have to take down those bright yellow “I CARRY FREE BAGS” signs from all of the luggage carts on the runways.

From MNB reader Rosemary Fifield:

When I fly Southwest, I know that I have no baggage fee and I figure that into my comparison of pricing because I do check luggage every time. But those who only carry their bags are subsidizing my luggage choice. I’ve always assumed it’s built into the price, and I happen to be on the receiving end of the benefit. Without knowing what percentage of customers check bags and what percentage do not, I don’t know if this is a good business move.

MNB reader Rich Heiland wrote:

This has nothing to do with your Southwest comments on baggage, but is related.

The Houston Chronicle had a story today about how United is going to change its computer system to lessen the chance for lower cost tickets. It notes that its latest earnings report shows a problem with too many low fare tickets, as determined by the computer program that balances empty seats versus discounting them within a certain window to put a butt in the seat.

While this would not involve last minute purchases I was shocked at the cost of tickets for New Year's to places like Cancun, Puerto Rico. My wife and I had thought of a getaway but now are going to a friend's hideaway in Northern Arkansas instead. 

I have to say that when my consulting/speaking career is over in a couple of years, I no longer will have loyalty to any airline. In retirement I will be the ultimate bottom feeder. Service has flattened out at such a low level, frequent flyer programs have been devalued to the point that my question on airline loyalty is fast becoming "why?" 

I also noticed that airlines are making seats smaller, which seems to fly in the face of our broadening butts. I commented to a friend that the only difference between a Greyhound and a 737 these says is altitude and time....and the bus has a better seat.

And, from another reader:

If ever existed an industry without a clue, it is the airlines. The a la carte model is certainly a huge revenue driver.

But, the law of unintended consequences does get in the way.

Far too many people carry on bags. That slows down every thing: the security lines; boarding; stowing bags on board; removing bags from the overhead; and exiting the planes. Some of folks cannot even lift or remove the bags without assistance. That is not their fault. They're just avoiding the bag check fees. No blame intended here. It is a good idea to avoid spending money whenever possible.

When I traveled extensively on business (for more than 30 years), I almost always carried on my bags. It saved time with very tight scheduling. I would have gladly paid for it.

Why not reverse the situation? Charge to carry luggage on to the plane. Stop charging for checked bags (unless more than two bags or excess weight or size). I think that is done - but I don't recall the airline(s) doing it.

Airlines make money when the flights are in the air. They should maximize flight time and minimize ground time. Connect in/out of London. The leading airline there makes it tough to carry on much more than the clothes you are wearing. While I don't particularly like their policy, it works. And, it does not matter how far up the elite scale you rank with their partner airlines. If you're in coach, you don't carry on a roller bag.

Make it easier and faster to get everyone through security and then on/off the planes. Southwest has been doing that superbly for years. Now it looks like they're at risk of coming down with the "dumb" virus infecting the airline industry for far too long.

If an airline market researcher asked me if I would rather have lower fares and pay for checked bags, I would (of course) say 'yes.' But having elite status exempts me from having to pay for checked bags.




And, responding to my RIP note on Friday about the passing of NY area sportscaster Bill Mazer, MNB user Tony Moore wrote:

Wow – blast from the past.  I grew up in North Jersey listening to him in the 60’s on the radio.  Remember getting  a book of his for Christmas and thought it was the best present that year.  While not a student of broadcast history, I always felt he was the “Father of Sports Broadcasting.”

Michael Sansolo and I were chatting about this on Friday. We agreed that if Mazer had been born 30 years later, he would’ve been an enormous star on ESPN or WFAN or any of the other all-sports format media ventures out there today. And you’re right … in many ways, he was the father of many of them.

Published on: October 28, 2013

In the Game Four of the World Series last night, the Boston Red Sox defeated the St. Louis Cardinals 4-2, bring the best-of-seven series even and two games apiece.



In Week Eight of National Football League (NFL) play...

San Francisco 42
Jacksonville 10

Cleveland 17
Kansas City 23

Miami 17
New England 27

Dallas 30
Detroit 31

NY Giants 15
Philadelphia 7

NY Jets 9
Cincinnati 49

Atlanta 13
Arizona 27

Washington 21
Denver 45

Pittsburgh 18
Oakland 21

Buffalo 17
New Orleans 35

Green Bay 44
Minnesota 31

Published on: October 28, 2013

• RETAILER TO RETAILER tactical education sessions on Merchandising, Fresh Foods, Operations, Financial Controls, Digital Marketing and Store Management.

• EXPANDED EXPO FLOOR with more suppliers and pavilions in categories such as Produce, Meat, General Merchandise & Health Care, and Technology.

• OPENING GENERAL SESSION featuring Pulitzer-Prize winning journalist Bob Woodward.

• CHAIRMAN’S DINNER AND GALA with entertainment by award-winning country stars Thompson Square!

For more information please visit www.TheNGAShow.com .