business news in context, analysis with attitude

MNB user Glen Terbeek had some thoughts prompted by our piece the Sears-Kmart debacle:

I'm old enough to remember when Sears and then Kmart were the retailers that all others looked up to. They were big, profitable, and growing fast. They couldn't do anything wrong. They were the darlings of Wall Street.

What happened? A look at history may tell the story. I believe that it's when a retailer gets too big. Too big is defined when a retailer losses its edge at each store's marketplace. And that is when it starts loosing its shoppers' and employees' loyalty, making room for others to attack. These attackers include such irritants as locally focused competitors, unions, suppliers, environmentalists, and city governments.

It is impossible for big retailers to keep the local market edge because their organizations and measurements don't enable them to do so. And as they get bigger and more obvious, they spend more of their time defending their business model, not the local market. As a result, they manage to average, not to potential, losing their local edge. How can anyone in headquarters worry about one of 3000 stores? It's impossible. As example, can the laundry detergent category manager know the needs of a store 1500 miles away? Is this starting to happen to Wal-Mart? History will tell.

Why don't big retailers organize in clusters of market modules, maybe 20 or so stores, with common market attributes? These modules would have responsibility and authority for maximizing market performance defined by shoppers and supported by employees. They would be big enough to develop marketing/merchandising skills, yet small enough to be local market effective. The module management would live and work in the area of the module. They would be enabled by centralized supply chain and other non demand services. Each module would be equivalent to a good local retailer, but not as bad as a big national chain. As they grow, they just add more modules. They could even use different store banners if necessary, helping them to stay under the radar screen of many attackers. The modules would drive the business, not the headquarters.

Remember the shoppers don't shop the "big chain", they shop their local market, and the stores competing for their business.

If you just skimmed over Terbeek’s email, go back and read it again. There’s a lot of wisdom in there.

We had a piece yesterday about the US government suggesting that there should be voluntary guidelines covering the gluten-free segment, which prompted one MNB user to write:

I was frankly surprised to read in your gluten-free article that Jane Andrews, a dietician at Wegmans, expressed "surprise" that the FDA would not allow the blurb "gluten-free" on any food product that was naturally gluten-free. There are firm guidelines to follow in what a food producer can claim on its packaging as a nutritional attribute. Foremost among them are not allowing food companies to claim positive attributes that they had nothing to do with--i.e. the food is naturally that way. If Wegmans is indeed claiming gluten-free on food that is naturally gluten-free, then they
are guilty of misbranding…

In other words, for Ms Andrew's Wegman's Spaghetti Sauce, if the label states "gluten-free", then it is misbranded as spaghetti sauce is inherently gluten-free, and their brand is no different from any others in this regard.

To be in compliance, the sauce label would need to state something like "spaghetti sauce, a naturally gluten-free food"--i.e. all spaghetti sauce is gluten-free so our brand is not special in this regard. The only food item labels that can claim simply "gluten-free" are those foods which normally contain gluten, such as bread, but which have been reformulated to contain no gluten--i.e. we have reformulated the bread recipe to produce a gluten-free bread, which is different from other bread that still contains gluten. The FDA regulations are quite clear in this regard, but it is amazing how many people involved w/food labels either do not understand them or simply choose to ignore them as not being particularly good for aggressive label marketing.

Another MNB user wrote:

The FDA distinguishes between the statements "Gluten Free" and "A Gluten Free Food". They think the former is misleading because it implies that somehow this food has been made in a way to exclude or remove gluten and therefore differs from other foods of the same type, whereas the latter just informs the consumer that this food type is always free of gluten. That same distinction has been applied to claims of "cholesterol free" for over ten years. FDA believes it is misleading to state "Cholesterol Free" on the label for a vegetable oil because all vegetable oil is free of cholesterol. However they permit the statement "A cholesterol free food". Moreover, there is a Supreme Court decision of a few years ago that confirmed a 1st Amendment right of commercial free speech. FDA could not legally prohibit a truthful and non-misleading statement about the gluten content of a food.

Now we’re really confused.

MNB user Stanton J. Barrett wrote:

What is really gluten-free? Different people suffering from celiac have different reactions to different amounts of gluten. This is up to research scientists to decide and even then, consumers will need to be cautious. As a parent of a celiac child (and I might have it, but not tested yet) I applaud Wegman’s efforts to label products that are naturally gluten-free as a way to cut through the clutter. If they sell rice, they should be able to label it gluten-free since it is naturally gluten-free! If their tomato sauce is naturally gluten-free, they should be able to label it as such. When we are shopping, we need more information, not less—our son’s long-term health and ability to deal with a life-long condition depend on it. If the folks at Wegman’s need someone to testify at the FDA, they should any one of the many celiac support groups.

This is the right approach. FDA ought to be drafting regulations based on what works for the consumers who need these foods, not the manufacturers who are looking for marketing advantages.

We wrote yesterday about Aldi considering the Dallas market, which led MNB user Glenn Cantor to write:

Aldi is well known, and often dismissed, in our industry as a small, low-price format. The high quality of their private label products is never mentioned. Some of their grocery products surpass better known, branded products in taste and quality. Their salsa is better than anything on the shelves in traditional grocery stores. Also, their dry breakfast cereal is better than the branded equivalents.

Following up on emails we had yesterday about the impact of hormones in foods, one MNB user wrote:

There was a quick comment about some research done on children reaching puberty earlier and the possible links to the children consuming mild with hormones in it. I would like to say first hand that there are several people in my family that are elementary school teachers and I will never forget my sister who teaches 4th and 5th grade coming home and having to by feminine hygiene products for her girls, and not just a couple of them, but several of the girls had already began getting their periods!!!! Hmmmmmmmm.........makes you wonder how much milk and meat product with hormones they had consumed by this time.

On the subject of retailers looking to exert greater control over labor practices in overseas factories, one MNB user wrote:

Sometimes I think this is a Catch 22, lets speak hypothetically...............A factory in Cambodia makes shoes, all 14 kids from one family work in the factory for lets say a dollar day (and that is probably more than they would get paid). Now a group comes in and tells the factory that is can not employ these kids b/c it is inhumane so they get rid of the kids and fix everything up at a huge expense and they pay everyone more but now us Americans do not want to buy our shoes for the price they are now being sold at but they are humane shoes but wow are they expensive. The price of the shoes going up aids in us not buying them b/c they are too expensive and the factory closes down. Now the kids and everyone else in Cambodia are out of work, the family ends up starving to death b/c the only income that was coming in was the kids working at the factory bringing home money, and now they are not, b/c bless our hearts we just couldn't bare to see kids work. I'm not saying child labor is right and that in 3rd world countries it is okay to take advantage I'm just saying the issue is harder to fix than it seems. We seem to want everything both ways and that just isn't going to happen.

This was the essence of what Newsweek editor and columnist Fareed Zakaria was talking about at FMI Midwinter yesterday. He suggested that America is in a tough place right now, because as a country we are used to riding into other nations where wrongs are being committed, fixing those wrongs, being appreciated, and then riding out of town triumphant. (There’s a reason the Western is such a prototypically American art form.) The problem is that in many cases around the world, countries don’t want out help, don’t perceive the US as improving their situations, and our country meets with hostility and resentment. Zakaria suggested that in a global environment where political realities and nationalistic attitudes often work against the US, the country and its leadership is going to have to find new ways to operate. To continue to operate under old premises would be suicidal, he said.

Responding to yesterday’s piece about companies trying to better leverage their employees so that stores are more responsive to the needs and desires of consumers, one MNB user wrote:

Do any of the senior executives actually shop at their own stores to see for themselves what should/needs to be done? Not as announced executives, but rather just an anonymous shoppers.

Not often enough.

We think that all food retailers should require every executive to do the main family grocery shopping at least once a month. Maybe more.

Finally, we continue to get email in the Bill Belichick debate…which we launched by saying that we were glad to see him lose last weekend because he seems like the most miserable, misanthropic person in professional sports.

MNB user Mark Monroe wrote:

Totally agree. The guy is not only arrogant, he is a hypocrite. He has no problem discarding long-time Patriot players in a ruthless, cold-hearted fashion, but when an ex employee of his violates HIS rules for loyalty and competes for one of "his" players, he gets all pissed off and treats him with a complete lack of respect. You can debate whether this is misanthropic, but hypocritical is not up for debate and arrogant is pretty clear to anyone paying attention.

MNB user Rob Allison wrote:

I agree with (the) view that Bill Belichick is a good coach, but he will never be as good as Dick Vermeil was with the Rams. He has done a lot with the Pats in his tenure; however, there is one player that comes to mind when people say there are “no superstar ego’s on the Patriots.” Tom Brady. I believe the field was re-sodden one game for him because he did not like the way it felt after the in-climate weather. I would have taken the rough terrain and asked general management to add the 5 million dollars directly to my paycheck.

And another MNB user wrote:

I agree w/ you on Bellichick. The guy has proven that he is a sore loser in the past (See Eric Mangini snub). Knows what he is doing when it comes to coaching, but possesses no tact in any situation, and that includes winning.

We also got an email reacting to our listing yesterday of the major Oscar nominations:

Not quite sure why “Little Miss Sunshine” was nominated for all these Oscars. Yes, I enjoyed the movie very much. However, I did not think it was anything show-stopping or groundbreaking. I simply thought it was an amusing film about a dysfunctional clan of "misanthropes." But then again, I usually don't agree with the majority of these so-called
expert nominations.

I'll stick with “24.”

Of the “best picture” nominees, we haven’t seen either “The Queen” or “Letters from Iwo Jima” yet, so we’ll reserve judgment on who we’d vote for.

But we have to say that we loved “Little Miss Sunshine” – it was the best time in terms of pure entertainment that we had at the movies this year.

Though there was one film generally overlooked by the Academy Awards this year that we found to be the most thought-provoking movie we’ve seen in years. (No, not “Borat.”) We’ll write about it in Friday’s “OffBeat”…
KC's View: