Wednesday, June 28, 2006

Shocking news from China

Well, OK, not so shocking: Researchers have found that people in China think TV is boring.

Isn't this dog-bites-man sort of stuff? What would be shocking is if someone, somewhere thought TV was interesting.
Ominously for advertisers, 85% of Chinese stop watching TV during commercial breaks. More than half change the channel, while rest of them do housework, eat, chat or use the bathroom.
Again, not exactly a shock, especially since commercial breaks in China can last twenty minutes.

Monday, June 26, 2006

Mark your calendars: TPMA, September

It's early (three months), but not too early to set the time aside -- the Trade Promotion Management Association will be holding their annual meeting in Chicago, September 25-27. Info on the conference is here, and registration is here.

It looks like an excellent agenda, and you should plan to be there.

J&J bulks up

In contrast to the Kraft item below, Johnson & Johnson is planning to buy Pfizer's consumer health division for $16.6b.

Pfizer has had the division on the block for the past couple months. We reported about three weeks ago that J&J was among the leading bidders, along with Glaxo and Reckitt Benckiser.

Sunday, June 25, 2006

Kraft slims down -- preparing for the single life

Kraft is selling off a significant number of its brands -- Milk Bone, Life Savers, Altoids recently -- apparently in preparation for being spun off by parent Altria.

The plan apparently is to shed about 5% of sales ($34b), and to concentrate on coffee, cheese, cookies, and crackers, and also to strengthen European operations.
Kraft's first-quarter revenue rose less than 1 percent, to $8.12 billion, as sales in Europe slid 9.1 percent amid stiffer competition from retailers' own brands.

"We are convinced we can perform better in Europe," Deromedi said. "In any market, but particularly in Europe, you need to be investing in your brands and in innovation."

Thursday, June 22, 2006

Off-topic: Southwest to test assigned seats

Business flyers throughout the US are today pumping their fists with joy at the news that Southwest Airlines is testing alternatives to their cattle-call seating policy.

I would love to fly Southwest, which frequently has the lowest fares on routes I need to fly, but I refuse to choose between the two options they give me:
1) Stand in line for an hour, or,
2) Take a middle seat
The test will take place on flights out of San Diego.
In a statement, Southwest said it would consider permanent customer satisfaction enhancements like assigned seating if the move would attract new customers and maintain or improve operational efficiencies.

Lord & Taylor sold

Federated announced the sale of Lord & Taylor to a property development firm for $1.2b.
Federated said that its board has approved the sale to Purchase, N.Y.-based NRDC Equity Partners LLC, which is a partnership between principals of Apollo Real Estate Advisors L.P. and principals of National Realty & Development Corp.
Given the nature of the acquirers, this would appear on the surface to be a real estate play, and L&T occupies some good real estate. NRDC denies it:
NRDC said it plans to run Lord & Taylor as a specialty department store chain and to keep L&T's management team, including CEO Jane Elfers.
Well, they sorta deny it:

Richard Baker, president of NRDC Equity Partners, said in separate release that the acquisition of L&T "furthers "NRDC's strategy of acquiring great companies that have a strong brand and a valuable real estate platform."

"Lord & Taylor has been an iconic national brand for 180 years. We believe there is significant opportunity to continue the revitalization of the brand begun in 2003," Baker said.

So which is it? An "opportunity to continue the revitalization of the brand" or "a valuable real estate platform"?

I'll go with this sentence: "Analysts say the retailer's most valuable asset is its real estate, particularly its 10-story, 600,000-square-foot flagship store on Fifth Avenue." $1.2b looks like a bargain.

Tuesday, June 20, 2006

Tuesday quick notes

Wal-Mart continues to struggle in many of its overseas markets. Reportedly they have closed a couple German stores and are considering further closures.

Ad Age tells us that the average CMO lasts 23 months in the job.

Nokia is going to open its own store in Chicago (on the Magnificent Mile, of course) this coming weekend. It will be one of four in the US and 18 worldwide. It's part of the trend of manufacturers to open stores, the counter-trend to retailers going private label, though it is of course at least as much an effort to brand as to sell product.

History of diet colas

American Heritage magazine has an interesting story this issue on the history of diet colas. It points up the importance of smaller companies as innovators, since the first such drink did not come from the industry giants; it was a small (and now defunct) Brooklyn bottler called Kirsch Beverages that introduced No-Cal in 1952. It would be a decade before Royal Crown would introduce Diet-Rite, to be followed eventually by Coke and Pepsi.
At its heart the diet-soda industry reflects a larger American story—a wealthy and increasingly populous nation that is willing to pay for an edible product that does not offer even calories as a benefit.

Monday, June 12, 2006

A webinar you shouldn't miss

Wipro Technologies is sponsoring a webinar June 20th on Keys to a Successful TPM Implementation. The webinar will feature Neil Rohrbacker, Coty’s Director of Worldwide Business Intelligence, discussing their recent TPM implementation. Rob Hand, CEO of Hand Promotion Management, will highlight issues, concerns and problems of a major TPM implementation. And Somjit Amrit, Wipro’s CPG industry lead, will discuss Wipro’s new TPM Center of Excellence. With TPM becoming a top I/T initiative, and supply and demand chain integration creating potential problems, this is one webinar that your entire TPM task force will need to attend.

Click here to register.

Sunday, June 11, 2006

Weekend quick notes

Rona, the biggest home improvement chain in Canada, is planning to reverse the usual pattern and come south to chalenge Home Depot and Lowes. The report is that they may buy a small US chain, and will concentrate initially on the northeast.

McCormick has bought Epicurean International, a Thai food marketer (Thai Kitchen and Simply Asia are their brands). "David Sakamoto, Epicurean International's chief financial officer, said the purchase by McCormick will allow his company's products to be further developed and distributed more widely."

Buick's cool. No, really.

Buick is a hot brand -- in China.
Buick’s sizzling sales have driven General Motors — even as it closes plants and lays off workers at home — to the top of the pack in China, the world’s fastest-growing automobile market. GM sold 665,000 cars and trucks in China last year. For now, only 1 in 100 Chinese own a car, compared to 9 in 10 in the United States. But the Chinese expect 130 million vehicles to be sold by 2020.
I can attest to the truth of this article. On my first visit to China, my driver picked me up in a Buick minivan, and I was surprised at the number of Buicks on the roads. Later I enjoyed tea at a teahouse looking out over the Huangpu at the storied Bund and the Shanghai skyline -- prominent in which is a huge red neon sign blazing the Buick logo.

Thursday, June 08, 2006

Effects of a name change

Federated Department Stores' decision to eliminate the names of local stores, replacing them with Macy's, may turn out to be a good plan in the long run. The idea is to create a national brand name, gaining effeciencies in advertising and merchandising.

In the short-term, however, the fallout has been negative. The Columbus Dispatch reports that eliminating the 150-year-old Lazarus name with Macy's has cut down on customer traffic.
In 2005, customer visits to Macy’s in the Columbus market declined 4.5 percentage points, or by more than 50,000 people, according to the independent marketresearch firm Scarborough Research.

The drop was steeper than Lazarus experienced during the previous five years combined.

Here in the Chicago area there is a strongly negative reaction to the elimination of the Marshall Fields name. How that will translate into traffic and sales will take time to see.

Update (Sunday): USA Today talks about Federated's plans in general, and comments on negative reaction to the name changes. It sounds like Federated's starting to get a bit testy on the subject:
Sosnick, like Lundgren, has grown weary of the naysayers: "Macy is a broad-line retailer that did $15 billion in business last year. People can say all these things, and it's true. You're not writing about nirvana, but it's a change and an improvement."

Got a few billion? Pfizer taking bids.

Pfizer is receiving bids on its consumer products unit, with bidders apparently including Glaxo, J&J, and Reckitt Benckiser.

The brands up for sale include Listerine, Sudafed, Rolaids, and Rogaine, and totalled $3.9b in sales and $670 million in profit last yea. This is about 8% of Pfizer's sales and 4% of profit, and the purpose of the sell-off is to concentrate on prescription drugs.

Monday, June 05, 2006

Mervyns -- turning it around?

Mervyns looked pretty much dead a couple years ago when Target dumped them in part of their effort to get out of the department store business. But the chain is showing signs of life.

The company has been drastically slimmed down, from 257 stores to 170, cutting back to its core west coast and southwest roots. After all the cuts, the chain just announced that it will open four nex stores -- in California, Arizona, and Texas.

The merchandise focus, as seems to be all the rage these days, is on private label

Central to Castagna's comeback strategy is revamping Mervyns' merchandise mix. Though remaining faithful to the store's core demographic group of 25-to-49-year-old women with families and moderate incomes, Castagna said she has culled national brands, keeping only the most popular and broadening the type and volume of apparel, shoes, accessories and home merchandise from those vendors. Today, there is no shortage of familiar brands - Dickies, Chaps, Nike, Van Heusen, Levi's, Haggar, Gloria Vanderbilt, Samsonite, Kitchen-Aid and Royal Velvet - on store shelves.

But Castagna also has expanded Mervyns' private-label offerings across product categories, including High Sierra, Hillard & Hanson, Sprockets and Real Kitchen. She has signed an exclusive agreement with Southern California designer Susie Coelho to carry her home merchandise.

Where are brand name manufacturers going to market their products when all the retailers have finished tossing them out?

Heinz cutting European trade spending

Heinz has announced it will close fifteen factories in Europe and cut trade spending and distribution costs, with part of the savings intended to increase spending on advertising.

The total cuts amount to about $355 million, with about $50 million to be redirected into advertising.

CPG trade spending is significantly higher in Europe than in the US.

Sunday, June 04, 2006

P&G wants retailers to earn their money

Procter & Gamble is borrowing a page from Gillette’s playbook – requiring that retailers actually execute a promotion in order to be paid for it.

According to Advertising Age, P&G will tie promotional payments to store performance:

Both P&G and Gillette traditionally dubbed their trade-marketing programs "pay for performance," but Gillette's appears to more closely tie retail payouts to specific in-store execution. Currently, retailers accrue funds from P&G based on the number of cases they buy. But while the funds are earmarked for specific promotion programs, retailers don't need to prove they executed the programs to collect.

"What we're talking about is ... being a little more specific with how we spend that money, how we evaluate the payout for it," said Chris Petersen, VP-investor relations for P&G …

It isn’t clear how P&G will monitor compliance, particularly since the article also notes that they are cutting back on full-time retail merchandising staff.

Since anything P&G does generally ripples through the CPG world, however, this move could have serious effects. When coupled with recent talk we are hearting about CPG manufacturers having a renewed interest in basing more allowances on accruals rather than on discretionary funding, it appears we may be seeing a trend toward bringing the Wild West days of trade promotion to a close, and restoring some long-overdue control.

An amusing sidelight: The AdAge article says that “Household and personal-care marketers typically spend nearly as much on trade promotion as advertising …” Right. Nearly as much. Try several times as much. Later, it estimates that P&G ($70 billion in sales) spends about $2 billion in trade promo. Only off by $10 billion or so.

Friday, June 02, 2006

Penn Traffic releases internal audit report

Penn Traffic, the upstate New York retailer who, as previously mentioned here, was investigating possible misstatements in its trade promotion allowances, has released the report of its audit committee:

The Penn Traffic Company announced today that the Audit Committee of the Board of Directors has completed its internal investigation of the Company's promotional allowance practices. The Audit Committee found that the Company had engaged in certain improper practices principally relating to the premature recognition of promotional allowances ...

The findings may result in restatements of earnings from the periods affected. The SEC is also investigating.

Oracle acquires Demantra

Oracle Corp., which has been on a buying spree lately, has bought analytics firm Demantra.

This is Oracle's twentieth acquisition in the past eighteen months, including Retek, ProfitLogic, and the high-profile purchases of PeopleSoft and Siebel.

From a trade promotion standpoint, the importance will be the integration of Demantra's promotional analysis tools (used by Welch's and other CPG firms) in Oracle's TPM package.

Thursday, June 01, 2006

Ten retailers to watch

Another bit of research from IGD is a list of ten global retailers who have "an impact beyond their scale." Number one on the list is Hong Kong's AS Watson:
... the world's largest health and beauty purveyor with sales of $11.4 billion from over 7,000 stores in 36 countries. Of those 36 markets, 17 are emerging geographies like Romania and Russia, whose growing ranks of middle class shoppers are eager to purchase cosmetics and hair care products, Gunz notes. The company hopes to have 10,000 stores by 2008, with a possible entry in the US coming down the road.
The rest:
2. Central Retail Corporation (Thailand)
3. Couche Tarde (Canada)
4. eBay (USA)
5. Pantaloon (India)
6. Perekriostok (Russia)
7. Tchibo (Germany)
8. Wegman's (USA)
9. Whole Foods (USA)
10. Wu Mart (China)

Who will be first into India?

IGD says that Wal-Mart will be the first big foreign retailer to enter the fast-growing Indian market, if/when the government allows entry (which this article says will happen soon.

If this happens, IGD believes that Wal-Mart will be the first to make a move with its hypermarket format. If the government drags its heels, however, Wal-Mart is likely to get a head start on its rivals by establishing a cash & carry operation in the unrestricted wholesale sector. Tesco is unlikely to enter India in the short term, while it concentrates on other key markets like the US and China, and Carrefour is currently focused on optimising the performance of its existing portfolio.

A contrary opinion is expressed by The Economic Times:

It reported that the UK supermarket chain is close to finalising a joint venture agreement with Indian firm Bharti Enterprises. The joint venture will focus on selling fresh foods, groceries and other convenience foods.

According to Indian law, Tesco will be prohibited from owning any stake in the company. However, sources said there would be a profit-sharing agreement and the door would be left open for Tesco to pick up a stake when the foreign direct investment laws change.

Tesco to start in LA/Phoenix?

Tesco is shopping for sites for 15,000 square foot stores in the Phoenix area, according to local real estate people.

… a recent report in Financial Times said Tesco will make its debut in Los Angeles and Phoenix. The report said online job ads posted by a U.S. recruiting firm indicate that the Tesco is "preparing to launch an unprecedented retail food business in the L.A. and Phoenix areas."

AAS acquired by Pitney Bowes

Pitney Bowes has announced the purchase of trade promotion management firm AAS and its sister company, PMH Caramanning.

In the press release, trade promotion management is treated as a sidelight, with the emphasis on promotional mailing and collateral:

AAS offers a variety of web-based tools for the customization of promotional mail and marketing collateral. PMH Caramanning designs and manages customer and channel performance solutions. These operations will become a wholly-owned subsidiary of the company, and operate as part of its Mail Services business led by Michael Monahan, Executive Vice President and President, Global Mailing Solutions and Services.

Sara Lee files plans for apparel spinoff

Sara Lee Corporation has filed information with the SEC on the spinoff of its apparel units. The new company, to be called Hanesbrands, will include Hanes, Playtex, Bali, Champion and Wonderbra, and will total $4.7 billion in sales -- making it one of the largest apparel firms.

The spinoff is planned for completion by September.

Sara Lee is seeking to transform itself into an entirely food, beverage, and household products firm.

Deep Depressing Dive

That's the title Merrill Lynch used for their latest report on the newspaper industry, in which they again lowered estimates.
"We remain concerned regarding the newspaper industry's outlook as the dual impact of changing media consumption habits and the migration of highly lucrative classified ads to the Internet are squeezing margins and hampering growth."

Vietnam opening to retail competition

Vietnam is planning to open its retail sector to foreigners gradually over the next several years, but local retailers are getting ready now.

The country's leading retail chain, Saigon Coop Mart, has only fifteen stores, but is planning to add units in all 64 provinces. Other firms have similar plans.

Their inexperience in managing distribution networks appears to be the largest concern:

G7’s Vu said developing a modern distribution network would be a challenge for Vietnamese retailers while international rivals were experienced in inventory management, marketing, and negotiating with retailers.

Local distributors should team up instead of operating individually if they were to take on international giants, he said.

Out with Masterfoods. In with Mars.

Masterfoods has decided to change its name back to Mars.
The name change is the final nail in the coffin of "the cockamamie bringing together of three disparate businesses that have nothing to do with one another," according to an executive close to Mars.
I don't feel so bad now. I recently came across a reference to Masterfoods and asked myself, "Who dat?" Apparently I was not alone.
But it isn't only consumers that barely noticed the move to Masterfoods.

"I continued to think of them as Mars," said an East Coast grocery executive, one of the many retailers the Masterfoods plan was supposed to benefit. "In meetings, our top executives would always say, 'Who the hell is Masterfoods?' They still call them M&M's."