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Perishable Pundit
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a

Produce Business

Deli Business

American Food & Ag Exporter

Cheese Connoisseur



DIETZ & WATSON TAKES ON
BOAR’S HEAD
Is Exclusivity Anti-Consumer?
Is It Even Good For Retailers?

Boar’s Head is an interesting company. The way it handles it brand and its relationships with retailers may hold lessons for companies in all perishable areas.

The company is difficult to get information about… some would say they are highly secretive… and we receive many inquiries from reporters for consumer publications looking for a way to get them to talk. Executives at Boar’s Head also stand their own ground. No less a customer than Wal-Mart has tried many times over the years to entice Boar’s Head to sell them, and Boars Head has refused.

In many more upscale areas, supermarkets have service delis that feature large banners indicating it is a Boar’s Head deli. Many competitors have grumbled over the years, claiming that Boars Head demands exclusivity, but now, after Harris–Teeter bumped Dietz & Watson in some stores to move to Boars Head, Dietz & Watson decided to speak out publicly and issued this statement:

DIETZ & WATSON SAYS CUSTOMERS
LOSE WHEN EXCLUSIVE DEALS ARE CUT

PLEDGES TO NEVER ASK FOR EXCLUSIVITY IN GROCERY STORES AND CHALLENGES BOAR’S HEAD TO DO THE SAME

Imagine pushing your shopping cart down the aisles of your local grocery store only to find one choice of breakfast cereal, one choice of candy bars, or one choice of yogurt. Doesn’t sound like much of a choice at all. But that one-choice-only model is what Sarasota, Fla.-based deli meat supplier Boar’s Head demands in grocery stores across the country. Challenger Dietz & Watson — already the #2 deli brand in the U.S. — says the practice of deli case exclusivity needs to stop, or shoppers will continue to lose.

“Dietz & Watson has never shied away from competition — we’ve been producing the finest deli meats and cheeses for 70 years,” said Louis Eni, President and CEO. “We would never — ever — consider demanding that grocery stores carry only our premium products at the exclusion of others. We want to win on quality and taste, not by cutting off competitors. That disrespects consumers. Yet that’s exactly what Boar’s Head has been doing to grocery store chains across the country — essentially telling grocers, ‘If you want to sell our product, you can’t offer your customers any other premium choices.’ Exclusivity is selfish and it needs to stop.”

Eni cited a recent example in North Carolina, where the Harris Teeter grocery chain was forced to tell its customers they could no longer choose to purchase popular Dietz & Watson products. Why? Because they wanted to offer Boar’s Head as another choice. But consistent with Boar’s Head’s anti-choice approach, Boar’s Head wouldn’t allow a premium competitor to sell alongside them in the deli case. A Harris Teeter spokeswoman told a local newspaper that customers enjoyed Dietz & Watson products — which she called “outstanding” — and that making the change was a “difficult decision.”

“It was a decision, frankly, that they never should have had to make,” said Eni. “Harris Teeter is a terrific grocer and we have been proud to sell our products in their stores. They didn’t want to see us go, and neither did their customers.

“As Dietz & Watson continues to grow and to thrive, we’re going to be entering new markets and reaching new customers. But as we grow, I pledge today that our company will never ask for exclusivity in grocery stores. Customers deserve choices and I’m confident, if offered a choice, they’ll choose Dietz & Watson more often than not. The bottom line is they will have had a choice — and that’s what this is all about.

“I challenge Boar’s Head to take the same pledge — to compete like everyone else. After all, if they believe their products are superior, what’s to be afraid of? Choice is good. It’s what all customers deserve.”

The Boar’s Head power play at Harris Teeter touched off spirited conversations on chat boards on popular food web sites such as Chow.com. Comments from frustrated consumers on Chowhound boards included: “This is awful”; “the only choice was no choice at all”; and “lack of choice sucks.”

This seemed to raise a lot of issues — from the perception that retailers run the show, to the power of brands, consumer choice vs. a manufacturer’s interests, legal issues such as restraint-of-trade and much more. We asked Pundit Investigator and Special Projects Editor Mira Slott to interview the grandson of Dietz & Watson founder Gottlieb Dietz, who also happens to be the company’s CEO:

Louis Eni
CEO
Dietz & Watson
Philadelphia, PA

Q: Boar’s Head’s business strategy is not new. Why are you being so vocal now?

A: It has been going on many years. It’s kind of an understood practice of our competitor to demand exclusivity. I guess at one time they could demand it, and didn’t have too much in way of competition. Not only are we formidable competition, we’re growing very quickly and felt enough is enough. Harris Teeter was the straw that broke the camel’s back for us to put out this pledge and challenge to Boar’s Head.

Q. In explaining the move, Harris Teeter spokesperson Catherine Reuhl said: “Dietz & Watson does have a quality product that we were proud to sell for over 10 years, but after receiving customer requests, we thought it was necessary to make the change to Boar’s Head.” [Editor’s note: Reuhl said Harris Teeter’s policy strictly forbids trade press interviews, despite acknowledging, yet not clarifying, misinformation about the topic in the consumer press. However she referred us to articles in the Charlotte Observer for accurate reporting on the issue.] Harris Teeter reportedly plans to replace Dietz & Watson with the Boar’s Head brand chain-wide. What is your understanding of the situation?

A: Understand that we are still a very big supplier of Harris Teeter delis. We are still in most Harris Teeter delis. Apparently what happened is that Harris Teeter got some requests in the Charlotte area for Boar’s Head and wanted to offer Boar’s Head as a choice in their stores. I wasn’t there but assume when they got into the process, Boar’s Head insisted Dietz & Watson as well as other brands had to come out of stores. What piqued our interest was a blog by a consumer upset because Seltzer’s Lebanon Bologna was no longer available at Harris Teeter because the store switched over to all Boar’s Head brand. Even though the blogger wasn’t asking for our brand, we said, wow this is enough.

We wouldn’t have relished the fact but we’re not opposed to competing with Boar’s Head in the Harris Teeter stores. If consumers want another brand, that’s fine. We’ll do taste tests, advertise, promote, and do the best with our pricing. Consumers will have a choice to buy other items such as Dietz & Watson and Lebanon Bologna.

Q: Harris Teeter’s position is that “it would be very difficult to carry two premium meat companies in the same deli.” How do you respond?

A: Deli cases are big enough to accommodate two premium brands, and consumers as a group will decide. Who knows, maybe the same consumer will choose different brands depending on the product.

Q: Harris Teeter states that Boar’s Head does not require exclusivity. You claim otherwise. If so, would there be legal issues, and are you pursuing those?

A: I’m not a lawyer, and I as president or as a company haven’t consulted a lawyer. We have no intent to make this a legal issue. We thought the time had come that consumers should know the practice our competitor uses to bolster their brand.

Q: So this is essentially a public relations effort? What are you ultimately hoping to achieve? Are you trying to rile up consumers to write protest letters to retailers only carrying Boars’ Head, or for shoppers to switch to supermarkets carrying multiple brands? Doesn’t this all come down to sales and profits in the end?

A: We’re talking to the trade here. I will tell you, I know for a fact, in many, many instances in the past few years especially, Boar’s Head has been able to go in as the exclusive brand in the deli and sales haven’t done that well. If I went into the grocery section and Pepsi was taken off the shelf because Coke insisted, Coke sales would go through the roof, but in the best case scenario there would be no boost in overall sales. Generally, exclusivity helps Boar’s Head more than it helps the deli.

To give a few examples closer to my heart, we make certain items that Boar’s Head doesn’t. Dietz & Watson’s London Broil Roast Beef, Southern Fried Chicken Breast, and Bacon Lover’s Turkey are three very, very successful items that Boar’s Head doesn’t offer. Just as an aside, our chicken breast is selling dramatically well nationwide; one of our biggest customers being Costco. In this instance, Costco is selling larger packages of sliced meats, which is a different scenario. What we’re talking about is the service deli. Limiting choice doesn’t allow consumers to buy those three items in particular.

If a retailer brings in Boar’s Head, the deli department sales are completely dependent on Boar’s Head. Boar’s Head improves its brand recognition, but does it really help the deli department and the perishables department in the grocery store in general? I don’t believe so.

Q: If it’s not good for business, why do retailers allow it? Don’t retailers have the ultimate say in terms of what products they carry?

A: Boar’s Head is so afraid to compete with Dietz & Watson they do not want us in the store. They are the brand leader right now, Number One in the country. We are the Number Two brand in the country and we are now to the point, we don’t know how long Boar’s Head can do this.

Retailers think Boar’s Head has this clout. If they did have it, wouldn’t the deli sales go through the roof? But they don’t.

Q: Isn’t Harris Teeter calculating many variables when making its business decisions? Is there an argument for customizing product brands and products to appeal to local market demographics and other competitive factors?

A: Right now, there are only a few Harris Teeter stores affected. Why did Harris Teeter choose to do this now? I think they wanted to bring customers back into their stores from their competitor figuring, ‘deli is only a certain percentage of business, maybe we can try Boar’s Head only in 12 or 14 stores right now.’

Harris Teeter is a wonderful store, and I don’t want it to sound like Harris Teeter is driving this. They had a reason to satisfy customers in a certain area. And the only way to do this was to take us out of the stores. I don’t think this is best for consumers or business.

Q: In clothing and home textiles industries, a manufacturer might have a contractual arrangement with stores that its premier brands be positioned in a high-end environment adjacent to better-quality, designer goods, or a specially-designated section, such as a Polo shop. Could your brand be sold somewhere else in the supermarket, away from the Boar’s Head products, maybe featured in its own display case or a separate kiosk? In the food business, are there examples of where this occurs?

A: The way we both go to market, we set up a portion of the deli case very much like a kiosk and we do merchandise our meats and cheeses together side by side. Consumers can go to that section of the deli case and look at all the things we make. Sort of like a Polo section. A consumer could go across to another aisle and buy a competitor’s clothing. The same thing could exist in the supermarket but it doesn’t. I’m not sure why it doesn’t other than the stronger brand is making the demands.

As we get there, and were getting stronger all the time, we give our pledge we’ll never go to a retailer and ask for exclusivity.

Q: Are there retailers that carry both Boar’s Head and Dietz & Watson?

A: It all depends on market strength. You can find Boar’s Head and Dietz & Watson in stores on the West Coast in the San Diego and Bay Area, and obviously in our home market. There are quite a few examples where we share the deli case. Boar’s Head doesn’t have the kind of clout to demand exclusivity everywhere.

Where a retailer wants to keep multiple brands, and to put another brand like Boar’s Head in the deli case, the only way for Boar’s Head to control the outcome is to say, ‘I’m not going to sell you.’ I believe in the Carolinas we have very strong brand recognition, and the retailer could insist the case be shared.

We are in many Harris Teeter stores in the Charlotte area. We are reintroducing product line to consumers and seeing double-digit growth in those stores. We also have other retailers in the area calling us and asking us to sell to them. One of the groups of stores starting very shortly is Bloom. I don’t think they have Boar’s Head, but we’re not asking them to take out other labels. Those are the dynamics. We’re going into a new chain and we’re going to sell on quality and our merits alone. That’s why I came up with this campaign at this point. Boar’s Head is our biggest competitor and it’s about time we said something.

We’re a family business, and as the third-generation running Dietz & Watson, my sister and I have seen dramatic growth. We’re very proud and want consumers to know how proud.

Q: When retailers bring in Boar’s Head, the company creates quite a presence to build its brand. Doesn’t Boar’s Head become more than just a product line, operating as a merchandiser, marketer, and employee training force as well? Is Dietz & Watson looking to bolster any of these areas to gain a competitive edge?

A: The only thing we’ve changed or strengthened is providing more people in our customer stores. We call them brand ambassadors. We are building that force up very quickly. We’re putting in those brand ambassadors on a rotating basis so they can talk to consumers. We can help consumers make choices, change to a premium brand by letting them taste products and educate them on the varieties, and also help train associates.

As a selling point, we’ve always merchandised our product and had people coming in. One of the differences we believe we’ve had over the years with branding and merchandising at the store level between Boar’s Head and Dietz & Watson is that Boar’s Head will be 100 percent directed at selling more Boar’s Head.

We try to improve the deli department in general, looking at general training of deli associates on how to use the slicer, certain ways to slice for certain kind of cuts, pastrami brisket across the grain, etc., general deli cleanliness, how to rotate the items for food safety, etc. Make sure you keep the freshest product in the back, first in, first out, the basic knowledge necessary to run a good department. The Dietz & Watson brand ambassadors and merchandising associates are employees of Dietz & Watson. Boar’s Head sells to independent distributors.

Q: How do you know that people representing Boar’s Head on the retail floor are not just as dedicated to training employees on food safety and proper slicing methods, etc.? Wouldn’t a Dietz & Watson brand ambassador have an interest in promoting its company’s product too?

A: I couldn’t say that Boar’s Head’s distributors aren’t teaching food safety. I’m just speaking about the concept of exclusivity with Boar’s Head. Their training is going to be naturally directed toward selling more Boar’s Head product.

If you are the consumer, and you ask for a pound of turkey, wouldn’t you like the person behind the counter to ask the question, would you prefer Dietz & Watson or Boar’s Head? And then describe what options are available. By only offering Boar’s Head, it takes the choice away from the consumer. If the consumers say they want a healthy turkey breast, we would educate the person behind the counter so they could provide the best options — try this light gourmet turkey breast; it’s low in sodium and fat and chosen best in the country by Consumer Reports… The end result is we hope to sell more deli meats and cheeses.

But as we got into this, there really is a message here the consumer is not hearing. They understand this is a public relations campaign to help Dietz & Watson sell more meats and cheeses, but we are helping the industry as well.

Q: If actions by Boar’s Head stifle competition and put retailers in precarious predicaments, why haven’t more people spoken up?

A: The vice presidents and other people at the chains we deal with say, ‘I’m a very busy person. It’s not worth the effort, go to the boss, the legal department, get approval. They may have to go to the board, and these companies are very private and don’t like to talk to the press. As far as Harris Teeter, Boar’s Head is in limited stores and Harris Teeter is continuing to do national ads that include Dietz & Watson.

We wrote about Dietz & Watson here when we mentioned how impressed we were with the job Dietz & Watson did for Wal-Mart when it assigned Dietz & Watson personnel to run the delis during the grand opening of the Wal-Mart Marketside concept in Phoenix, Arizona.

The executives at Dietz & Watson are smart folks, and they are attempting to add another consideration — the general public — to the interplay of a retailer’s decisions on this matter. No retailer wants upset customers, and by presenting this as a matter of “consumer choice,” Dietz & Watson raises the prospect that stores could lose customers or suffer from boycotts. It also raises the possibility that the Boar’s Head brand image could become muddied — not merely known for high quality product but also for a vaguely anti-consumer position of limited selection.

Of course, this area is complex and it is not 100% clear that Dietz & Watson will win this battle.

First, supermarkets aren’t exactly pushovers on tying their own hands. So if Boars Head demands some kind of exclusivity, the Boar’s Head brand must be powerful indeed if supermarkets feel compelled to agree. Although we are sympathetic to the idea of “choice,” to some extent we can’t help but think that any producer or marketer, faced with a retailer that grants exclusivity to a competitor, should be looking at how it can build the sort of demand among consumers so that a competitor’s demand to exclude a product or brand would be unacceptable to the retailer.

Second, without access to the actual contract between the retailer and Boar’s Head, the exact meaning of any “exclusivity” clause, even if it exists, is unclear. The Publix store near Pundit world headquarters has a Boar’s Head deli, but it sells lots of private label Publix brand product and select private lines, such as Land ‘O Lakes American Cheese and various brands of hard salami and other products. Sometimes it features Hebrew National salami and bologna in the deli case. So what is actually allowed or not allowed is unclear.

Third, the deli branding complicates the issue. It is not just that many supermarket delis carry Boar’s Head products; they actually are branded as if they are Boar’s Head delis with signage promoting Boar’s Head more prominent than any other signage. Once again, there is no certainty without reading the contract but this prominent branding of the deli seems more like a concession, a franchise or a “store-within-a-store” than just simply a bunch of Boar’s Head product.

If a retailer decides to put a Pizza Hut in the store, he has to sell Pizza Hut products only unless he gets permission to do otherwise. If there is going to be a big Boar’s Head sign above the deli, there are issues of consumer confusion that can be raised by selling non-Boar’s Head product and wouldn’t Boar’s Head have a legitimate case to want to avoid association with some products?

Although the willingness to allow cheaper product into the deli case — say the Publix private label product — does seem to indicate that the goal of Boar’s Head in allegedly seeking to avoid having certain products in the deli case is not to avoid sullying its reputation by association with less expensive product but, actually, to avoid competition with similarly situated product.

Fourth, there is the issue of money. Although retailers may have chosen to call their operations a “Boar’s Head Deli” it is also possible that Boar’s Head induced them to do so — and gain exclusivity in some category — by paying a fee. This, if true, would mean that Boar’s Head is just getting what it paid for.

Still, there is something that rankles about the giving of exclusivity. One of the things that distinguishes foodservice from retail is that, whereas in a restaurant the chef or menu planner has decided for the consumer to limit options based on his judgment of what is delicious or will be in demand, supermarkets typically offer a wide range of options, including dozens and dozens of mustards, hot sauces, cereals, etc.

Although Dietz & Watson has made it clear that it is not pursuing this as a legal matter, we would think it a valid question as to whether a demand for product exclusivity is, in fact, a restraint of trade and so against the law.

We looked into the matter. Here is the Federal Trade Commission (FTC) statement on Dealings in the Supply Chain: Exclusive Dealing or Requirements Contracts

Exclusive dealing or requirements contracts between manufacturers and retailers are common and are generally lawful. In simple terms, an exclusive dealing contract prevents a distributor from selling the products of a different manufacturer, and a requirements contract prevents a manufacturer from buying inputs from a different supplier. These arrangements are judged under a rule of reason standard, which balances any procompetitive and anticompetitive effects.

Most exclusive dealing contracts are beneficial because they encourage marketing support for the manufacturer’s brand. By becoming an expert in one manufacturer’s products, the dealer is encouraged to specialize in promoting that manufacturer’s brand. This may include offering special services or amenities that cost money, such as an attractive store, trained salespeople, long business hours, an inventory of products on hand, or fast warranty service.

But the costs of providing some of these amenities — which are offered to consumers before the product is sold and may not be recovered if the consumer leaves without buying anything — may be hard to pass on to customers in the form of a higher retail price. For instance, the consumer may take a “free ride” on the valuable services offered by one retailer, and then buy the same product at a lower price from another retailer that does not offer high-cost amenities, such as a discount warehouse or online store.

If the full-service retailer loses enough sales in this way, it may eventually stop offering the services. If those services were genuinely useful, in the sense that the product plus the services together resulted in greater sales for the manufacturer than the product alone would have enjoyed, there is a loss both for the manufacturer and the consumer. As a result, antitrust law generally permits nonprice vertical restraints such as exclusive dealing contracts that are designed to encourage retailers to provide extra services.

On the other hand, a manufacturer with market power may potentially use these types of vertical arrangements to prevent smaller competitors from succeeding in the marketplace. For instance, exclusive contracts may be used to deny a competitor access to retailers without which the competitor cannot make sufficient sales to be viable….

It is unclear to us whether a judge looking to enforce the FTC standard would uphold a contract requirement of exclusivity in the deli or reject it. Clearly these exclusivity clauses can be legal — the FTC actually gives an example in a Q & A form of a manufacturer of flat screen TVs:

Q: I am a small manufacturer of high-quality flat-panel display monitors. I would like to get my products into a big box retailer, but the company says it has an agreement to sell only flat-panel display monitors made by my competitor. Isn’t that illegal?

A: Exclusive distribution arrangements like this usually are permitted. Although the retailer is prevented from selling competing flat-panel display monitors, this may be the type of product that requires a certain level of knowledge and service to sell. For instance, if the manufacturer invests in training the retailer’s sales staff in the product’s operation and attributes, it may reasonably require that the retailer commit to selling only its brand of monitors. This level of service benefits buyers of sophisticated electronics products. As long as there are sufficient outlets for consumers to buy your products elsewhere, the antitrust laws are unlikely to interfere with this type of exclusive arrangement.

The question is really whether deli meat and cheese is the kind of product that, under a “rule of reason” standard, would be judged to allow for the kind of added amenities and services that could justify such a restraint. We have trouble seeing it. What free-rider problem is possible — getting education on low salt turkey breast at one store and then buying it at a store that doesn’t have salespeople trained to provide such info? Sounds like a stretch to claim that the exclusivity in this category is really helping retailers to provide extra services or a better environment.

Of course, there are often state laws to deal with that can complicate the situation. It also seems as if each situation is evaluated individually rather than one of hard-and-fast rules. For example, a judge would look at questions such as whether as a result of exclusivity there were enough outlets available to keep other producers in business. In other words, if one is a high-end deli meat manufacturer and all the high-end stores have exclusives with Boar’s Head, to the extent that a court would judge that there is not enough business left for a competitor to be viable, the court might well invalidate any exclusivity provisions.

Still Dietz & Watson has not made a legal issue of it, so neither shall we, though it seems likely to be tested at some time by someone.

Yet if the legal route to dealing with this problem is closed, we also see the effort to arouse consumer wrath as unlikely to succeed. The argument for “choice” sounds appealing but the obvious rejoinder is that consumers have lots of choice — they can buy the product at another retailer. As long as that is true, it is hard to imagine enough consumer indignation being aroused over the loss of a brand of deli meat to significantly change the calculation of most retailers.

Which brings us to the obvious: The focus needs to be on the retailers, since Boar’s Head can demand what it wishes, but wishes can only be granted by retailers. If the issue is exclusivity, the arguments against the retailer agreeing are five-fold:

1) Consumer Passion for a Brand

A lot of time in perishables brands hold the esteem of consumers and have recognition but do not have passion. In other words, consumers may prefer to buy branded product, thinking someone is standing behind it. They may also think well of particular brands as expressed in surveys. But the nature of perishables, where consumers can typically see and often taste a substitute, makes consumers unwilling to change stores because their favorite brand isn’t there.

So a consumer may have a favorite brand of roast beef and even be disappointed that a store stopped carrying it, but if he can see the substitute brand, sample a slice and likes it, he may buy as much as ever and keep shopping the store.

In contrast, a store will be loath to stop selling Helmann’s mayonnaise, because many consumers simply won’t consider a substitute.

So the challenge for marketers is to build the kind of consumer demand for the product where retailers believe that consumers will be attracted to the store specifically because they are selling the brand and, conversely, that consumers will seek out other shopping venues if the brand is not available.

No easy task to be sure. Yet, in fact, that is what Boar’s Head has done. We are not privy to the internal Harris-Teeter discussions but, obviously, management thinks their stores will benefit: Higher sales, more profit, association with a name recognized by consumers as being high quality.

If a manufacturer can demonstrate consumers are passionate about its product, the retailer will be most hesitant to throw it off the shelf.

2) Quality

Consumer brand perception is very important, but many retailers really value the offering of excellent product. A producer that can provide compelling evidence that its products win blind taste tests has a powerful argument to make even against a giant, well financed, well regarded competitor. To have quality product and the quality control so that it can be produced consistently is the key.

If a producer wins every cutting, it is a powerful reason for a retailer to keep the product in the store, indeed, a powerful reason to help promote the product.

3) Benefit of Variety

Although the assumption is that satisfying the most consumers is the most important thing, that often is not true or, to be more precise, it may not be what matters.

Perhaps 90% of consumers prefer common cookie types — brands such as Oreos and cookies such as chocolate chip. This doesn’t imply that it would be wise to ignore the other 10%. In fact, just the opposite may be true.

Precisely because these items are so popular, virtually all competitive retailers will have acceptable options in these areas. The decision of where to shop then may be made by consumers based on things that don’t rank so highly — such as a love for some obscure Swedish cookie.

If a retailer is going to agree to an exclusive, it should never agree to a clause preventing it from selling a unique product. So if Dietz & Watson has a great Bacon Lover’s Turkey that Boar’s Head does not — any chain is taking a great risk excluding that product. That might just be the differential by which some consumer elects where to shop.

4) Quality Line vs. Individual Product

Dietz & Watson would not find this argument useful as the company is, like Boar’s Head, a producer and distributor of a large line. Many more specialized producers could argue against the Boar’s Head branding program on the basis that, even if the retailer believes Boars Head has the best quality program out there, it surely doesn’t have the very best on each individual item.

This means a retailer, by investing the effort, can surely select a superior range of offerings. A retailer can select the best roast beef, the best pastrami, the best of each and every item. This creates a formidable competitive advantage for a retailer, as most retailers don’t have the staff or inclination to invest so much work.

5) Store Brand vs. a Manufacturer’s Brand

Most retailers that look to put any manufacturer’s name on their deli are thinking of the short term advantages that can come from such a tie-in.

Long run, however, the promotion of the manufacturer brand diminishes the chance to promote the store brand or a concept that the store actually owns.

The real question is not if the retailer grants the manufacturer an exclusive; it is if the manufacturer grants the retailer an exclusive.

After all, to use a store’s precious space and opportunity for consumer interaction to promote a brand that can equally be picked up down the street is very questionable marketing.

Better for a retailer to maintain flexibility to meet consumer needs by being able to sell what it wishes to sell and better to persuade consumers that the value and the quality are incumbent in the retailer, not any given vendor.

Many thanks to Louis Eri of Dietz & Watson for helping us reflect upon this important issue.




In Effort To Spur Business, Restaurants Look To Lure Families With Kids

The Wall Street Journal ran a rather odd article titled, Restaurants Look Beyond Chicken Fingers, which purports to explain how the restaurant industry is responding to the recession by attempting to induce parents to bring the kids along to the restaurant:

Restaurants trying to get more families to dine out have a new recipe: Get rid of the French toast sticks. Put more broccoli and carrots on the menu. Let the kids eat free.

The industry is scrambling to counter a tendency by recession-pinched parents to leave their children at home when they go out to eat. Restaurant visits among groups with kids fell 5% in the 52 weeks ended June 30 compared with a year earlier, according to researcher NPD Group.

Restaurants are responding with revamped kids’ menus, healthier food and kids-eat-free nights. Such moves are tricky to do well because restaurants must appeal to young palates while addressing parents’ health concerns. This summer, P.F. Chang’s China Bistro Inc. and The Cheesecake Factory Inc. added their first-ever kids’ menus.

We would say the author is conflating two things that have nothing to do with each other: offering discounts or free meals to entice parents to visit the restaurant and offering healthy choices. It is not so much that they want the kiddie business at these discounted fares, but during tough economic times parents aren’t going to hire a babysitter, so if they don’t have family around willing to babysit, they either do take-out or cook. Restaurants are shrewdly noting that if they don’t need a babysitter and the kids eat free anyway, many parents may indulge themselves with a night out. It is probably a more effective psychological pitch than lowering the cost of everything by 5%.

When it comes to offering healthy choices, the article is an example of a kind of journalism that really doesn’t reveal much:

While awaiting a table at a P.F. Chang’s in Northbrook, Illinois, Saturday night, Andie and Ron Pearson said they hadn’t heard about the chain’s new kids’ menu, but lamented the lack of healthy kids’ options at other restaurants where “kids’ menus tend to favor hot dogs, Mr. Pearson said.

Ms. Pearson said she’d appreciate more healthy choices such as fruit and vegetables, especially since her five-year-old daughter, Alicia, loves broccoli. “Whenever restaurants offer fries and fruit, she’ll choose the fruit, but restaurants rarely offer that,” Ms. Pearson said.

A study last month by market research firm Mintel International Group Ltd. found that parents are looking for healthier alternatives to the standard kids’ fare of chicken fingers, grilled cheese sandwiches and macaroni and cheese.

We are sure Mrs. Pearson is sincere in her desires, although we typically find restaurants pretty willing to swop out items if they have something else available that the kids prefer. But whether, on balance, children will choose healthy choices is questionable. We are not quite sure what to make of points such as this one presented in the article:

Even kid-friendly fast-food and family-oriented chains are also beginning to deviate from the usual by offering healthier and novel kids’ dishes.IHOP Corp., famous for its sweet-laden funny-face pancakes, now offers a Tilapia fillet for kids, served with steamed broccoli; an egg and pancake breakfast served with a scrambled egg substitute; and a kids’ fresh fruit dish.

We confess that we think that the Tilapia dish is on there to make the menu look good to activists, that most children have no need to order egg substitutes and we are not really sure how a kid’s fresh fruit dish differs from an adult fruit cup or fruit plate except possibly by offering less fruit.

The article also explains that Denny’s now has “added carrots, celery and cucumbers with Ranch dressing, vanilla yogurt with strawberry topping, and spaghetti with marinara sauce…” — all actions that we are in favor of, that might do a little good and, certainly shows some consciousness of societal concerns over childhood obesity and awareness of dietary changes.

But the executives in the industry understand that the pitch to kids is not really about healthy menu choices; it is really about money. The piece quotes Denny’s CEO:

“People with kids are uncertain of the economy, so they don’t need any discouragement from the industry from dining out,” said Denny’s Chief Executive Nelson Marchioli.

Many Denny’s restaurants are allowing kids to eat free on Tuesday and Saturday nights. Others, including IHOP and Baja Fresh Mexican Grill, also offer kids-eat-free nights.

If they let the kids eat free, they will drive some traffic, menu changes or not.

The article closes up with a quote regarding Mintel research:

Between the first quarter of 2007 and the first quarter of 2009, there was a 2.4% increase in kids’ restaurant side dishes containing fruit and a 6.8% increase in side dishes containing vegetables, according to Mintel.

“We don’t have data yet on whether it’s helping restaurants boost traffic, but having healthier options on the menu can’t hurt,” said Mintel’s Ms. Caranfa.

They don’t make clear whether Mintel is saying that of all kids’ items on menus, there has been an increase in those listed as containing fruits and vegetables or if those ordered contain more produce.

Of course, the real challenge is neither listing the items on the menu, nor having them ordered. The real challenge is getting children to eat the items.




Pundit’s Mailbag — Got Produce? Advantage Goes To Convenient Produce

Our extensive coverage of the proposal for a Generic Produce Promotion program often brings kind words:

Good job on shining some light on a cloudy subject.

— Chuck Zambito
Owner
Zambito Produce Sales
West Deptford, New Jersey

Sometimes, though, we receive questions that find an intersection between the proposed generic promotion program and marketing dilemmas of the contemporary produce industry:

We are in a microwave age.

Consumers will not buy most products unless they are really convenient to serve and eat.

Looking at the generic program presented, it appears that the only items being helped by generic advertising are already more in demand because of their easy-to-use nature. Grapes, strawberries and such are doing very well on their own.

What about some of the products that are some of the best nutrition- and health-wise, but are being thrown by the wayside because they are more difficult to serve and eat? Pears and plums, peaches and nectarines are good examples.

— Julian Lipschitz

(Mr. Lipschitz had worked at Hemphill and Wilson Enterprises, Selma, California, then spent approximately a decade at Fruit Patch Sales Co. in Dinuba, California, where he was Sales Manager. His most recent duties were in the sales department at Dayka & Hackett LLC in Reedley, California.)

Julian has his finger on a vitally important issue, both health-wise and marketing-wise.

Many of the initiatives of the produce industry, such as plans to have free produce in schools and inoffices, are nominally about produce but seem actually to be about snack fruits of some sort.

This is one of the reasons why United’s new initiative to place a salad bar in every school is so fantastic… it not only will expand produce sales and consumption but provides a tool for sampling of many of the vegetables that are so nutritious but not suitable for the other program.

Julian points out that the move to convenience products disadvantages even some fruits. He might have pointed out that some items — particularly pineapple — has benefited enormously from the marketing of fresh-cut fruit, whereas other items, such as stone fruits, have not been able to use the technology to create more appealing products.

What Julian also brings to the surface is the marketing conundrum of trying to effectively market all this variety in a persuasive message.

It is not widely recognized the degree to which the proposal for a generic produce promotion program is different — in kind and not just degree — from all existing programs.

There is no national protein board selling chicken, beef, pork, fish etc. All the other mandatory boards derive from one base product — a cow, a pig, an egg, etc. This makes the producers, though anxious for results, mostly indifferent to what precisely is being promoted. They can leave that to the marketing team.

Should such a broad board be established, Produce will be taking a leap into the great unknown. It will face both a political problem — how to keep the constituencies that represent all these varied items happy — and a substantive problem — what is the best message to tie together all of these items?

It means that should we ever pass the program, the challenges for the trade would just be beginning.

Many thanks to both Chuck Zambito and Julian Lipshitz for weighing in on the issue of generic promotion.




Advice To The Groom

When the world was created,
G-d made everything a little bit incomplete.
Rather than making bread grow out of the earth,
G-d made wheat grow so that we might
bake it into bread.
Rather than making the earth of bricks,
G-d made it of clay so that we might
bake the clay into bricks.
Why? So that we might become partners
in completing the work of creation.

— from the Midrash

This evening, September 4, 2009, Pundit Aide-de-Camp James Matthew Elmer, Jr. will wed Maureen Margaret Gides at what will surely be a ceremony both meaningful and beautiful at the Saint Sebastian Church in Pittsburgh, Pennsylvania.

James is a good man and a conscientious aide. We wish him and his new bride every happiness.

In selecting Labor Day weekend for their nuptials, the couple certainly picked an auspicious time for a wedding — and that comes from personal experience.

For it was ten years ago this week, Labor Day weekend of September 1999, September 5th to be exact, and this writer was in a hotel room, putting on top hat and tails and preparing to take an elevator ride down to a beautiful room at The Plaza Hotel in The City of New York where my betrothed awaited and where we would be wed.

I have been thinking of what lessons I could draw from my decade of marriage to pass along to James, and I thought of the selection from the Midrash that I put at the top of this article.

Because I was having a Jewish wedding and many of the guests were not Jewish, I prepared a little booklet to explain the ceremony and I selected this excerpt because I had been inspired by my own parents.

Dating since they were kids in high school, my parents married young and partnered with one another to create a life and build a family. It wasn’t until years later… sitting in a hospital room in Houston, Texas, while my father, suffering from leukemia, underwent chemotherapy in preparation for a stem cell transplant from his identical twin brother… that I fully understood that for all our efforts, we are all also in partnership with G-d.

The ten years Debbie and I have been married have been years of work and commitment, leavened with joy and pride.

On the business front, we’ve surely spent much time and effort building a business, including launching the Pundit. We’ve worked hard to build a reputation and we’ve been fortunate to see some reward from that effort. Ken Whitacre, with whom I founded PRODUCE BUSINESS and who, along with my brother, Barry Prevor, was best man at my wedding, was kind enough to write a piece in the Pundit when I was given an important award earlier this year. The piece was titled Prevor Wins An Award, But Industry Gets The Prize.

Yet the greatest work of the past 10 years has certainly been procreative — two little gentlemen named William and Matthew.

Debbie and I have shared our lives with the industry. When we first got married, the Pundit published a piece titled Marriage to a Produce Man in Pundit sister publication, PRODUCE BUSINESS. The article identified Forthrightness, Empathy, Necessity, Work and Perishability as five lessons learned by growing up in a produce family that I thought would help in marriage.

It was just after 9/11 and William was born. The world looked a little scary at that moment, and two new parents saw their role as protecting that little guy. Yet we were never pessimists and saw the hand of a divine providence in the fact that William was born on October 19, 2001, the same date we had launched PRODUCE BUSINESS in 1985. We called the piece we wrote about the birth, Faith in the Future.

Then there was Matthew. I wonder if he will ever know how precious he is… because we almost lost him. To this day I think of myself standing outside the delivery room because they wouldn’t let me in, and then I shudder, as I did that very day, when I suddenly realized that all those people around me were sent by the hospital to be near me if they had to tell me something awful. The article about the experience was called No Accidents In Life.

As with many in our age brackets, while we are busy raising families, we also sometimes get opportunities to say thanks to our own parents for all they did for us. When my father was ill and I traveled to Texas to help, it was Debbie who manned the home front. I wrote a Special Note about the experience and included the famous Dylan Thomas poem, Do Not Go Gentle Into That Good Night.

Then there have been the industry friends and family we’ve had fun with. We stole off to Las Vegas with some industry friends, swooped into town to attend the 40th birthday of another, did a cruise with family and friends, and a barbeque in the backyard out in Los Angeles and countless fun times with others.

Of course, life is bitter mixed with sweet, and we’ve known sadness as well. As when we went to the Animal Kingdom Lodge with our friends the Nuccis, and Joe Nucci suffered a fatal heart attack, or when I gave a Eulogy at the United Nations Chapel for an industry consultant, Stan Silverzweig.

And as quick as you blink, ten years is over: Building a business, having children, helping your parents — living and dying with family and friends. It just happened so fast. Then it starts to hit you. If I just blinked my eyes and we traveled ten years from our wedding day, that means if I blink again, William, my second grader, will be 17-years-old and Matthew, my kindergartener, will be 16-years-old. Now the boys leap on me when I walk in the door; ten years from now, I suppose they will be distracted by friends and girlfriends and who knows what activities?

If I were to give James advice, it would be that life quickly gives people roles, and, especially if you have children, it is easy to focus on all your jobs and forget to focus on each other.

Some of it is inevitable. I’ve traveled so widely and so often — think how wonderful it would be to have Debbie with me in Cape Town or London or Sydney — but we have an obligation to our children, so I mostly travel alone.

But whatever the circumstances, one can always pay more attention to one’s spouse.

My grandmother, Bebe Prevor, was not a schooled person, yet she was very wise. When my father told her that he wanted to marry my mother, my grandmother asked, “Are you compatible?” I think that is a crucial question. Debbie and I have occasionally disagreed over the ten years (of course, in the end Debbie was always right and I was wrong — recognizing that is another key to a happy marriage), but never, not once, have we disagreed on anything I would think of as a core value.

But a marriage is more than just a partnership to raise the children, and as I think about blinking my eyes a couple of times and think of the children off on their own, I’m resolved to try to make my priority this second decade to let my wife know how much I love her.

As you read this, Debbie, our boys and your friendly Pundit will be jetting off to the Las Casitas Resort at the El Conquistador in Puerto Rico. A long weekend to celebrate ten years, two boys and the creation of a family — or to go back to the piece we started with — to celebrate our chance to be a partner in perfecting the work of creation.

* * * * * *

My grandfather, Harry Prevor, who was an auction buyer and wholesaler in New York on the old Washington Street market, taught me a song with a wry look on marriage. It was an old Eddie Cantor classic called Makin’ Whoopee. Michelle Pfeiffer did a rendition of the song in The Fabulous Baker Boys with Jeff Bridges as her accompanist.

She is not as hot or as sultry as my Debbie, but thought you might enjoy the song:

Of course, between basketball, the school play, piano lessons, soccer, swim lessons, chorus, homework, etc., we don’t really have that much time for going out in high style. In our house — and I guess this is all about marriage when you have young children — we are at the stage where life involves a different take on the song. Cookie Monster from Sesame Street (before he became politically correct and declared cookies a “sometimes food”) did a version called Eatin’ Cookie:

Whatever life stage you may find yourself in, here is wishing you and yours a terrific labor day weekend.

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