business news in context, analysis with attitude

Another fascinating day in the Pacific Northwest, where we’ve been attending Portland State University’s annual “Connections” conference, sponsored by the school’s Food Industry Leadership Center (FILC).

Let’s hit some of the high points:

  • On a day in which Procter & Gamble executives were basking in the glow of the company’s strong quarterly report, Thomas M. O’Brien, VP of North America Customer Business Development, offered a brief look at the restructuring that P&G has undertaken over the past two years.

    Noting that there are two “moments of truth” in terms of a consumer’s relationship with a brand -- when she chooses the product in the store and when she uses the product at home -- O’Brien said that P&G had not traditionally paid enough attention to the moment of choice. Focusing on when the customer makes the choice of products means that P&G has to support more effectively the activities of the places where she makes the choice, which, he said, has been a critical part of the company’s recent activities.

    Best line from O’Brien: When talking about brands, he said, “If we keep them relevant, they will continue to grow and thrive.”

    Important words, especially if applied to every brand -- packaged good or retail venue -- that a customer comes in contact with.

  • Speaking mostly to the students attending the sessions, Richard A. Parkinson, president of Associated Food Stores, described trade allowances as “the opiate on which many retailers depend for their margins.”

    Parkinson described Associated’s efforts to move away from a “trade push” model to a “consumer pull” oriented company.

    “Our focus now,” he said, “is giving customers what they want.”

  • Chuck Cerankosky, managing director of McDonald Investments, offered a fast look at the economic of food marketing, describing how business valuations have gone from being focused on EAT and EBT…to EBIT…to EBITD…to EBITDA…to EDITDAR…and now, finally, to what he called EBANANA -- or “Earnings Before Any Negative Amount, Number Or Asset.”

    In describing the financial issues that face any retailer looking to grow or acquire, or even be acquired, Cerankosky observed that the main difference between unionized companies and non-unionized companies is that it is virtually impossible for union chains to be low-price oriented, faced as they are with union contracts and work rules. This is, he said, a tremendous disadvantage to these companies for which a solution must be found.

  • Art Turock, recently interviewed in this space, spoke to the group about the importance of an “unfettered imagination” in developing strategies that can succeed in today’s increasingly competitive marketplace. He also described in chilling detail “the supermarket death spiral” that threatens the entire industry, and suggested that while retailers need to identify and focus on consumers’ latent needs, a big mistake is to ask consumers what they want and then giving it to them.

    (We can’t possibly do this justice here. Go to for details, or buy his book. It’s good reading.

  • Dick King, former president and CEO of Albertsons and current member of the Encore Advisory Board serving as Interim General Merchandising Manager for Food and Consumables at Kmart, described how the troubled and bankrupt retailer is working to “improve sales and operating efficiency, but also to help them prepare for the future.”

    Key points made by King:

    • If sales don’t improve during the holiday period, Kmart will “have to make adjustments in our operations” in January.

    • That education and training of employees is a major priority. “They are an investment, not an expense,” he said.

    • That Kmart needs to develop a private label strategy in grocery while still supporting recognizable national brands.

    • That sometimes speed and necessity require compromises. “I’d rather have a Grade B program with Grade A execution” than a Grade A program with Grade B execution, he said. Or, we suppose, no program or execution at all.

KC’s View: Terrific program put on by FILC, which seems to be a real up-and-coming program in the food business. We were thrilled to be a part of it, and recommend that industry leaders look to Oregon as an increasingly important source of talent and intelligence.

More tomorrow from the road…
KC's View: