business news in context, analysis with attitude

We had a story yesterday about the Cleveland Clinic, where the new CEO is trying to evict the McDonald’s in the lobby because he doesn’t feel it is consistent with the hospital’s goal of heart healthiness.

MNB user Charles Bartell wrote:

As a Clevelander, the Clinic is an anchor of the community and should be applauded for their contributions. The initiative to eradicate McDonalds is not laudable. The problem is not the consumption of McDonald's food - it is that consumers are living unhealthy lifestyles.

Lifestyles are the problem not McDonald's. Consumers seek low carb diets so they can painlessly loose weight - unfortunately the path of lowest possible resistance is becoming the norm for American life. Dr. Cosgrove must recognize the American ambition and values and then embark on a program to educate and encourage lifestyle changes. The money he is going to spend on breaking the lease could be put to a far more productive use in creating walking and running trails in the Clinic's urban environment. Additionally, his thought process is frightening and can be applied to other commodities - automobiles have great potential to inflict pain and death - restrict their use and sale. Alcohol has potential to inflict immediate and chronic pain and suffering - eliminate it. Education on moderation and incentives to change one's lifestyle are alternative approaches to the problem.

MNB user Ron Rash wrote:

Why is that the only answers to obesity and "fat" food coming out of the press, "do-gooders", and the politicians are: tax it, ban it, make it unavailable?

Whatever happened to education and personal responsibility? Not to mention personal choice.

One could burn down every pizza place, burger place and chicken place in America and people will still find the food they desire. Making the outlets go away is not the answer. Personal responsibility and education are the correct answers.

Nobody is suggesting the banning of all fast food joints. But it seems to us that it is perfectly legitimate for a hospital to only sell heart healthy food.

One MNB user wrote:

Doesn't Dr. Cosgrove realize that if people all had good eating habits, he would probably be unemployed? I realize KC you are Mr. Marathoner and are probably in the top 1% of people your age as far as fitness goes. So I can see why you would feel strongly about this issue. And preaching good health habits is the right thing to do. Although I'm annoyed by it sometimes, don't stop.

But this is still America and the land of the free. Go to the back door of any hospital in this country and what do you see? Probably a bunch of CNAs and orderlies smoking cigarettes. What next, they have to eat their McDonalds hamburgers outside too?

Another MNB user wrote:

I am on McDonald's side here. McDonald is offering the public a service, has negotiated a lease and had done nothing wrong.

I do not normally frequent McDonalds (except when I am in airports)...but the last time I looked at the menu ..they were offering some alternatives to "junk food." There are salads. People can make choices.

Does head of the clinic mean that Cosgrove represents the clinic's Board. I do not like Cosgrove's grandstanding.. if the Board wants to execute this business decision they should go about it in a business-like manner.

I like freedom of choice.

Another MNB user observed:

I have been appalled when visiting hospitals to see all the junk food vendors in the corridors between the parking deck & hospital proper.

How about Cleve Clinic and McD's working together with the end result being that McD's stays but modifies its menu significantly to offer nutritious, low fat, non trans fat, reduced sugar, fresh fruit & veggie options? I also agree that the Cleve Clinic should review it's own, on-site eateries & vending machines for content & cost. Make Cleve Clinic a test market for McD's in hospitals.

If McD's doesn't wish to compromise, then they go. Cleve Clinic should STILL review it's food availabilities whether McD's stays or goes.

MNB user Kathleen Whelan responded:

Not one word was mentioned about increasing exercise....even when you offer healthy choices, if one continues to take in more calories than one burns, one will gain weight!

One MNB user wrote:

The Clinic certainly has the right to lease the space to someone else when the lease is up. If the hospital employees stopped eating there, the tables would be turned and McDonalds would want out. If the clinic wants to offer healthy choices it looks like they need to get rid of the vending machines and change their own menu. I wonder how many people would stay there for lunch?

We also had a lot of email about yesterday’s piece looking at Albertsons and its CEO Larry Johnston’s vision of the future.

MNB user Mark Heckman wrote:

Every time I read a quote from Larry Johnston or other high level Albertsons brass, I come to the conclusion they must be living in a parallel universe, one where Albertson's stores are actually pleasant venues to shop. The stark and undeniable truth is that Albertson's stores from a facility perspective are average at best. Their operational acumen is below average at best, and their pricing is regarded by many that have studied consumer perceptions in the marketplaces they operate, is positioned somewhere between Gelson's and Whole Foods....or perhaps even higher.

Instead of addressing the "blocking and tackling" issues that are fundamental to success, Mr. Johnston appears to be focused on "Star Wars" technology. While that is a much more exciting place to play, it does not move the business forward unless the basics are addressed.

Another MNB user chimed in:

While reading Larry Johnston of Albertson's comments I began thinking of an interesting backstory that is now developing. Here we have Johnston, an ex-GE guy who was parachuted into Albertson's as CEO with no relevant experience except for his esteemed GE pedigree. He's telling us that food retailers have got it all wrong and the industry leaders are as lost as Detroit automakers. He thinks we need Six Sigma and we need high tech devices in wired stores.

So here's the backstory. When Johnston landed at Albertson's he was picked as CEO over the existing President and COO, a seasoned retail executive who had successfully led a major turnaround effort generating
$500 million in cost savings. Unfortunately, the former COO foolishly thought that Albertson's simply needed to execute well at the basics. He was passionate about it. He emphasized the importance of well-trained employees offering good service and fresh products in clean stores with the right assortment at a competitive price. No wizardry, just executing
consistently on the fundamentals like communication, teamwork, trust and solid leadership. And where does this former Albertson's COO, Peter Lynch, find himself today? In a turnaround effort as the newly appointed CEO of Winn-Dixie. Where he will bring turnaround skills and a much-needed passion for the fundamentals to a struggling retailer.

While a lot of people have written off Winn-Dixie as near death, I suspect Peter Lynch will bring Winn-Dixie back to profitability long before Larry
Johnston can convince bi-focaled baby boomers to carry web-enabled scanners down Albertson's aisles. And I'll bet my paycheck that Peter Lynch will still be in food retailing 3 years from now and Larry Johnston will have moved on to yet another business that doesn't "get it".

MNB user David J. Livingston wrote:

Albertsons is burdened with divisions of low volume, under-staffed stores that are being destroyed by Wal-Mart, HEB, Winco, Costco, and other superb supermarket companies that have put success before stock price. Putting high tech devices such as hand held scanners in an Albertsons is like putting a GIS system in a Yugo.

Another MNB user described Johnston as the man whose company has been, and continues to be, the least pro-active in response to Wal-Mart. When Wal-Mart began to eat into Albertson's profits, the response was to raise prices and reduce labor at the store level. Also the continued consolidation of the buying and middle-management of the company, while needed, has been implemented extremely badly and has led to chaos at the division levels. Programs are not implemented, schematics are rarely followed and the stores are aging fast with a noted lack of cleaning and maintenance. The end result is a much poorer shopping experience for the customer today compared to 2001. This has all happened under Johnson's watch. The result has been the largest loss in market share of any of the chains where they compete directly with Wal-Mart. Johnson exemplifies the "Arrogant attitude". Men in glass houses…

Referring to Albertsons’ acquisition of Bristol Farms, one MNB user wrote:

Bristol Farms is a high quality upper end store where customers demand the best products. Albertson's should take note of this as they continue their high price low quality journey. From dairy to floral, any attempts to cut quality will start putting the water in the gas.

Many of us in the industry have not seen Albertson's ability to grasp the obvious so we are listening for the motors of the Bristol Farms airship to begin the sputtering and eventual coughing as this investment spins out of control.

We hope not; but if history is any portent of the future…

And MNB user Ken Fobes observed:

Interesting comments from someone who is taking a fresh look at the grocery business. For a moment there, I thought maybe Larry Johnson had attended the FMI SuperTECHmart edu-tainment event at the 2000 FMI Convention. That event, more than four years ago, focused on a number of customer facing initiatives, including “buying what you sell” versus “selling what you buy;” store specific customer demand; merging “bricks and clicks” strategies to build loyalty and provide better service to customers; using technologies within the store to make shopping more appealing; and introducing the concept of the “no checkout, checkout.”

I also agree with you, that the “proof will be in the pudding.” I certainly hope that Mr. Johnson can change the “hearts and minds” of his entire Albertson’s team to successfully execute his vision. That will not be an easy job, considering the industry’s penchant for conducting “business as usual.”

And finally, we had some discussion on MNB this week about the profitability of e-grocery services; some users continue to express doubt that anyone is making money in this arena, while we said it was our impression that some companies are turning a profit.

MNB user Mike Spindler, who happens to be president of, not surprisingly has some insight into this area:

Kevin, you are, of course correct. There are a number of grocery folks out there who make money, very nice money, from their online channel.

Not too many "pure plays" make money, but my impression is that Fresh Direct is operationally on the cusp, and they have certainly carved $120+ million dollars out of the Manhattan business. Peapod is reportedly close, but they are more a mixture (multi-channel in most cities) than a pure-play.

Our retailers, many of them, make money off the channel and use the channel strategically to both gain new business from incremental customers and a defensive measure to keep their most profitable and loyal customers "at home" in their stores. If one looks at studies of retail multi-channel operations, such as the Comscore report you detail in today's MNB, one has to realize that multi-channel customers are the fastest growing spenders and the most profitable spenders in their stores.

I am afraid many folks who view this channel as unprofitable are looking at the business in their rear view mirrors. If any retailer is serious about the channel and wants to talk about our findings on profitability, I will be happy to talk with them.

And that’s about as close to a free commercial as we’re going to get…
KC's View: