CFA FOOD·4·THOUGHT
Friday, February 29, 2008
Stan Sorkin, Executive Director
195 Farmington Avenue, Suite 200 · Farmington, CT 06032 · 860 677 8097 · Fax 860 677 8418
The information presented here is not intended to take the place of legal or professional advice or to be relied on as such,
nor does it necessarily express the views of the CFA.
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GENERAL ASSEMBLY UPDATES
Bottle Expansion Bill Introduced
This year’s version of the expanded Bottle law RB-357 was introduced. As anticipated, it expands the
program to include water only. It also eliminates the handling fee for beer and changes the handling fee
to 1-1/2 cents for soda and water which was not anticipated. CFA is obviously opposing the bill.
On a more positive front, HB-5138 which calls for funding and measurement of pilot programs for
enhanced recycling programs was introduced. CFA is proactively backing this bill as a far better
alternative to bottle bill expansion. Along these lines, CFA and the top executives from Recycle Bank met
with key committee chairs and the Speaker’s office to educate them on the positive results of singlestream recycling and the role Recycle Bank plays in the dramatically improving those rates.
Labor Committee Actions
The legislature’s Labor Committee has proposed many measures that would significantly increase
business costs, repeal key reforms of the workers’ compensation system, and make Connecticut a much
less attractive place in which to do business.
Benefit expansions:
SB-255 expands workers’ compensation discretionary benefits. It was estimated by the National Council
on Compensation Insurance (NCCI) that a similar measure last year would have increased workers’
compensation costs for the average employer in Connecticut by more than 50%.
SB-63 expands workers’ comp benefits to include post traumatic stress disorders with no associated
physical injury.
SB-64 expands workers’ comp benefits for scarring to include scars occurring anywhere on the body –
even if they don’t affect the employee’s earning capacity.
Increased administrative burdens: SB-57 increases employers’ burdens for managing workers’
compensation by imposing new administrative responsibilities. Increased penalties on employers: HB5334 penalizes employers for trying to manage workers’ compensation claims properly.
Other proposals
The Labor Committee is also moving forward many other measures of concern to the business
community. These include proposals dealing with:
Penalties for retirement plan adjustments: SB-58 eliminates state assistance — loans, grants,
guarantees and tax credits — to companies doing business with the state that reduce employee retirement
benefits during their contract. This measure disregards the fact that companies often make financial
decisions that directly or indirectly affect employee retirement benefits — the same way consumers
periodically adjust their own retirement accounts. Penalizing corporate investment and other such
decisions will discourage companies from seeking to do business with the state.
Workplace bullying: SB-60 broadly defines “bullying” in the workplace to include any behavior an
employee might find offensive; and substantially increases employer liability for those actions. This
measure leaves the door wide open to frivolous complaints and significantly higher workplace costs for
employers.
Paid time off mandate: SB-217 requires employers of 25 or more employees to provide their employees
with a minimum of one hour of paid time off for every 40 hours worked for illness, domestic violence
treatment and other associated reasons. It also allows employees to carry over accrued paid sick leave
indefinitely from year to year.
Minimum wage hike: HB-5105 increases the minimum wage to $8 per hour from the current $7.65 per
hour which took effect last year. Under state law, Connecticut’s minimum wage — already sixth-highest in
the U.S. — is indexed to stay above the federal minimum wage.
Electronic pay restriction: HB-5114 restricts employers from issuing employee pay checks electronically
in certain cases.
Unemployment compensation: The committee is also looking at a positive unemployment compensation
measure. HB-5482 modernizes unemployment compensation eligibility standards by switching from a
monetary threshold to time worked.
Minors in workplace: RB- 216: CFA testified in favor of this bill that would reauthorize employment of 15
year olds in supermarkets. Passage looks promising.
HARTFORD SINGLE STREAM RECYCLING PROJECT SET
The roll out plan for the City of Hartford single-stream recycling program is now in place. The Harford
Project will bring single stream recycling to 5000 city residents. The Project is a joint effort between the
City, the National Recycling Coalition, NPR, CRRA, FCR Recycling, RecycleBank, and the CFA. The
project will be announced on March 17th with the rollout scheduled for May 12. CFA and its members will
help develop the plan and materials needed to educate the public on how single-stream recycling works
and its benefits to the environment. Our Hartford stores will be instrumental in delivering the message to
our consumers. The project will showcase single-stream recycling as a better environmental alternative to
an expanded bottle bill. The success of the project is a key element of our “Give Green a Chance”
campaign.
WORKERS CAN SUE OVER 401K LOSSES
Wall Street Journal: The U.S. Supreme Court unanimously upheld the right of workers to sue over losses in
their 401(k) retirement-savings accounts in some circumstances, but pension law experts said a minority
opinion in the case could also bolster some defenses used by employers. The ruling yesterday could affect
dozens of retirement-plan lawsuits brought by workers against their employers. Retiree advocates praised
the decision. But employers may find solace in a minority opinion by Chief Justice John Roberts, which,
while concurring with the majority, appeared to offer companies a roadmap for combating similar cases in
the future. Employers -- or whoever they appoint in their stead -- have an established obligation to run
retirement plans as "prudent experts" on behalf of participants. Failure to do so can invite litigation, says
Gregory Ash, an Overland Park, Kansas pension attorney. Recent cases have included allegations that
employers offered participants unwise investment choices, or allowed investment managers to charge
participants unreasonably high fees. At issue in the case before the Supreme Court was whether federal
pension law, which allows lawsuits on behalf of a group of employees, also allows an individual to sue over
losses in his own account in a 401(k) or similar plan. Previous case law allowed participants to sue
employers over losses on behalf of the retirement plan as a whole. But the prior ruling had arisen in
traditional pension plans, in which assets are invested collectively. Employers have argued that participants
couldn't file the same kind of suit over losses in 401(k)s and other individual accounts because they didn't
represent losses to the plan itself. In Wednesday's decision, the court disagreed. The majority opinion, by
Justice John Paul Stevens, said pension law "does authorize recovery for fiduciary breaches that impair the
value of plan assets in a participant's individual account." A concurring opinion by Justice Clarence Thomas,
joined by Justice Antonin Scalia, said losses to an individual's account were effectively losses for the plan
as a whole.
WHOLE GRAINS IMPROVE HEALTH
Researchers found that obese adults who cut calories and increased their whole-grain intake were able to
reduce abdominal fat and inflammation in their blood vessels. This clinical study is the first of its kind to
prove that a diet full of whole grains can lead to weight loss as well as reduce the risk of several chronic
diseases.
PACKAGED GOODS COMPANIES DRIVE TO CUT COSTS
Business Week: Packaged food companies, under the gun to shore up profits squeezed by soaring
commodity costs, are finding savings in unexpected places. So it was that General Mills reduced the
number of pretzel shapes in its Chex and other snack mixes to three, from 14. The company had pretzels in
the shapes of the letters "H," "O" and "T." But research found (not surprisingly) consumers cared more
about the variety of pretzel flavors than shapes. That move, combined with other manufacturing
improvements, is saving the division more than $1 million a year. General Mills cut in half the number of
pasta shapes it uses in Hamburger Helper to 10. Food engineers and marketers even worked on the pasta
bits so they nested together, enabling the company to shrink the box. That reduced the cost of raw
materials by 10%. Chief Executive Ken Powell says General Mills had no choice. "With commodity prices
increasing, we needed to think about how we generate productivity in a more powerful way." Cost savings
are a big issue for the food companies that gathered for the Consumer Analyst Group of New York annual
conference on Feb. 19-22 in Boca Raton, Fla. Globalization—the rise of consumer incomes in India and
China, in particular—is pushing up demand for all sorts of commodities, including foodstuffs such as wheat,
corn, and dairy products. The price of wheat, for example, has doubled in the past year and is at an all-time
high. Meanwhile, the push for alternative energy sources is leading some farmers to divert corn to that use,
and creating spot shortages of grains such as soybeans, as farmers divert acreage to the more lucrative
crop. To be sure, food companies are passing along much of their higher costs to consumers, in the form of
price hikes or smaller packages. Sara Lee has raised bread prices four times in the past year and a half,
and expects another increase before the end of June. At General Mills, price increases accounted for two to
three percentage points of the company's first-half sales gain of 7%. So far, consumers have been willing to
pay the higher costs, because the overall price of a full shopping cart is less than eating out. Still, food
companies are feeling the pinch. As a group, their stocks are down about 11% since Dec. 1.
TV AD EFFECTIVENESS DECLINES
The bad news: Marketers believe that the effectiveness of television advertising has declined over the past
two years. The good news? They're more interested in trying new formats and other forms of video
commercials. According to the fourth biennial TV & Technology survey, 62% of the marketers surveyed
believe television has become less effective over the past two years. However, nearly half of them have
begun to experiment with technologies that work with digital video recorders and on-demand programming.
Moreover, 87% of advertisers believe branded entertainment will be a big part of TV advertising in the
coming year. The marketers' response is backed up by separate data from BIGResearch, revealing that
traditional media's influence is declining when it comes to influencing purchasing decisions. For example, in
the survey of more than 15,000 people, broadcast television declined nearly 14% when it came to
influencing electronics purchases as compared to the year-ago period. Cable television declined more than
14% over a year ago. Conversely, blogging and instant messaging grew 21.5% and 22% when it came to
influencing electronics purchases. Similar gains and declines were found when it came to car and truck
purchases. "The traditional media is declining, and that's because people are self-directed," Gary Drenik,
president of BIGresearch. "If they want information, they'll find it somewhere. They're not watching
'American Idol' to see what flat-screen TV they're going to buy." However, most marketers believe they're
ready for the changes. According to the ANA survey, more than half of them said that when DVR
penetration reaches 50% of all TV households they plan to cut advertising by 12%. In a related measure,
87% of respondents said they will increase their Web advertising spending. And according to the survey,
most marketers believe their agencies have caught up with the rapidly changing marketplace. Twenty-eight
percent felt their media agency is ill-equipped to address TV, down from 47% two years ago. However, 47%
of the marketers said their creative agencies were ill-equipped to deal with changes, which is only a slight
improvement over the 55% from two years ago.
NEWSPAPER WEB SITES REACHING YOUNGER DEMOGRAPHICS
Newspaper web sites are reaching elusive younger readers, a new analysis by Scarborough Research
indicates—giving a much-needed boost to the ailing newspaper business. The growth in online audiences is
offsetting losses in print readership, at least somewhat. The Scarborough survey tracked 88 newspapers in
the top 50 local markets from August 2004 to March 2007. It found that local newspaper audience weekly
"coverage" or penetration grew 14%, from 6.4% of the total adult population in the year ending September
2005 to 7.3% in the year ending March 2007. Scarborough also studied the group of "Web exclusive" young
adults ages 18-34, who visit the Web site but don't read the print edition. This cohort increased 21% over
the course of the study, with average weekly penetration of Web sites among non-newspaper readers ages
18-34 increasing from 2.6% to 2.9%. The growth of online audience is mitigating the decline in print
readership somewhat, according to Scarborough, which says online audience growth offset losses in print
by 28%. However, 70% of visitors to the Web site also read the print publication, suggesting opportunities
for cross-platform ad messages.
P&G ENDORSES IN-STORE MERCHANDISING EFFECTIVENESS INITITIVE
P&G CEO Lafley has given a ringing endorsement to an industry initiative aimed at gauging how effective instore marketing is in driving purchase decisions. Known as P.R.I.S.M., the initiative offers the potential to
provide details on which promotional materials are effective with shoppers, Lafley said. And it's a chance to
use that information to determine whether P&G can persuade consumers to spend more per trip. Companies
that are participating in P.R.I.S.M. include Coke, ConAgra, General Mills and Nintendo, as well as P&G.
Agencies OMD and Starcom MediaVest Group, as well as multiple retailers, are also involved. "P.R.I.S.M. will
transform how we think about in-store consumer communications and behavior," he said at an investor event.
CIRCULARS STILL MOST IMPACTFUL AD MEDIUM
Retail TouchPoints: Despite the increased attention to digital marketing, recent research shows that
traditional mediums such as inserts and circulars are among the most impactful advertising mediums for
retailers. According to the recently released Vertis Customer Focus 2008: Retail Study, 47 percent of
Americans cited inserts and circulars as the most effective advertising methods that capture their attention,
an increase of nine percent over a similar study conducted five years ago. The study also found that
consumers use inserts and circulars for more than price comparisons. More than 50 percent of the
respondents indicated they said they read the printed advertising pieces for help in preparing shopping lists
for future store trips, browsing for new products or styles and clipping coupons. Additionally, 45 percent of
respondents use inserts to look for recipes, while 37 percent claimed they help steer shopping trips the
same day they read the insert. "This research proves advertising inserts and circulars are a valuable
marketing tool, even in a day and age when consumers are constantly being bombarded by marketing
messages,” said Scott Marden, director of marketing research for Vertis Communications. "The fact that
inserts and circulars are more efficient at capturing consumers' mind share than television, radio, display
advertising and any other medium is clear indication that savvy marketers should take advantage of the shift
to drive greater ROI." While new mediums are grabbing increased share of budgets, only nine percent of
respondents selected the Internet as the most influential medium, and e-mail advertising was the least
popular choice, selected by a mere one percent of respondents. TV advertising continued to represent a
dominant medium, with 43 percent of respondents indicating TV was their top influencer, that figure
represented a 10 percent decline over the results from the same period five years prior. Newspaper
advertising also declined as a top attention grabber, with only 38 percent selecting that medium, compared
with 45 percent in 2003.
THE SEVEN TRAITS OF A GOOD MANAGER
Business Week: In managerial and executive success, it is what comes after the "but" that is important.
Executives are generally hard-charging drivers with rough edges. They are often not out to please people
but are focused on getting things done. What does the research say about the characteristics that keep an
executive in favor, even if he or she possesses some flaws or shortcomings?
"He can be awfully shrewd and is always looking for an angle, but you eventually realize that he has got the
company's best interests at heart and is not looking out just for himself." And, "She can be very forward and
biting with her ideas and opinions, but she is also willing to take the time to listen carefully to your point of
view." Or, "He can be pretty rough on people, but underneath he is compassionate and considerate."
What comes after the "but" are called saving graces—qualities or redeeming features that make up for other
generally negative characteristics.
Saving graces serve as balancers so that the driver strengths that got you where you are do not go into
overdrive and damage your efforts. They also offer benefits of their own. Because many saving graces
contribute to perceptions of you as someone who is trustworthy, considerate, and insightful, they can help
you more easily acquire information from key people, gain access to limited resources, and navigate the
bureaucracy.
The saving graces are listed in order of importance:
1. Listening: Taking the time to listen can get you out of more jams than the rest of the saving graces
combined. It is the ultimate way of demonstrating that it is not all about you and your agenda, and it is an
excellent tool for breaking down barriers and getting more out of what you do with others. Few executives
are good listeners.
2. Approachability: The best executives need to be early knowers, especially when it comes to negative
information. The best executives are easy to talk to, even when conveying or having potentially bad
information conveyed to them. To be effective, approachability has to be combined with listening.
Executives tend to play 20 Questions: "Where did you get the information? Who else knows? Why didn't I
hear about that before?" This is not a best practice for effective executives.
3. Boss Relationships: Those who tend to venture into deep and dangerous waters find that it can be very
difficult to swim alone. If you tend to stir up controversy and are quick to engage in conflict, it is helpful to
have the advice and counsel of a seasoned boss who can coach you through such situations and provide
some support when you falter. Making your boss successful is Job One, whether you like him or her or not.
4. Integrity and Trust: This one speaks for itself. The people you lead will often forgive a lot if they can
clearly perceive that you speak the truth and are a person of your word.
5. Humor: The use of humor to make others comfortable is a useful skill. Using self-deprecating humor is
one of the better techniques. It puts others at ease and makes your thoughts appear to come from
someplace a little more accessible. Humor allows you to become approachable by putting others at ease
when in your presence.
6. Interpersonal Savvy: Being able to relate 360 degrees is important. Finding a way to make a connection
with individuals up and down the chain and inside and outside the organization gives you something to rely
on when things are not going so well. Diplomacy, tact, and knowing what to say and when to say it can take
the tension out of situations and make unpopular decisions and unfortunate mistakes easier to deal with.
7. Understanding Others: The focus here is on groups rather than individuals. Understanding others is
about knowing what makes one group different from another and why that matters. This is more difficult to
master than listening, but learning to identify what is important to a group and why is often the key for
gaining buy-in and knowing how to lead through difficult situations.
Saving graces are not the fire extinguisher you pull out in the case of emergency, but are more the trusty life
preserver you should wear at all times, in calm waters and rough seas. Saving graces lead to longer tenure
and staying power when coupled with the power skills like drive, strategy, results, and power. They can
compensate for mistakes that would get those people who don't possess them into trouble. They smooth
out the rough edges and can help smooth over rough situations.
PRICE OPTIMIZATION RISES TO THE FOREFRONT FOR GROCERS
Retail Insights: With razor-thin margins and constant promotional efforts, supermarkets are increasingly
looking to price optimization technologies as a core merchandising tool. A growing number of supermarkets
are working with vendors such as Revionics, DemandTec (a RetailWire sponsor), and KSS Retail to help
category management teams and pricing analysts make timely pricing decisions. Using complex algorithms,
optimal prices are computed based on factors such as historical price variations; cost and competitive data;
purchase behavior; temporary price reductions; multiple geographical, pricing and demographic market
zones. Overall, the use of PO technologies appears to be on the rise among grocers. According to RSS
News, grocers now working with Revionics include Hollister Supermarkets, C&K Markets, Supervalu, C&S
Grocers, Grand Union Family Markets, Scolari's, Fresh Encounter and Boyer's Food Markets. DemandTec's
PO clients include The Brookshire Grocery Co. and BI-LO. KSS Retail works with Ball's Price Chopper,
Raley's Supermarkets, ABC Fine Wine and Spirits, and Gigante Supermarkets in the area. Hollister
Supermarkets, an independent supermarket chain in California's Central Valley region, implemented
Revionics' pricing system last year. Revionics system taps into competitive pricing, price changes from
vendors and item movement. The latter, said Chang So, Hollister's general manager, is "the most important
part of the equation." It also outputs suggested retails and integrates special pricing for categories that are
highly price sensitive. "We can now charge more for certain items while maintaining velocity," said Mr. So.
"We can reduce pricing on others while increasing velocity by 50 percent or more. We're experiencing
higher margins throughout our stores and increased sales, due in large part to this system. Pricing
optimization technology helps when competing with large grocery chains as well as mom and pops." Ball's
Price Chopper grocery stores went live with KSS in May 2007. Mike Beal, CFO for Ball's, said the solution
helps the chain "ensure we are offering the best value." The application offers insight into how consumers
perceive Ball's pricing and promotions, providing the ability to improve its competitive positioning. Pat
Walsh, VP of industry and trade development for FMI, told RSS News that pricing remains critical for the
supermarket trade class, where earnings before interest and taxes are roughly 4 percent. "Unlike in the
apparel segment, where more profit is built into products, grocery items that typically generate just four
cents on the dollar bring pricing thresholds directly into play," said Mr. Walsh. "If I take the price too high or
too low, what have I lost? There's a small window where supermarkets can find pricing comfort while
maintaining their marketing strategies and pricing image in terms of acquiring and retaining customers."
CONSUMER CONFIDENCE NOSEDIVES
MediaPost: February’s consumer price index nosedived, falling to its lowest level in 15 years, reports the
Conference Board. And, as if to underscore just how concerned consumers are, a number of leading
retailers posted results dotted with the kinds of adjectives that CEOs dread: Difficult. Disappointing.
Challenging. The Consumer Confidence Index, which had also fallen a bit in January, dropped to 75, from
87.3 last month, its lowest level since November 1993, when it hit 71.9. To a degree, boatloads of media
headlines predicting recession are a factor in how consumers feel, says Lynn Franco, director of The
Conference Board Consumer Research Center. "Certainly," she says, "negative news tends to impact
consumers' expectations." But the steady downtrend in the index, she says, "is more than just the impact of
news." When confidence falls, "the first thing that goes is discretionary spending--and that can mean dining
out, going to the movies, and it can also mean shopping. Plus, retailers also have more competition for that
spending, in the form of higher prices at the pump and for food."
HALL OF FAME DINNER- THURSDAY APRIL 10, 2008
5:00 pm Cocktails, 6:00 pm Dinner & Silent Auction. The Aqua Turf
To honor the induction of:
Tim Devanney, President, Highland Park Market and Harry Garafalo, President, Shop-Rite of Milford.
CALL the CFA Office 860-677-8097 to reserve your table or purchase tickets.
CFA UPCOMING:
 CFA Executive Committee • Wed. Mar.26, 2008 • 8:30 a.m. • CFA Office, Farmington
2008 EVENTS:
 Hall of Fame Dinner – Thursday, April 10 • Aqua Turf, Plantsville, CT
 21st Annual Golf Tournament – Monday, June 2 • Laurel View Country Club, Hamden, CT (tentative)
 Summer Fun Picnic – Thursday, July 31 (tentative) • 4:30-8:30 p.m. • High Meadow, Granby, CT
 UConn Football Tailgating Party – Date TBA • Rentschler Field, East Hartford, CT
 Person of the Year Banquet – Saturday, October 11 • Hilton New York, New York City