CFA FOOD·4·THOUGHT
Friday, March 28, 2008
Stan Sorkin, Executive Director
195 Farmington Ave., Suite 200 · Farmington, CT 06032 · 860 677 8097 · Fax 860 677 8418 · www.ctfood.org
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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CFA WEB SITE-www.ctfood.org
Have you checked out the CFA web-site recently? You’ll find links to information that you can use in your
daily business routine:
 Back issues of Food4Thought
 Latest monthly issue of Nielsen’s “Facts, Figures, and Trends, and Thoughts” authored by Phil
Lempert
 Updates on legislation affecting the food industry
 Link to 21stcenturyrecycling.org
 Executives Director’s monthly overview of CFA issues
LEGISLATIVE UPDATE- BOTTLE LAW SB-357
The bottle law, SB- 357 that passed the Environment Committee reverted back to last year’s language
covering most beverage containers- water, sports drinks, and juice. It’s time to step up our anti-bottle bill
phase of our strategy and still remind legislators of the better alternative-single stream recycling.
BOTTLE LAW ACTION REQUIRED!
The next key step in our anti- bottle bill campaign is to have members schedule meetings with democratic
caucus members listed below to explain to them the negative effect on your business that the new
expanded bottle law would have plus remind them that if they are serious about recycling there is a better
way—single-stream recycling. They just need to give it a chance to work. Pulling beverage cans and bottles
out of curbside containers would give a mixed message to consumers and hurt the revenue stream needed
to make single stream a success.
We are targeting the Democratic caucus. The members should set meetings with Doyle, Harp, Hartley,
Harris, Slossberg, Kane, LeBeau, Crisco, Duff, Handley, Fonfara, Daily, McDonald, Stillman, Maynard,
Call first thing today and schedule meetings ASAP. This is very time sensitive. Meetings are a must if you
have a store in the districts represented by an above named senator.
POSTCARD CAMPAIGN!
Over the next two weeks, make sure your store is participating in the pro-single-stream recycling/anti-bottle
bill campaign. Get consumers and store associates to fill out the cards and send them to the CFA office.
OTHER BILLS STATUS
MINIMUM WAGE: CFA will be meeting with the House Majority Leader to discuss the effect on the
proposed minimum wage on the industry.
BEER COOLER: CFA initiated legislation to remove the “locked” requirement for cold beer during
prohibited hours is progressing.
15 YEAR-OLDS WORKING IN SUPERMARKETS: CFA initiated legislation is progressing.
PLASTIC BAG BANS: CFA will be meeting with the Chairman ROY to discuss CFA proposals for a
voluntary program to encourage the use of recyclable bags vs. an outright ban on plastic.
DAIRY FARMERS SUPPORT: CFA continues to monitor legislation aimed at supporting the dairy farmers
in the state to insure that no price-fixed milk legislation is introduced.
CONSUMERS MORE PESSIMISTIC
The New York Times reported that a Conference Board survey suggests that Americans haven’t been
this pessimistic about the economy since 1973. “Americans are bracing for rising unemployment and
shrinking salaries, a gloomy outlook that could translate into a serious cutback in consumer spending,
the primary engine of the economy,” the Times writes, noting that while fears can be overblown,
“expectations can often be self-fulfilling: worried consumers are less likely to make the big purchases
that help keep the economy humming.” The Times continues: “The gloom among consumers appeared
widespread. A quarter of those surveyed said that businesses conditions would worsen in the next six
months, and nearly a third said the economy would have fewer jobs. Fewer Americans plan to purchase
big-ticket items like refrigerators, vehicles and television sets, and more than half said that jobs were
currently ‘not so plentiful.’ “Responding to a question about income expectations, the proportion of
Americans who said they expected their incomes to rise over the next six months dropped to 14.9
percent, the lowest level since the Conference Board began its survey in 1967.” A new survey released
by Citigroup Global Markets this week said that about a quarter of consumers would change their
supermarket if 1) food prices continue to increase and 2) they find a place that sells groceries for less.
And more than a third of consumers say they are spending less on indulgent food products.
MEN FAVOR CONVENIENCE AND SERVICE, WOMEN PRICE: STUDY
Progressive Grocer: Almost half of all chief female shoppers—those who do more than 60 percent of their
household's grocery shopping—said price-related offerings such as lowest everyday prices, best advertised
specials, and store coupons were most important to them in deciding where to spend their grocery dollars,
according to a new study from marketing research firm Vertis Communications.
It's a different story for most men. Vertis' "2008 Customer Focus" found that while price-related offerings are
important to approximately 30 percent of chief male shoppers, 41 percent of male shoppers aged 18-34
value convenience -- such as proximity to home and work -- more than any other factor.
"Recently, we revealed through our 2008 Customer Focus findings that 47 percent of adults feel advertising
inserts best capture their attention over any other medium," said Scott Marden, director of marketing
research for Vertis Communications. "This new set of data regarding chief female shoppers is further
evidence that marketers can ensure the largest return on investment by devoting dollars to solid advertising
insert campaigns targeting male and female shoppers of varying ages." According to the findings, 48
percent of women aged 35 to 49 who do more than 60 percent of the grocery shopping value these
offerings, as do 47 percent of chief female shoppers aged 50 and older, and 46 percent of chief women
shoppers age 18-34. Additionally the study found that 22 percent of Hispanic household decision makers
prefer super-sized grocery outlets over any other super discount, wholesale, or regular discount store,
compared to just 15 percent of non-Hispanic household decision makers. Selection and quality ranked third
behind price and convenience for almost all age groups. Also, the best quality food overall was important to
only 1 percent of total adults.
ECONOMIC FACTORS MORE IMPORTANT THAN QUALITY
MediaPost: When it comes to stocking up at the local grocery store, overall food quality matters less than
you might think. A new study from Vertis Communications finds that just 1% of adults say overall food
quality is the reason they choose a supermarket, while the perception of low prices and convenience-especially how close the store is to either work or home--is far more important. "Economic factors, such as
gas prices and the housing market, are changing shoppers' habits drastically," says Scott Marden, director
of marketing research at the Baltimore-based Vertis. "More than 90% are affected, and many are shopping
closer to home, stocking up more and combining shopping trips." The company says there are other big
changes afoot. In the last four years, the chief grocery shoppers in families are "showing great receptivity to
grocery stores' prepared meals, increasing from 28% in 2004 to 40% in 2008." And in just two years, there
has been a considerable shift in adults who judge a store by its parts: "There's been a 5 percentage point
increase in the number of adults that listed a department other than meat and produce as the determining
factor in where they shop for groceries," he says. "Organic and seafood are showing signs of increased
importance." What it means, he says, is that shoppers are increasingly looking to make fewer trips to the
store, and to do one-stop shopping. The survey also found some significant shifts in the media shoppers
use before they go shopping. "While grocery insert readership has held steady more than four years, the
percentage of adults using them to decide where to shop has increased significantly, from 52% in 2004 to
59% in 2008." And the number of shoppers who get help from the Internet has doubled in four years. It also
found gender differences, noting that women are paying closest attention to rising food prices. Almost half
of all chief female shoppers say that price-related offerings--including the lowest everyday prices, best
advertised specials and store coupons-- are the most important factor in choosing where to shop. Men, on
the other hand, are more likely to make a choice based on convenience
WEB SAVY SHOPPERS
MediaPost: Manufacturers and e-tailers must be prepared for confident and educated buyers who can now
buy through any channel, at any time, according to a new research study from local shopping search data
provider Krillion. In conjunction with Chicago-based consultancy, the e-tailing group, Krillion found that 67%
of Web-savvy shoppers spend more than 30% of their total shopping time researching products on the
Web. Meanwhile, another group--dubbed 'Web-informed buyers' by researchers --spends more than 50% of
their shopping time researching online, and have developed sophisticated behaviors and requirements as
they use the sites of manufacturers and e-tailers to determine what to buy and where to buy it. "Consumers
are actively gathering detailed product information, insight from other shoppers, and third-party validation
from multiple sources--regardless of where they end up consummating the final purchase," said Sherry
Thomas-Zon, vice president of marketing at Krillion. "This means retailers must be poised for a confident,
ready buyer who has done his or her homework." Overall, the study of the online shopping behavior of
some 1,000 consumers found that they spend a substantial proportion of their total shopping time scouring
the Web for product information, buying guides, opinions and reviews of the products they wish to buy.
When consumers are considering purchasing complicated and information-intensive products such as
computers, kitchen appliances and consumer electronics products, Web-savvy shoppers consult a wide
variety of online resources in a research phase that can begin days, weeks or even months before the
actual purchase. The study also revealed that expectations are high for today's online shoppers regarding
the number of information sources they seek out and the features they expect to find on the sites they visit,
such as cross-channel purchasing options and real-time inventory information. These consumers make a
substantial investment of their time in the hope of finding the best price for an in-stock product. Many of
them have embraced the concept of buying items online for in-store pick-up: 55% of the shoppers surveyed
have purchased a product this way, while for sophisticated, Web-informed buyers this number is 60%.
Notably, when shopping for complicated and information-intensive products, manufacturers' sites are
ranked as the most essential destination for 72% of the 1,000 shoppers surveyed, followed by online stores
operated by retailers--54%--and comparison-shopping engines--50%. "Manufacturer Web sites are clearly
critical links in the information-gathering process," said Lauren Freedman, president of the e-tailing group.
"This survey underscores their influence.”
SOCIAL NETWORKS: GREAT UTILITY, BAD BUSINESS
The Economist: Social networking is definitely the next big thing, but it's not necessarily the next big
moneymaker. Like Web-based email before it, social networking will evolve as a feature tied to the Web
portal experience. However, like email, it's not (really) a business. Meanwhile, as media companies bid up
the value of social networks like MySpace, Facebook, and Bebo, the industry is still searching for a suitable
revenue model. Recently, Google co-founder Sergey Brin admitted that "social networking inventory as a
whole"--which includes its own offering, Orkut, as well as a search advertising deal with News Corp.'s
MySpace--was performing worse than expected. Facebook has done even worse. The company recently
admitted that it "simply did a bad job" with Beacon, an advertising program that tracks online activity and
informs users of their friends' purchases or actions taken on third-party sites.
The bigger question is whether users should really have to visit a specific Web site to make use of those
connections. As Forrester Research analyst Charlene Li said in a recent report, "We will look back to 2008
and think it archaic and quaint that we had to go to a destination like Facebook or LinkedIn to be social,"
because social media services "will be like air. They will be anywhere and everywhere we need and want
them to be."
CVS CEO SPEAKS: RECESSION PROOF?
Thomas Ryan, chief executive officer at CVS Caremark, didn't say his company is recession proof but he
doesn't see the economy causing consumers to cut back significantly on the purchases they make at the
company's drug stores. "People will keep filling prescriptions and taking care of personal hygiene and
nutrition," he said. About 85 percent of CVS Caremark's revenues are generated from purchases of drugs
and healthcare products. According to Mr. Ryan, about three percent of CVS's business is "affected by the
economy." CVS is looking for sales growth of between 13 and 16 percent in 2008. The company expects its
pharmacy benefits management and in-store MinuteClinic businesses to help it achieve that goal. "We are
leveraging our unique combination to help payers control costs more effectively, improve patient access and
promote better health outcomes," Mr. Ryan said. "Our integrated model provides us with an opportunity to
gain share and create new sources of growth in 2008 and beyond."
HALL OF FAME DINNER
THURSDAY APRIL 10, 2008
5:00 pm Cocktails
6:00 pm Dinner & Silent Auction.
The Aqua Turf Plantsville, CT
To honor the induction of:
Tim Devanney, President, Highland Park Market and Harry Garafalo, President,
Shop-Rite of Milford. CALL the CFA Office at 860-677-8097 to reserve your table or
purchase tickets.
CFA UPCOMING:
 CFA Finance Committee • Thursday, April 10 • 9-11 a.m. CFA Office, Farmington
 CFA Board Meeting • Wednesday, April 23 • 8:30-10:30 a.m. CAS, Cheshire, CT
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
RECESSION: A MARKETER’S BEST FRIEND
Advertising Age: The massive bailout of Bear Stearns from the brink of bankruptcy could be the first of
many financial rescues needed. Despite double-digit plunges, U.S. housing is still overpriced by historical
yardsticks. Retail sales have gone from slow to declining, and the consumer-spending binge that propped
up the U.S. economy for years may not return for a long time.
In short, it's a great time to be in marketing.
Previous recessions have provided big opportunities -- spawning the brand-management system, soap
operas, modern cable networks, airline loyalty programs, the IBM personal computer, the iPod, Crest
Whitestrips, Axe body spray and -- for better or worse -- fast-food value menus.
But as any old-timer could tell you, quite correctly, today's marketers don't know much about marketing
through recessions -- or how good they have it when things feel so bad.
Short slumps
The past two downturns have been among the shortest on record: eight months each. They followed two of
the longest economic expansions on record: 92 months and 120 months. That compares with the average
recession of 14 months and average recovery of only 46 months. Gut-wrenching news, layoffs and budget
cuts aside, history shows recessions have been some of the best times for media and marketing innovation.
For marketers who kept their wits, economic valleys -- the deeper the better, in fact -- became foundations
of empires.
Two years into the Great Depression in 1931, a Procter & Gamble Co. executive named Neil McElroy wrote
the memo that ushered in the brand-management system. It eventually helped propel him to the presidency
of P&G. It wasn't a cure-all. During the first three years of the Great Depression, P&G's sales fell by more
than half, from $192 million to $94 million, and earnings fell 50%, to $11 million. (Deflation accounted for
some of that decline.) But P&G didn't lay off anyone during the Depression. And it charged ahead with
innovation. In 1933 it launched the first radio soap opera nationally and its first synthetic detergent brand,
Dreft. Around to cover such events were Advertising Age, launched seemingly inopportunely in 1930, and
BusinessWeek, launched at the outset of the Depression, in 1929.
New downturns, new networks
You don't need to go that far back to find successful media launches or marketing initiatives during
recessions. During the next-deepest downturn of the 20th century, the 1980-82 double-dip recession, Ted
Turner founded CNN in 1980, and MTV launched a year later. By the time the economy began rebounding,
those networks were poised to reshape media for a generation. Less glamorously perhaps, airlines reeling
from a recession-fueled downturn developed what would become a new marketing currency as American
Airlines and Delta Air Lines launched miles-based loyalty programs in 1981. Ronald Reagan, who
essentially reinvented the marketing of politics as he realigned the political landscape, did so not
coincidentally in 1980, during a respite of weak growth between two recessions. Franklin Roosevelt, did the
same a little less than five decades earlier during the Depression. Even the ultimately short recession in
2001 brought two notable media innovations, all the more notable because they emerged from the flaming
wreckage of the dot-com bubble.
Wikipedia was conceived in January 2001 and rolled out over the course of the year. Of course, with no
apparent revenue model, it's somewhat, um, recession-proof. But it did spawn a plethora of revenuegenerating open-source media.
Tech picks up
In October 2001, only 42 days after Sept. 11, Steve Jobs unveiled the first iPod. It wasn't an instant
success, as compatibility issues with PCs led to one of the highest post-holiday return rates in consumerelectronics history, said Rob Enderle, principal of the Enderle Group. But by 2002, it was still well on its way
to reinventing portable media and music. Indeed, recessions have been salad days for technology. Just
about 20 years earlier, during another recession in August 1981, Apple's nemesis, the IBM personal
computer, ushered in a new era in home and business computing. Arguably, the productivity and
information revolutions it helped spawn did much to make subsequent recessions shorter and expansions
longer. OK, that's technology. As everyone knows, recessions kill other sectors, such as automotive. Right?
Wrong. The mid-1970s recession, spawned by the first energy crisis, produced an entire new segment of
imported fuel-efficient cars in the U.S. During a recession in 1981, Lee Iacocca turned around Chrysler
through the launch of fuel-efficient K-Cars (albeit backed by government loan guarantees). And in 1991, in
part because the recession lowered fuel prices, sales of SUVs rose 55% to more than 1 million units. SUV
sales kept rising at a double-digit compound annual pace for a decade, quadrupling to 4.2 million by 2002.
Here come the hybrids
Ironically, of course, that contributed to rising gas prices today and current double-digit declines in SUV
sales. It's not obvious how a combination of declining consumer spending, tighter debt standards and rising
fuel prices could spawn a new automotive segment this time, though hybrids and super-efficient vehicles
are an obvious guess. Recessions also have been fertile ground for some retail chains. Home Depot
opened its first two stores near Atlanta just before a recession in 1979. But it expanded the concept rapidly
as the economy headed south, going public in 1981 and using the proceeds to build 100 stores by 1989.
On the brink of the early-1990s recession, corporate raider Robert Campeau took Federated Department
Stores in a leveraged buyout and quickly shed its Gold Circle and Richway high-end discount chains in
1989. Rival Dayton Hudson bought many of the units, which it used to push its similarly styled Target into
new territory during the 1990-91 recession. Wal-Mart Stores used the opportunity to charge into markets
Gold Circle had vacated in the Midwest. And Wal-Mart's ruthless efficiency, merchandising savvy and valueconscious consumers made the early 1990s the fastest-growing period in the retailer's history, with samestore sales up 10% to 11% each year from 1990 to 1992.
Expansion
A decade later, the 2001 recession similarly helped fuel the national expansion of Wal-Mart rivals Dollar
General and Family Dollar. Hard times have spawned seminal innovation even for the finance industry.
Charles Schwab founded his discount brokerage during a recession in 1974. The first interest-bearing
(negotiable order of withdrawal) accounts launched in 1972 and spread rapidly in Massachusetts during the
same recession. They won nationwide authorization during another recession in 1981. That same
recession's high interest rates spawned legislation authorizing adjustable-rate mortgages nationally in 1982.
Of course, those helped spawn the current mess -- and a new opportunity for yet-unnamed financial
instruments to help fix it. While consumer staples might seem immune to business cycles, the reality is that
the recessions of the early 1980s brought on the generics craze, and another in the early 1990s brought
another surge in private labels and helped spark a rolling series of restructurings of such giants as Kraft
Foods and P&G throughout the decade. Yet recessions also have spawned launches of highly successful
and pricey new brands, such as Kimberly-Clark Corp.'s Pull-Ups training pants in the early 1990s. It was
probably the biggest risk K-C had ever taken, said former Chairman-CEO Wayne Sanders in a 2002
interview. It was also one that rival P&G considered, rejected as too small an opportunity, then later
regretted not taking, Chairman-CEO A.G. Lafley has said.
Huge risks, rewards
But the last recession, under Mr. Lafley, spawned two of the most expensive products in P&G's history:
Crest Whitestrips and Swiffer WetJet, both launched nationally in 2001 at prices near $50. And though both
brands ultimately cut prices by half or more to expand their market or meet competitive threats, they still
established new, high-margin categories they still dominate. WetJet launched less than three weeks after
Sept. 11, recalled Maurice Coffey, a P&G marketing director who led the launch as a brand manager, in a
2006 interview. "Quite amazingly," he said, "we were on track come January on our sales numbers." He
credited extensive prelaunch buzz and the product's inherent appeal with helping it overcome the economic
headwinds. Amid an economy still reeling from that recession, Unilever launched Axe body spray in 2002,
establishing a new category priced about 50% above existing deodorant sticks. The recession "made the
stakes higher," said David Rubin, brand manager on the U.S. launch and now director of U.S. hair-care
marketing for Unilever. "Consumers are forced to make tougher choices when the economy is bad, and the
role of marketing just gets amplified." Following a better-than-expected year in 2001, the U.S. business got
a waiver on profit requirements from London to allow for an expensive launch expected to take three years
to pay out, said Charles Strauss, who was president of the North American home and personal-care
business at the time. Ultimately, the economy didn't factor into the launch decision, he said, and Axe came
in ahead of Unilever's sales and profit forecasts regardless.
Charging ahead
Marketers should draw lessons from such examples of charging ahead despite recession, said Ed Rensi,
former CEO of McDonald's USA through the early 1990s recession; he's now a motivational speaker,
Nascar team owner and director of several companies. Unfortunately, he said, companies usually do just
the opposite. They cut staff, which he said leaves those left behind overworked and risk-averse. And they
cut marketing, which props up profits short term but erodes market share down the road. In his case,
McDonald's lost market share in the early 1990s, in part to Taco Bell, which gained share with national
advertising of its value menu (see story, P.1). But by continuing to invest in new stores and remodels
through the period, Mr. Rensi said, McDonald's came out stronger -- and in a position where it didn't have to
rely on discounting to build business. Likewise, he said, McDonald's focus on new products and customer
experience over discounts will continue to pay off. "My response has always been that when you go
through periods of stress, that's when you really have to go after top-notch, high-quality people," he said,
"and really go out and market like crazy."
Did Taco Bell Sell Itself Short? An Argument Against Price Cutting
The decision to nationally advertise its under-a-buck value menu was hailed as a brilliant stroke by Taco
Bell during the recession of the early 1990s -- a defining moment that allowed it to pry share from
McDonald's. But a former McDonald's CEO maintains that the short-term gain forever doomed Taco Bell's
long-term prospects. Ed Rensi, who helmed McDonald's USA at the time and through 1998, said he
believes his competitor's value menu ultimately proved to be a big mistake. Though he said he wasn't
paying much attention to what Taco Bell was doing at the time, in retrospect, he said he believes national
advertising of Taco Bell's value menu helped etch the image of the chain indelibly as a marketer of cheap
food. "Discounting as a tactic that's event-driven is one thing," he said. "Discounting as a strategy is
something else. It's a very bad idea, because it cheapens your product and your brand." In fact, he said the
way the chains responded to that recession played a role in why McDonald's has sales per unit today of
around $2 million vs. $1.2 million for Taco Bell. McDonald's, of course, had its own flirtation with value
menus after Mr. Rensi left in 1998, and still offers one today. But he believes part of the company's
turnaround since has been from focusing instead on new products and improving the customer experience.
"There was a lot of criticism of McDonald's in the late 1980s and early 1990s for remodeling their
restaurants and building so many," Mr. Rensi said. "But that period of stress, when we remodeled and built
so many restaurants, put McDonald's in the position it's in today." A former Taco Bell executive who
worked on the chain's marketing during the early 1990s said the company's gains came from two factors: its
59-79-99 (cent) value menu and that for the first time the chain went from being a spot advertiser in about
150 markets to buying national media more efficiently. But the executive, who spoke not for attribution
because she still works in the industry, acknowledged that today a value-menu strategy probably won't
accomplish much, in large part because so many others follow suit with value offerings. Nevertheless, she
believes quick-service restaurants of all sorts will gain ground in the current downturn, likely at the expense
of casual family restaurants such as Chili's and Applebee's.
Tips for surviving in tough times

Don't cut that budget: Recessions offer what may be unprecedented opportunities to market in an
environment of relatively less noise as others cut back. And, particularly in industries with high ad-tosales ratios, such as package goods, analysts have become fairly adept at flagging earnings gains
that stem from marketing cuts, which can portend slower sales and earnings growth later.

Maintain or increase strong launches: Even in the deepest recessions, things that truly appeal to
consumers, be they soap operas, CNN or disposable training pants, still flourished.

Beware that discounting can be addictive: Unless the price reduction is truly strategic -- e.g., a
discount retailer or brokerage or a one-time event to drive traffic -- you could live to regret it.

Go with the flow: Some of the most successful recession-era launches were natural offshoots of the
conditions created by or causing the crisis, i.e. high gas prices spawning fuel-efficient cars, interestbearing checking accounts that sprang from high interest rates in the 1970s and '80s, or declining
gas prices and gas-guzzling SUVs.

You can't go wrong with diversion: Media, entertainment and other forms of cheap frivolity can be
the bread-and-circus salve for hard times -- from the soap operas of the 1930s to MTV in the 1980s
to the iPod and Axe body spray in 2002.