Daily Memo: Whole Foods Market - FTC Settlement Deal Watch - Countdown to March 6

The week has come to an end without a settlement deal being reached by Whole Foods Market, Inc. and the U.S. Federal Trade Commission (FTC) over the FTC's legal challenge to Whole Foods' 2007 friendly $565 million acquisition of Wild Oats Market, Inc.

The two parties will take the weekend off from the settlement talks and resume them on Monday, March 2, 2009. (Remember, February only has 28 days.)

The FTC has set March 6 as the day when its current halt of legal proceedings regarding its attempt to overturn the merger ends. The federal regulatory agency can extend its halt if it so desires.

However, the FTC has set April 6, 2007 as the start date of its administrative trial at which an Administrative Law Judge chosen by the U.S. federal government agency responsible for antitrust issues and consumer protection will hear arguments from both sides regarding the 2007 acquisition. Plans are that after the end of the trial, the Administrative Law Judge will make an administrative ruling on the status of the now nearly 100% combined Whole Foods-Wild Oats.

It's been about 18 months since the deal was done. U.S. Federal Judge Paul Friedman ruled in Whole Foods Market, Inc.'s favor nearly a year ago, giving Whole Foods the green light to merge Wild Oats into its operations and rebrand the former Wild Oats' stores to Whole Foods -- a ruling that was later overturned by a federal appeals court -- which is why the two parties are where they are today.

All but about 6-10 of the former Wild Oats stores have been rebranded to the Whole Foods banner. After selling off some of the stores after the acquisition, most notably the then Wild Oats'-owned Henry's stores in Southern California (26 stores) and Sun Harvest stores (9) in Texas -- which were bought from Whole Foods Market, Inc. by Los Angeles, California-based Smart & Final LLC -- along with closing a few of the Wild Oats banner stores, Whole Foods is left with about 100-110 former Wild Oats stores, all bought the handful mentioned above now integrated into Whole Foods' culture and operations.

When the Whole Foods Market-FTC. settlement negotiations start-up again on Monday morning, March 2, there will only be five full business days left until March 6, the date the FTC plans to end its halt of legal proceedings regarding the merger.

The FTC initiated the halt after outside legal counsel for Whole Foods Market, Inc. came to the regulator with a settlement proposal from the company in January, 2009. The initial halt, which was to have ended earlier this month, was extended to march 6 by the FTC as a good faith gesture designed to give both parties some "breathing room" in the settlement talks.

We believe both parties are motivated to reach a settlement deal rather than go to trial on April 6. The question remains: Can they collectively come to an agreement-settlement that satisfies the needs and requirements of both parties this late in the game?

FTC. v. Whole Foods Market: News & Notes

Fear & Loathing in the Texas Congressional delegation: The 'silence of the pols'

Whole Foods Market, Inc., which had gross sales in 2008 of $8 billion, is headquartered in Austin, Texas, it's hometown since 1980 when the very first Whole Foods Market natural foods store was opened in the city.

The company is ranked as the 21rst-largest food and grocery retailing chain in the U.S. by the supermarket industry trade publication Supermarket News, which each year ranks the 75 top food and grocery retailers based on total annual sales, regardless of format, in the U.S.

Whole Foods' is a major corporate citizen and employer in Austin and throughout the state of Texas. The natural grocery chain currently operates 278 stores in the U.S., Canada (6 stores) and the United Kingdom (5 stores). Of those 267 Whole Foods stores that are in the U.S., 16 are located in the state of Texas, the natural grocer's home state

Three of the 16 Texas natural foods markets are located in Austin, including Whole Foods biggest store, it's flagship, Austin natural foods emporium that's over 80,000 square feet in size. [Click here for a full list of Whole Foods' Texas stores.]

Whole Foods Market currently has five new stores in various stages of development in Texas.

In other words, with $8 billion in annual sales, its corporate headquarters in Austin, and 16 current and five new stores in development in Texas, Whole Foods Market, Inc. is an important company for Texas in terms of job creation, tax generation and revenue, and corporate philanthropy, among other benefits of having it located in the state.

One would think so at least. But we just have to ask: Where are Texas' two United States Senators and its 32 members of the U.S. House of Representatives when it comes to speaking out for Whole Foods Market, Inc. on the FTC. v. Whole Foods Market, Inc. legal case? The answer: basically silent.

Are they "for it (the merger) or are they agin' it (the FTC's challenge)," as they like to say in Texas? One should expect some rather vocal public show of support for the local grocery chain in this battle, shouldn't they? We've been listening closely for a long time and haven't heard it.

We've been covering the issue closely since the summer of 2007, and even more closely since November of 2008, when things started heating up again, to the present, where the heat is even hotter. In this time we have not been able to find one of Texas' 32 Congress members, including those from Austin, Whole Foods' hometown, who has taken a strong, public stand on the issue and spoken out regularly on the FTC's legal attempt to overturn the deal.

[You can view a complete list of all 32 members of Congress from Texas here. The list includes links to their e-mail addresses. So if you want to ask them where they stand on FTC. v. Whole Foods and why they haven't spoken out on it, just click the little folder at the bottom of this post and you can e-mail the story to them.]

The two Senators from Texas, John Cornyn and Kay Bailey Hutchinson, both Republicans, haven't said anything we can find, and certainly not in any significant public way, about the FTC's continued attempt to overturn the acquisition of Wild Oats Market, Inc. by one of their state's leading corporate citizens, Whole Foods.

Since Whole Foods Market, Inc.'s growth means more jobs in Texas, more taxes paid by the corporation, and other related things favorable to Texas, one would think the state's Senators, especially since both are Republicans who are self-stated strong anti-government regulation types, would speak out in favor of Whole Foods Market and urge the FTC to reach a settlement with their home town grocer wouldn't you? [Click here for information on the two Senators from Texas.]

This should have particularly been the case since the FTC launched the challenge in 2007 when a fellow Republican, George W. Bush, was President. President Bush just left office at the end of January. But then it's the two Republicans on the FTC who have been the most aggressive in wanting to break-up the merger. So, go figure.

Austin, Texas, where Whole Foods Market was founded and is headquartered, is in Texas' 25th Congressional district, which is represented in the House by Democratic Congressman Lloyd Doggett.

Congressman Doggett has been near as silent as one can be in public office about the FTC. v. Whole Foods Market, Inc. case. We find that rather strange. For example, take a look at his House Web site here. There's lost of news about issues dear to his heart but not one thing we could find about the FTC-Whole Foods issue, which is currently at his high point and affects his home city of Austin. Doggett was born in Austin and still lives there.

Neither Texas Senator has said much of anything about the FTC's 18-month challenge to Whole Foods friendly 2007 acquisition of Wild Oats Market, Inc. Since Whole Foods' spend $11 million alone in its first quarter of this fiscal year, and many millions more since the FTC challenge in 2007 started, millions the natural grocery chain could have used to hire employees in Texas, for example, you would think the company's biggest defenders would be the two Republican Senators from Texas, along with Congressman Doggett and the other 31 members of the House of Representatives from Texas.

We now some of the members of the Texas delegation have been working the issue from a lobbying perspective on Capital Hill among fellow members. But we also know many of the members from Texas have done little or nothing regarding the case. And we can't find one who has taken a strong position against the FTC's legal challenge and spoken out against it on a regular and sustained basis, such as appearing on the cable news channels, talk radio and the other normal venues members of congress always use when they want to make a point and influence regulatory agencies, the press, fellow politicians and the public.

Not even former Republican candidate for President and Congressman from Texas, Ron Paul, who like Whole Foods Market, Inc. CEO John Mackey is a Libertarian, has spoken out in any way in public about the FTC challenge to his home state grocer, which is really odd since Paul is arguably the leading elected official in Washington against excessive government regulation, not to mention the fact he represents people who work at Whole Foods stores in Texas.

The "Silence of the Texas Delegation" is indeed odd to us. It's not like they are shy people after all. And its not like Texas couldn't use a few more new jobs that a combined Whole-Foods, or even a healthier Whole Foods Market, Inc., will bring it.

You can bet if Whole Foods' was based... let's see... say in California, where it currently operates 53 stores -- three times as many as it has in Texas -- and has 20 new stores in the development pipeline, that Democratic Senator Barbara Boxer, a Whole Foods Market shopper in Washington D.C. and at home in Marin County, and Senator Diane Feinstein (also a Democrat -- who's husband, financier Richard Blum, has been known to comb the aisles of the Whole Foods Market store on California Street in the city not just as a shopper but also to get ideas for investments by looking at products on the shelves -- would be speaking out publicly and strongly in favor of Whole Foods' and against the FTC, even if they were lukewarm on the whole thing -- without a doubt. It's called good constituent service, not to mention job savings and creation.

We also are willing to bet that if the Colorado Congressional delegation, especially those members representing the city of Boulder and the surrounding metropolitan region, which lost Wild Oats' corporate headquarters after Whole Foods acquired the company, thought it possible that Whole Foods Market, Inc. might be interested in moving its corporate headquarters to Boulder, there would be no 'silence of the pols" like is the case with the Texas delegation.

We think that's food for thought for Whole Foods Market, and the members of the Senate from Texas, and the Texas Congressional delegation.

By the way, what's really with the Texas Congressional pols' and their silence vis-a-vis the FTC's ongoing attempt to break up the Whole Foods Market acquisition of Wild Oats?

Maybe they agree with the FTC?

Are the Republicans afraid to look soft if they support crunchy Whole Foods?

What about Democrat Doggett, the Congressman from Austin? He should have been on CNN's Larry King and MSNBC (and Fox News if they let him on) talking up the issue last year when the FTC got tough again. He wasn't there. He didn't do it. Too late now.

It's hard to know the answers though -- because of the "silence of the Texas pols" on the FTC. v. Whole Foods Market legal case and issue.

Leibowitz is in as new FTC Chairman

On Tuesday, February 24 we reported in this piece [Retail Memo - Breaking: FTC Commissioner Jon Leibowitz Odds On Favorite to Be Named Chairman; Positive Development For Whole Foods' Settlement Talks] that current FTC Commissioner Jon Leibowitz, the only Democrat out of the current four sitting FTC commissioners, was a lock to be named by President Obama to head the regulatory agency, replacing the current Republican Chairman. We also said President Obama would likely announce his decision by the end of this week.

Yesterday (Thursday, February 27) in our Daily Memo: Whole Foods Market - FTC Settlement Deal Watch - 9 Days to March 6 column we wrote this item:

"On Tuesday in this piece [Retail Memo - Breaking: FTC Commissioner Jon Leibowitz Odds On Favorite to Be Named Chairman; Positive Development For Whole Foods' Settlement Talks]we wrote that current FTC Commissioner Jon Leibowitz, a Democrat, appears to be a lock as the new chairman of the regulatory agency. We said President Obama was likely to make the announcement before the end of this week. We are told by our sources the President will do so tomorrow. But President Obama is a rather busy President these days, so it might not happen on Friday. However, we continue to believe Leibowitz is the man."

Today, Friday, February 28, a spokesperson from the White House press office told correspondents that cover the White House that Jon Leibowitz indeed is President Obama's choice as the new FTC Chairman. The spokesperson said a formal announcement would be coming next week.

We made it by the skin of our teeth in terms of saying the choice would be announced by the White House by the end of business today. We will have some analysis on Mr. Leibowitz being named the new FTC Chairman as it relates to FTC. v. Whole Foods Market, Inc. next week. Stay tuned.

Friday Foodie Feature Memo: Brand Emeril (Lagasse) to the Rescue

Emeril Lagasse is a one man tour-de-force in the food world. He's a successful restaurant owner and chef, cookbook author, television cooking show host, appears on ABC's Good Morning America as the show's resident foodie, speaks to groups throughout the world about food and cooking, and is a specialty foods and gourmet cookware entrepreneur, who markets his Emeril's brand of specialty food products, which includes sauces, marinades, coffee, cooking spray, mustard, salad dressings, salsas, seasonings, spices, rubs, and his Emeril line of cookware and related kitchen gadgets.

He also has a line of Emeril brand food-related apparel, plus a corporate and consumer gift item line in which he includes bits and pieces of all of the branded products in his empire.

The Emeril brand of specialty foods are sold online, at supermarkets, and at specialty and natural foods stores.

Emeril's cookware and kitchen gadget line-cooking tools line,which has been one of his fastest-growing product line extensions, also is sold online, as well as at numerous medium-range -to- higher-end department and home-centered stores.

When it comes to the world of food and cooking, it's safe to say Emeril understands the term "line extensions." He's got the home kitchen -- from pantry, stove top and counter top to what the home chef wears to cook, and the recipes she uses to cook from -- covered.

But even Emeril and his marketing staff likely couldn't have thought about the latest line extension in the Emeril brand portfolio, or rather the new use a woman found for one of the celebrity chef and specialty foods entrepreneurs gourmet cookware line cooking pans.

A woman who is a big fan of everything Emeril, from his cookbooks and television shows to his branded specialty foods products -- and especially his cookware -- created a brand new use for one of those Emeril frying or saute pans recently -- and it was a spur of the moment brain storm.

You see, an intruder broke into her home and surprised her. But she in turn surprised him back by taking one of Emeril's cooking pans and beating the intruder over the head with it, thereby proving not only that cooking pans have more than one use, but also that Emeril's pan meets the stress test -- the handle did not fall off when she used it to club the intruder.

But enough said: A picture, as they say, is worth a thousand words. So feel free to view a video of the woman using one of Emeril's pans to fend off her household intruder. It's Friday after all, we can lighten up a bit.

Click her to watch the video.

We bet the woman is now one of Emeril's best customers. But we wonder: When she used the Emeril brand cooking pan on the intruder, did she also used the celebrity chef's famous tagline? That famous tagline -- "BAM!" of course.

Daily Memo: Whole Foods Market - FTC Settlement Deal Watch - 9 Days to March 6

There was no announcement at the end of business today, Thursday, February 26, 2009, regarding a settlement deal between the U.S. Federal Trade Commission (FTC) and Whole Foods Market, Inc. on the FTC's legal challenge to overturn Whole Foods' 2007 friendly acquisition of Wild Oats Market, Inc.

The FTC halted its legal proceedings in its ongoing case against the deal until March 6 while the federal government agency responsible for antitrust and consumer protection issues and the Austin, Texas-based natural foods grocery chain hold talks designed to negotiate a settlement to the FTC's now about 18-month challenge to the merger.

While the clock is ticking towards March 6, the FTC could extend its legal proceedings halt beyond that date if it feels negotiations are promising but that all that's needed is more time to arrive at a settlement deal.

However, the FTC has an April 6 date set for an administrative trial in which an agency-appointed Administrative Law Judge will hear arguments from both parties on the acquisition-merger and at the end of the proceeding make a decision on the status of the combined Whole Foods-Wild Oats. Whole Foods has virtually completed integrating all but a handful of the Wild Oats stores into its culture and corporate operations, rebranding all but about 6-10 of the former Wild Oats stores that it hasn't sold or closed (about 100) to the Whole Foods brand.

[Read our first column of the countdown to March 6 here: Daily Memo: Whole Foods Market - FTC Settlement Deal Watch - 10 Days to March 6. The link also includes (at the bottom of the post) a compete bibliography of our recent coverage and analysis of FTC v. Whole Foods Market, Inc. from December 2008 to the present, as well as containing archival links to past stories from NSFM on the topic and issue going as far back as the summer of 2007.]

FTC. V. Whole Foods Market: News and Notes

A wise old Motley Fool:

The financial and investment publication "Motley Fool" appears to agree with Natural~Specialty Foods Memo's (NSFM) analysis and argument, which we've been making since August, 2007, that the FTC's 18-month challenge to Whole Foods Market, Inc.'s friendly $565 million acquisition of Wild Oats is folly.

Here's what Motley Fool writer Alyce Lomax wrote about the FTC. v. Whole Foods case in a general piece in the online publication on February 17, 2009 about government regulation and federal regulatory agencies like the FTC: "Regulators vs. reality: Meanwhile, I’ll bet we can all think of examples when regulators have done things that simply didn’t seem to make sense. How about the Federal Trade Commission’s bizarre and ongoing witch hunt against Whole Foods Market (Nasdaq: WFMI)? Whole Foods’ CEO John Mackey contended that the FTC asked for more documentation from his company when it was trying to acquire Wild Oats than it demanded when ExxonMobil (Nasdaq: XOM) hooked up. Meanwhile, the whole thing was absurd, since Whole Foods faces competition from everybody from Wal-Mart to Trader Joe’s."

Sounds about right to us.

[You can read the full piece, "The Trouble With Regulation, here.]

Whole Foods and its competitors:

The FTC's central antitrust argument regarding a combined Whole Foods-Wild Oats is that Whole Foods Market, Inc. now constitutes a monopoly in various U.S. markets in what the regulator calls the "premium natural and organic retailing segment (PNOS)." We argue this is wrong because the FTC-created category is non market reality-based and doesn't depict how natural and organic foods are retailed in the U.S. today.

That reality is that Whole Foods has plenty of competitors -- from fast-growing natural foods chains and independents to discounters like Trader Joe's, mega-discounters getting deeper into the categories like Wal-Mart, Costco, Target and others, mega-supermarket chains like Safeway Stores, Inc. with its Lifestyle format (1,750 stores in the U.S. and Canada), Kroger Co. and Supervalue, along with scores of big regional chains like Publix in Florida, H-E-B in Texas, Wegmans in New York, Raley's in Northern California and dozens more, topped off by scores of multi-store upscale independents and even more single store independents, all deep in natural and organic products merchandising and sales.

Three of those fast-growing natural foods class of trade chains agree with us based on their behavior. Those natural grocers -- Colorado-based Sunflower Farmers Market, Colorado-based Natural Grocers and Arizona-based Sprouts Farmers Market -- all are opening stores in Whole Foods Market stronghold markets throughout the Western U.S., taking the competitive battle right to the leader. These states include Colorado, New Mexico, Arizona, California -- and now Texas, where Whole Foods is headquartered, and where some might think it owns the natural and organic foods retailing market.

Not so. Sunflower Farmers Market just opened its latest Texas natural foods market right in Austin, Whole Foods' home town. It has, and is building, additional stores throughout the state. Sunflower now calls its Texas stores Newflower. The grocer hasn't confirmed it but the change from Sunflower in Texas (and it's just in Texas) to Newflower could be because there is a long time health foods store in the state that uses the Sunflower name.

Sprouts and Natural Grocers also have stores in Texas and plan more. Sprouts announced this week in fact it has just signed a lease for another Texas natural foods market. Sunflower-Newflower will be announcing shortly leases for two more new store sites in Texas, according to one of our sources.

Would these three fast-growing natural foods retailers really challenge Whole Foods on its home turf if they thought it was a powerful monopoly natural products retailer? Of course not. They are doing so for the complete opposite reason: They believe the Whole Foods Market business model and format is vulnerable to their smaller, fewer-frills, everyday low price formats, which is something all three of these Western U.S.-based chains have in common.
Maybe the FTC should just watch the market -- and the behaviors of Whole Foods Market's competitors? Just a thought.

FTC Chairman watch: Tomorrow?

On Tuesday in this piece [Retail Memo - Breaking: FTC Commissioner Jon Leibowitz Odds On Favorite to Be Named Chairman; Positive Development For Whole Foods' Settlement Talks] we wrote that current FTC Commissioner Jon Leibowitz, a Democrat, appears to be a lock as the new chairman of the regulatory agency. We said President Obama was likely to make the announcement before the end of this week. We are told by our sources the President will do so tomorrow. But President Obama is a rather busy President these days, so it might not happen on Friday. However, we continue to believe Leibowitz is the man.

Lanny Davis: The Zelig of Washington D.C.

Speaking of busy people, Washington D.C. lawyer (partner in the Orrick law firm) and Democratic Party major player Lanny Davis, who is the lead outside counsel and head lobbyist for Whole Foods Market, Inc., as well as the lawyer heading up the current settlement talks with the FTC for the natural grocery chain, (there are three Washington, D.C. law firms retained on the case) in its battle against the FTC., still has time not only to handle other clients for his firm, and to appear as an analyst at least once a week on CNN or Fox News (along with a few other projects), but he's also doing some Op Ed writing this week.

Davis, who was a fraternity brother at Yale College with former President George W. Bush, went to Yale Law School with former First Lady, Senator from New York and now Secretary of State Hillary Clinton, and has been best friends with her since then (including being one of her top advisers in her run for President last year), as well as serving as Special Counsel to Bill Clinton when he was President, is a volunteer with the Israel Project, an American nonprofit group that describes itself as being organized to get out facts about Israel to the media.

As part of that fact-communicating project, Lanny Davis wrote an opinion piece titled, "A Nuclear Iran; Just Suppose..." in Monday's (January 21) edition of the conservative Washington, D.C. daily newspaper The Washington Times. You might find his opinion and position on the issue interesting. [Click here to read the opinion piece.]

Independent Grocer Memo: New York's 7,000 Bodega (Small Grocery) Store Owners Say 'No' to Proposed 18% Tax Hike On Juice Drinks and Soda Pop

Sweet Grocery, pictured above, is a classic, old school Latino family-owned New York City bodega. The name bodega came from these classic stores, mostly started and operated by immigrants in the city's Latino neighborhoods. A distinctive design feature of an original bodega is the calssic metal sign like the one on Sweet Grocery above. Today the term bodega is used in New York City to describe a small grocery store regardless of it look. And most today look just like a typical urban, small grocery store looks. The photograph above was taken by New York City artist Josh Goldstein. His art is inspired by New York City's many bodegas. Josh Goldstien even has a Web site "BodegaNYC,' where he showcases and sells his bodega inspired art, and offers observations about the stores and the city. You can view the Web site and Josh Goldstein's bodega-inspired art here.

The "Bodega (small grocery store) Association of the United States," which is based in New York City and represents 7,000 independent grocery store owners in New York state, according to its Web site, most which independently own and operate small stores or bodegas in New York City, has joined a fast-growing coalition that's fighting New York State legislation that would slap an 18% sales tax hike on juice drinks and soda pop sold at food, grocery, convenience and other stores in the Empire State.

The anti-soda pop and juice drink tax-hike coalition called "New Yorkers Against Unfair Taxes," says it has thus far signed up 90 New York business and citizen's groups in its efforts to stop the proposed legislation. The coalition also says it has so far obtained the signatures of 5,400 New Yorkers in a petition drive it's launched to demonstrate voter opposition to the new tax. [You can view group's petition Web site at the link here.]

Today the anti-juice drink and soda pop tax increase coalition turned up the heat on its campaign in New York City by staging a rally at the Fine Fare supermarket, which is at 1239 St. Nicholas Ave at 172nd Street, in New York City. The store is a branch of the New York-based 50 store Fine Fare supermarket chain.

It's estimated there are about 25,000 grocery stores in New York State, the majority of which are small stores or bodegas, many averaging only a few hundred square feet in size. The highest concentration of those small, independently-owned grocery markets is in New York City. For those who've never visited the Big Apple, there are generally two or three, and often more, of these bodegas on every block.

Here's what Nelson Eusebio, the chairman of "New Yorkers Against Unfair Taxes," says about the "Bodega Association of the United States" joining the coalition: "The exorbitant cost of doing business in New York has already taken a major toll on the state's small supermarkets and neighborhood bodegas, with more than 2,300 bodegas closing over the past four years, representing a loss of more than 8,500 jobs. The inclusion of the Bodega Association of the United States is particularly significant, given its representation of more than 11,000 bodegas throughout the state of New York. (Note: the bodega association's Web site says it represents the interests of 7,000 grocery stores rather than 11,000. So we are using that number.)

Walking around most any neighborhood in the five boroughs, you will see an iron gate where a storefront used to be. In addition to the bodegas, more than one-third of our city's supermarket owners have had to close their doors in the past five years. I'm proud of the way New Yorkers have come together through this coalition to protect this industry and preserve our communities, and we will continue to press forward to defeat this tax," he adds.

Ramon Murphy, the president of the 7,000-member association of small grocery store owners says: "Every week a bodega closes down as a result of the current economic conditions, and this proposed tax could lead to even more family-owned businesses having to shut their doors forever," said Ramon Murphy, President of the Bodega Association of the United States. "We've joined the coalition to prevent this from destroying our livelihoods, and the communities built around these businesses."

The new, proposed 18% sales tax hike will be in addition to the sales tax New York state consumers already pay on the juice and soda drinks. If the legislation is passed, New Yorkers will pay about a 25-30% sales tax on the retail price of the drinks.

The "New Yorkers Against Unfair Taxes" coalition includes in its membership, in addition to the Bodega Association of the United States: The Food Industry Alliance of New York State, which represents supermarket chains and independents in the state; Gristedes supermarket chain; New York Association of Convenience Stores; New York State Restaurant Association, New York State Automatic Vending Association; which represents companies in the vending machine business; Coca-Cola Bottling Company of Buffalo, New York; Polar Beverage Company; Dan's Supreme Supermarkets, Inc., a chain of independent supermarkets in the state; Grocery Manufacturers Association, the national trade group for U.S. grocery product manufacturers; The Coca-Cola Company-Glaceau; National Restaurant Association; Hispanic Chamber of Commerce (many of New York's bodegas are owned by Hispanic Americans, particularly those of Puerto Rican nationality); National Puerto Rican Coalition; and numerous other associations and businesses, including many individual grocery stores and restaurants. [You can read a full list of the members on the anti-tax hike coalitions Web site here.]

New York's Democratic Governor, David Paterson, and the majority Democratic legislature in the state capital in Albany are struggling to find ways to cut expenses and raise revenues because of the state's massive budget deficit. Much of New York's tax revenue depends on Wall Street and the state income taxes paid by the highly paid financial services industry workers who work on the street, according to data Governor Paterson recently presented.

The financial industry crash, and all of the value taken out of the big banks and investment firms, combined with the many layoffs in the industry, have reduced New York state's income tax revenue by double-digit percentages. As a result, the Governor and the state legislature has cut tens of millions of dollars worth of programs, are cutting more, and are searching for new revenue by proposing tax increases like the 18% sales tax-hike on soda pop and juice drinks.

New York city's bodega owners are an important group and can be very affective politically in the state, particularly in New York City. Since they operate thousands of retail stores -- stores where the windows will be plastered with anti-juice drink and soda pop tax-hike signs and where daily the grocers can collectively tell tens of thousands of people about their anti-tax position -- the store owners will be a powerful "retail politics-oriented" force in the coalition's campaign to defeat the proposed legislation.

The anti-juice drink and soda pop tax-hike coalition is planning more rallies like the one held today at the Fine Fare supermarket. A major focus of the anti-tax hike campaign is to highlight what the coalition argues will be the loss of many more jobs at a time of massive job loss already in New York and throughout the U.S. if the tax hike passes.

Of course, the people of New York and the rest of the country want and need added services -- unemployment insurance, medical assistance, ect. -- because of the current unemployment situation.

And it is here where nobody has the answer: In this recession, states like New York and California (and many others) are going broke, hundreds of thousands of people are losing their jobs each month (perhaps 700,00 this month alone), and the demand for government services is way up but tax revenue is way down. There really are only two things state governments can do in some combination -- cut programs and thus expenses and raise revenue (taxes).

Unlike the U.S. federal government, most states in the U.S. can't borrow their way out of the mess because they have state laws that require them to balance the budget. New York and California both have laws that require this.

So it comes down to this: Does a state cut all of its vital services until it can balance the budget in these times when more and more people are demanding those services? Does it raise taxes, like with the juice drink and soda pop tax hike? Or does it try to do some of both: Cut programs as much as feasible and raise taxes in a way that focuses on things like consumption rather than payroll taxes or income tax.

That answer depends on where you sit, we suspect. And for New York's food and grocery retailers, they are sitting, actually standing most of the time, in the position of being the ones that feel they will be most impacted, along with the state's juice drink and soda pop drinkers, by the proposed 18% tax hike on the drinks. Therefore they oppose the legislation.

Supply-Side Memo: Dean Foods, Producer of White Wave, Horizon Organic and Silk Organic Is In the Tall Grass and Grazing For More

Dean Foods, which is the largest processor and distributor of fresh fluid milk and dairy products in the U.S., along with being one of the major players in the organic milk (fluid and soy) and natural-organic dairy products categories through its WhiteWave-Morningstar division, held an investor day today which was Webcast via the company's Web site. Some of the company's well-known natural-organic dairy brands are: Horizon Organic, Silk organic soy milk, WhiteWave dairy products and Rachel's Organics. [Click here for a list of all of the company's dairy brands.]

The purpose of Dean Foods' investor day and Webcast was to detail the company's new strategic plan for going forward. The company's natural-organic dairy divisions will play a major part in it's new strategic plan and direction.

Below are the three key planks of its new strategic plan that Dean Foods' executive team described at the meeting/webcast today:

~Dean Foods' said today it plans to extend its current low cost position in the dairy industry. "The first key component of the strategic plan, and the clear focus for the near term, is to reduce costs across the business and extend Dean Foods' low cost position in the marketplace," the company said today.

~Additionally, the company said it will focus on driving revenue and profit growth in its core businesses. "In the DSD dairy platform, the company says it plans to build on its core manufacturing and distribution strengths to continue to increase its market share and drive strong operating returns. This includes branded dairy products and private label.

At its natural-organic WhiteWave-Morningstar division, Dean Foods said it will focus on "leveraging and building upon the strong net sales growth of the branded portfolio to drive continued revenue growth and reignite segment operating profit growth."

~Finally, the dairy giant said it's going to "invest for growth in new capabilities and platforms to drive sustainable long-term growth." In other words its investing despite the current economic recession, at least in a prudent if not massive way.

Dean Foods' CEO Gregg Engles outlined this morning in the webcast a $300 million across the board cost-savings program the dairy processor, marketer and distributor will embark on over the next five years.

He said the majority of the $300 million in cost savings targets what the company calls its DSD Dairy Segment, which involves the production, marketing, distribution and sales of its branded fluid milk, soy beverage and related dairy products. These include the numerous brands under the WhiteWave-Morningstar natural-organic division.

[You can read a detailed summary of the company's specific cost-cutting plans designed to eliminate $300 million in expenses over five years here.]

Dean Foods' organic dairy brands -- Horizon, White Wave, Silk ect. -- have been a leading source of the company's growth since it acquired most of those brands. In the U.S., for example, Organic fluid cow milk and refrigerated, fresh soy milk have gone from mere micro-niche items sold primarily in natural foods stores just five years ago to near-mainstream items today.

Nearly every U.S. supermarket chain and independent grocer today offers organic fluid milk and refrigerated soy milk (as opposed to just the varieties in shelf-stable tetra packaging) for sale, devoting an increasing amount of dairy case display space to the products. Even many convenience stores, drug chain stores, discount stores and dollar stores are selling organic fluid and soy milk today.

Additionally, there's been an explosion in the amount of supermarket shelf space devoted to organic yogurt varieties, beverages and related natural and organic dairy products of all kinds in just the last five years alone. Additionally, many more mainstream supermarkets that in the past never sold natural-organic dairy products at all have added them to their dairy cases.

Dean Foods' biggest advantage in the organic segment is the strong brand identity it has with Horizon, Silk, WhiteWave and the like, in our analysis.

And even though organic category sales are down in the recession, it's surprising that organic dairy items, particular value-added items like yogurt, cottage cheese, ect., are still doing well overall.

Our analysis is this is the case in-part because consumers tend to cut back first on organic shelf-stable packaged food and grocery items in bad economic times, perceiving buying those to be less important to their health and well-being than fresh products like organic produce and dairy products are. In other words, fresh is the last organic segment cash-strapped shoppers will cutback on in many cases.

Milk prices down, good for dairy processors

Big dairy companies like Dean Foods actually are doing well in this economy in a relative sense because the price for milk they purchase from dairy farmers is at the lowest price it has been at in recent, and even not so recent, history. Dramatically lower the primary ingredient in a company's products and lots of good things will follow.

At the other end of that equation though are the dairy farmers, who are suffering.

For example, in California's Central Valley, one of the top milk producing regions in the U.S., a local dairy farmer association just announced a program in which the dairy farmers- members will kill off thousands of cows and sell them to the meat processing industry as a way to reduce their herds and thus lower the supply of milk, resulting, they hope, in higher prices being paid them by processors like Dean Foods (and others), which has a large processing plant under its Morningstar division in the Central Valley County of Merced. Similar scenarios are happening in all of the dairy-producing states.

With the cost of cow milk so low, Dean Foods today actually revised upward its estimate for its first quarter of the new fiscal year earnings. Here is what CFO Jack Callahan said today in the webcast: "As we discussed a few weeks ago in our fourth quarter earnings release, we expected the first quarter to be strong as the commodity environment continues to improve. "Most notably, the Class I Mover milk price will decline in March to $9.43 per hundredweight, which is the lowest price in recent memory. The energy complex also remains favorable. Based on our analysis of the January results and what looks to be, based on preliminary reports, a solid February, the quarter will likely be even stronger than we initially though," he said.

"The Company increased its first quarter 2009 guidance for adjusted diluted earnings per share to at least $0.41 per share, from its prior guidance for at least $0.38 per adjusted diluted share. Additionally, the Company's full year expectations have also increased, with management now expecting adjusted earnings to reach at least $1.55 per diluted share in 2009, representing full year growth of at least 19% from the $1.30 posted in 2008," company CFO Callahan added.

Dean Foods posted its highest-ever quarterly operating income in its recently-ended fourth quarter, which it announced on February 11. [You can Read More on the company's Q4 peformance.]

The solid performance in its fourth quarter and the increase in earnings estimate for the first quarter should allow Dean Foods to continue from a financial perspective the aggressive promotion its been doing of late on many of its organic dairy product brands like yogurts.

One thing we don't see changing at retail is the price of organic milk, Horizon brand or any other. A gallon of organic milk (from a cow) is priced about 50% -to- 60% higher at retail today than a gallon of non-organic milk. That's a stiff premium, which is why many consumers just can't afford to buy organic fluid milk in this economy (and often in a good economy) even though they want to. The core organic milk consumer still seems to be sticking (again our fresh organic cutback last theory) but their is significant overall sales erosion in the category as evidenced by recent data.

A slightly lower organic milk retail price a good goal

We suggest one long-term goal of the milk processing industry is to get the price of organic fluid milk down by at least 20%-25% over the two -to- three years.

Of course retailers can help with this by continuing to take the higher margins they do on organic fluid milk as compared to non-organic (after all they should as the volume is considerably less in organic), but perhaps taking a bit less high margin. A 5% reduction would be a big deal, for example, assuming the dairy processors would toss in 5% in cooperation. Doing so would help to build greater retail demand for organic fluid milk, in our analysis.

Until the price to consumers of organic milk comes down a bit closer to that of non-organic, say 20-25% higher, it will remain a niche product.

Daily Memo: Whole Foods Market - FTC Settlement Deal Watch - 10 Days to March 6

FTC v. Whole Foods Market, Inc. - Settlement Negotiations

The U.S. Federal Trade Commission (FTC) and Whole Foods Market continue negotiations over a settlement deal regarding the now about 18-month legal challenge by the FTC to overturn the 2007 friendly acquisition of then Boulder, Colorado USA-based Wild Oats Market, Inc. by Austin, Texas USA-based Whole Foods Market, Inc.

Earlier this month the FTC extended a halt in its legal proceedings against the deal until March 6, 2009 so the two parties could have some "breathing room" in their talks designed to reach some sort of mutually agreeable out of court settlement to Whole Foods' $565 million acquisition of Wild Oats in the summer of 2007.

Additionally, the FTC has set an April 6, 2009 date for an administrative trial, which will be held before an Administrative Law Judge chosen by the regulatory agency, in which the judge will hear legal arguments from the FTC's Bureau of Competition's lawyers and Whole Foods Market, Inc.'s legal counsel regarding the acquisition and the respective antitrust (or not antitrust) arguments from both sides. At the end of those oral arguments the FTC Administrative Law Judge will issue a ruling on the merger, assuming an out of court settlement deal isn't reach by the two parties before then, and the April 6 administrative trial goes forward.

The FTC can extend the March 6, 2009 legal action halt if a settlement deal hasn't been reached by then if it desires. If a settlement deal hasn't been reached by the two parties by March 6, 2009, the FTC could extend the legal proceedings halt if it feels progress is being made in the talks and all that's needed is more time to reach an agreement.

The FTC's case and argument: In summary

The FTC contends that a combined Whole Foods-Wild Oats is a monopoly retailer in what the agency calls the "premium natural and organic retailing segment (PNOS)" in 29 U.S. markets. As a result it says the 2007 acquisition of Wild Oats by Whole Foods Market, Inc. violates U.S. antitrust laws because in the FTC's legal view the combined Whole Foods-Wild Oats prevents competition in its self-defined category in these 29 U.S. Markets.

Natural~Specialty Food Memo (NSFM) disagrees with the FTC's position because, in summary, the entire premise of the regulator's antitrust argument rests on a false assumption of how natural and organic foods are retailed in America today, based on our experience and analysis. The FTC has created an artificial category -- PNOS -- which it then is using to justify its legal argument, in our analysis.

That false FTC premise presumes a combined Whole Foods-Wild Oats chain's competitors consist only of premium or high-end natural foods class of trade retailers such as New Seasons Market in Oregon (which ironically based on its format doesn't even fit the PNOS artificial category the FTC has created), Earth Fare in the southern U.S. and some others. That premise is wrong.

FTC argument not based on market reality

The empirical, market-based reality of natural and organic foods retailing in the U.S. today is that its a multi-corporate (and independent) and multi-format business. Major players include fast-growing natural foods class of trade chains like New Seasons Market and Earth Fare, along with Sunflower Farmers Market, Sprouts Farmers Market, Planet Organic, PCC in Washington state, Henry's Farmers Market, Natural Grocers by Vitamin Cottage and others.

It also includes hundreds of more upscale-oriented independent natural foods retailers and co-ops located throughout the U.S., including in most of those 29 markets in which the FTC argues the combined Whole Foods-Wild Oats is a monopolist natural products retailer.

Along with this segment, major players in natural and organic foods retailing today include some of America's biggest supermarket chains -- Safeway Stores, Inc. Kroger Co., Supervalue, Inc., just for starters -- as well as the two top-selling retailers of food and groceries in America -- Wal-Mart Stores, Inc. and Costco, both of which are deep in the natural-organic categories and getting deeper in terms of product selection and merchandising.

Add to this list Target, Trader Joe's, B.J.'s Wholesale and many more non-supermarket format food and grocery retailers.

Along with these segments are the big regional supermarket chains deep into natural and organic category product sales, as well as premium foods and premium fresh, prepared foods. These include Wegmans in New York, Publix in Florida, H-E-B and United Supermarkets' Market Street format in Texas, Raley's in Northern California and many more multi-billion dollar grossing regional supermarket chains located throughout the U.S., including in most of those 29 "monopolist" markets the FTC says the combined Whole Foods-Wild Oats controls in terms of the retailing of natural and organic foods.

If all these examples aren't enough, feel free to add the thousands of multi and single-store independents throughout the U.S. that put a focus on upscale food and grocery retailing, including putting a major emphasis on natural, organic and premium foods. These regional players exist and thrive -- competing head-to-head with Whole Foods Market stores -- in most U.S. market regions, including those infamous 29 "monopolist" markets. In many cases these independents actually outsell Whole Foods in the natural and organic products categories in their respective markets.

Finally, the FTC's argument fails to take into consideration the dynamic, fast-changing food and grocery retailing business in the U.S. For example, when Whole Foods Market, Inc. acquired Wild Oats in 2007, not one of the now 113 Tesco Fresh & Easy Neighborhood Market combination grocery and fresh foods markets currently open and operating existed in California, Nevada and Arizona, the three markets United Kingdom-based Tesco, which is the third-largest retailer in the world, operates in.

That's a lot of new competition in slightly over a year (the first Fresh & Easy stores opened in November, 2008) in these three states, all states Whole Foods Market has stores. The competition isn't head-to-head between the two chains. But there is only so much share of the natural and organic foods pantry, and since Tesco sells numerous category items for lower prices than Whole Foods does, it is taking some of this share, just like all of the other competitors are, regardless of specific retail format.

Additionally, giant discount retailer Target announced yesterday it is putting a new, major emphasis on food and grocery merchandising. The retailer plans to add fresh meat and produce departments and expanded perishables, groceries, household consumer packaged goods and health and beauty care selections in all of its new and remodeled discount format stores. Target has already converted one such discount format store in Illinois to the food and grocery-emphasis model and has plans to do the to many more over the next year and beyond.

Target operates some Super Target combination full-supermarket and general merchandise stores in the U.S. These stores are similar in product selection to a Wal-Mart Supercenter. However, the retailer operates many more of the discount format stores. Therefore, adding fresh foods and expanded grocery selections to these stores will have a major impact in numerous U.S. markets as Target gains critical mass in the remodels and new store openings.

Target has become a major retailer of natural, organic and premium food and grocery products over the last couple years in its stores. It's created its own store brands of premium, natural and organic food and grocery products and continues to expand those lines, as well as regularly promoting the category items in its stores and in its weekly advertising circulars.

Over the last few months, for example, Target has been regularly offering its private label premium, natural and organic brands and lines at across the board 15% and 20% discounts in its weekly advertising circular. This is direct competition to Whole Foods Market, and as Target converts more and more of its discount stores to this new food-enhanced format, the competition will get even more intense, as it has for Whole Foods Market from Wal-Mart with its major initiatives in the natural and organic categories over the last few years in its Supercenters and Sam's Club stores.

We site the Tesco Fresh & Easy and Target examples to illustrate a simple point. In the about 18 months since Whole Foods Market, Inc. acquired Wild Oats, two major retailers, both much bigger than Whole Foods, have entered (Tesco) and announced plans to enter more deeply (Target) the food and grocer retailing space, both retail chains of which are and continue to make a major impact in the premium, natural and organic categories.

A good way to view Whole Foods Market today vis-a-vis the natural and organic categories, its core selling proposition, is that it is being challenged from multiple formats -- the fast-growing natural foods chains mentioned above, the big, regional and independent supermarket chains, and the discounters like Wal-Mart, Costco, Target, Trader Joe's ect. -- each picking off bits and pieces in terms of sales from Whole Foods' core natural, organic and premium primary offering.

This fact is one reason why Whole Foods is struggling during the current recession -- many consumers are turning to these alternate format stores, including Trader Joe's, and either not shopping at Whole Foods at all or spending far less at the stores than they were just a year ago.
When the recession ends and the economy improves, Whole Foods will be challenged even more aggressively by numerous retailers.

For example, Safeway Stores ("The Market") and Wal-Mart ("Marketside") have opened their own versions of a smaller-format, upscale grocery and fresh foods market -- Safeway has one store, "the market by Vons," which it opened in the summer of 2008, currently operating in Long Beach, California, with plans to soon open a second "The Market" format store, "the market by Safeway" in downtown San Jose, California.

Wal-Mart has four of its "Marketside" stores opened in Metropolitan Phoenix, Arizona (opened in OCtober, 2008), with a fifth unit set to open in the region (in Peoria, Arizona) later this year. It also has plans to open five of the stores in Southern California. Leases for the first two in the region have already been signed, one in downtown San Diego and the other in nearby Oceanside.

The Safeway and Wal-Mart small-format stores are between 15,000 and 25,000 square feet, small for a supermarket, but about the same size as the average new natural foods store. Whole Foods even recently announced it plans to build much smaller stores, about in the 20,000 -to- 35,000 square-foot range, going forward over the next few years. For the last few years new Whole Foods stores have generally averaged about 45,000 -to- 65,000 (and some even bigger) square-feet.

The "Marketside" and "The Market" format stores, which many people describe as looking like a "small Whole Foods Market" (we've been in both formats and they do look a bit like that) sell lots of natural, organic, specialty and premium, prepared foods. The Wal-Mart "Marketside" stores even prepare the foods in-store in a kitchen and have an eating area in the store for shoppers.

But the two new formats from Wal-Mart and Safeway also have the added advantage of selling basic food and grocery items (Tide, Pampers, Coke, Pepsi) as well as natural and organic, something Whole Foods obviously doesn't do. When the economy improves, Wal-Mart and Safeway could open scores (and in Wal-Mart's case hundreds) of these upscale, small-format stores throughout the U.S., competing head-to-head with Whole Foods. They certainly have the resources to do so. Wal-Mart Stores, Inc. has annual sales of $400 billion. Safeway Stores, Inc. has annual sales of about $60 billion. Whole Foods Market has annual sales of about $8.5 billion.

A settlement deal needs to be reached

All this being said, we believe the FTC and Whole Foods Market, Inc. need to come to a settlement deal that is mutually agreeable to both parties so that Whole Foods can get back to focusing on what it does best -- merchandising and selling natural and organic groceries (and saving in its second quarter the $11 million it had to spend in its first quarter of this fiscal year on legal fees to battle the FTC) -- and so that the FTC can get out there and find a real monopoly or two to file an antitrust action against.

Countdown to March 6

As we mentioned at the top of this piece, the FTC has halted its legal action in the Whole Foods-Wild Oats merger case until March 6, which is just nine days away.

Beginning today, we will be counting-down those nine days in this column, "Whole Foods Market - FTC Settlement Deal Watch," offering news, analysis and commentary each day between today and March 6 until a settlement deal is reached -- or not reached -- by the two parties.

The daily column will be in addition to our regular reporting, writing about and analysis on the FTC v. Whole Foods Market, Inc. legal case and issue.

As of the end-of-business today there is no report of a settlement deal between the FTC and Whole Foods. But we will keep you posted in "Whole Foods Market - FTC Settlement Watch," as well as in Natural~Specialty Foods Memo (NSFM) in general.

Natural~Specialty Foods Memo (NSFM) Linkage

Below is a bibliography of the most recent -- December, 2008 to the present -- reports, stories, analysis, commentary and posts on the FTC. v. Whole Foods Market case and issue, along with directly related topics and issues, from Natural~Specialty Foods Memo (NSFM). At the very bottom of the bibliography we also include links to direct and related posts going as far back as the summer of 2007.

February, 2009

February 24, 2009: Retail Memo - Breaking: FTC Commissioner Jon Leibowitz Odds On Favorite to Be Named Chairman; Positive Development For Whole Foods' Settlement Talks.... February 22, 2009: Retail Memo: The 'Whole Analysis' - Whole Foods Market Inc's First Quarter Financials, FTC v. Whole Foods...The Natural Grocer At Home and Abroad....February 11, 2009: Retail Memo: 'God And Man at Yale' - The FTC-Whole Foods Settlement Talks: Whole Foods CEO John Mackey Speaks Out at Yale University....

February 5, 2009: Retail Memo - Breaking: FTC Delays Whole Foods Merger Opposition Case Another 30-Days For Settlement Talks; Progress Towards A Deal Remains Positive....February 3, 2009: Retail Memo - Breaking Developments: FTC, Whole Foods Market, Inc. Progressing in Settlement Talks; Could the Negotiated End-Game Be Near?....February 1, 2009: Promotional Merchandising Memo: Whole Foods Market's Super Bowl In-Store Promotional Merchandising Message: 'Value'....

January, 2009

January 31, 2009: Store Brands - Private Label Memo: Smart & Final-Owned Henry's Farmers Market Preparing to Debut New Natural & Organic 'Sun Harvest' Store Brand....January 29, 2009: Retail Memo - Breaking: Whole Foods Makes Settlement Offer to FTC; FTC Halts Action For 5 Days; Natural~Specialty Foods Memo Calls For A Settlement....January 25, 2009: Retail Memo: Judge Sets February Hearing Dates On FTC Motion That Could Result in Whole Foods Market Having to Rebrand 100 Former Wild Oats Units....

January 24, 2009: Retail Memo: Despite its Battle With the FTC and Other Struggles, Whole Foods Market Still Ranked 22nd 'Best Place' to Work in America By Fortune....January 24, 2009: Retail Memo - News & Analysis: Gelson's Chain Challenges Whole Foods' Subpoena For Trade Secrets; FTC Says No Like it said to New Seasons Market....

January 23, 2008: Retail Memo: Three Judge Federal Appeals Court Panel Rules Against Whole Foods' FTC Lawsuit Today; What's Next?.... January 21, 2008: Retail Memo: An Argument in Favor of the FTC in FTC v. Whole Foods Market, Inc. -- Or At Least Against Whole Foods' Legal Tactics....

January 19, 2009: Retail Memo: Concerned With Fast-Looming FTC Hearing Date Whole Foods Re-Files Lawsuit Taking it Directly to Washington, D.C. Federal Appeals Court....January 19, 2009: Retail Memo - Breaking News: Portland's New Seasons Market and Whole Foods Market, Inc. Reach Agreement; New Seasons Will Provide Trade Secrets....

January 16, 2009: Read Memo: Colorado Newspaper Columnist Joins NSFM's 'Whole Foods Market Isn't A Monopoly' Bandwagon....Friday, January 16, 2009: Retail Memo - Exclusive: Supermarket Industry Investor Ron Burkle Looking For A Seat On Whole Foods Market's Board of Directors....Thursday, January 15, 2009: Retail Memo: Natural-Organic Foods and U.S. Retail Marketplace Realities; Why the FTC's Case Against the Whole Foods-Wild Oats Merger is Pure Folly....

January 15, 2009: Retail Memo: Fresh & Wholesome Market Fears Not A Whole Foods Market Monopoly; In Fact Part of its Competitive Strategy is to Be the Anti-Whole FoodsRetail Memo: Whole Foods Offers Carrot and Stick to Retailers That Have Yet to Comply to Subpoena For Trade Secret Data and Information....

December, 2008

December 29, 2008: Retail Memo - Breaking News: New Seasons Market Doesn't Turn Over Trade Secrets to Whole Foods Market Despite Deadline to Do So Being Today....December 29, 2008: Independent Grocer Memo: Natural-Organic, Local, Fresh and Premium Keys to Pacific Northwest USA's Haggen Foods; Now Adding Value....December 28, 2008: Retail Memo: Web Site and Blog-Driven Viral Boycott of Whole Foods Market Stores in Portland, Oregon Region Going On; Could it Intensify?....December 28, 2008: Retail Memo: Tomorrow Deadline For Portland, Oregon's New Seasons Market to Turn Over Trade Secrets to Whole Foods Market's Legal Counsel....

December 24, 2008: Christmas Eve Memo 2008: 'Twas the Night Before Christmas' - FTC v. Whole Foods Market, Inc. Version....December 24, 2008: Independent Grocer Memo: From Mrs. Gooch's to the Auto Body Business, Then Back to Retail, Chris Kysar is On A Healthy Organic Foods Retailing Roll....December 24, 2008: Retail Memo: It's 'Deja Vu All Over Again' - Judge Paul Friedman to Whole Foods Market, FTC: 'What's My Role Here?'....

December 23, 2008: Retail Memo: FTC Postpones Scheduled February 16 Administrative Hearing on Whole Foods-Wild Oats Deal Break-Up Until April 6, 2009....December 23, 2008: Independent Grocer Memo: National Grocers' Association Asks President-Elect Obama to Look Out For Independent Grocers When He takes Office in January....December 22, 2008: Retail Memo: Only Slightly More Than Half the 93 Natural Foods Retailers Issued Subpoenas By Whole Foods in its Case against the FTC Have Complied....

December 22, 2008: Retail Memo: Whole Foods Market Wants to Depose and Obtain Internal E-Mails From FTC Commissioner, Suggesting Possible Conflict of Interest Situation....December 22, 2008: Retail Memo: At Hearing Today Judge Tells FTC to Provide Road Map of How Whole Foods Could Take About Merged Companies Should Ruling Go In its Favor....December 19, 2008: Retail Memo: Whole Foods' Lobbying Effort Baring More Fruit - House Committee Leaders Send Letter to FTC Chair Similar to One Sent By Senate Leaders....

December 18, 2008: Retail Memo: 'This Isn't Over Yet' - New Seasons Market CEO On Judge's Decision the Natural Gorcer Must Turn Over Trade Secrets to Whole Foods Market.... December 18, 2008: Retail Memo: The 'Whole Primary Source Scoop' -- FTC and U.S. Federal Court Documents on the FTC v. Whole Foods Market, Inc. Case....December 17, 2008: Breaking News: Judge Orders New Seasons Market to Comply With Whole Foods' Subpoena and Submit Sales Data, Financial Records and Other Trade Secrets....

December 16, 2008: Retail Memo: Whole Foods, Wild Oats and Boulder, CO...And the Rocky Mountain News' Editorial Take On FTC v. Whole Foods Market, Inc....December, 15, 2008: Retail Memo: Eight Members of U.S. Senate Judiciary Committee Send Letter to FTC Chairman Regarding FTC's Legal Case Against Wild Oats' Acquisition....December, 13, 2008: Retail Memo - Analysis & Commentary: More On FTC v. Whole Foods Market, Inc. and Whole Foods Market, Inc. v. FTC....

December 9, 2008: Organics Category Memo: Wither Organics? Organic Food & Grocery Category Sales Down; But Double-Digit Growth Still Likley With Mass Market Lift....December 9, 2008: Retail Memo: Whole Foods Markets' 'Whole Legal Paycheck:' Three Top Washington, D.C. Law Firms Teaming Up On The Natural Grocery Chain's FTC Lawsuit....December 9, 2008: Retail Memo: Whole Foods Market CEO John Mackey and Team Launch First Aggressive Attack Against the FTC's Legal Case at Press Conference This Morning....

December 8, 2008: Retail Memo: Mr. Mackey (and the Whole Foods Market Troops) Goes to Washington....December 8, 2008: Retail Memo: Breaking News - Whole Foods Market, Inc. Files Lawsuit Against the FTC; Argues the Regulator Violated the Company's Due Process Rights....December 7, 2008: Retail Memo: New Seasons Market CEO Brian Rohter and Whole Foods Market Co-President Walter Robb Discuss and Debate the Subpoena Issue Online....

December 7, 2008: Retail Memo: New Seasons Market CEO Brian Rohter Speaks Out Again Today on the Whole Foods Market, Inc. Subpoena of His Company's Data....December 7, 2008: Retail Memo: Whole Foods Market Retains Top Washington D.C. lawyers and Politically-Connected Lobbyists to Plead its Case Against the FTC....December 6, 2008: Retail Memo: Fast-Growing and Scrappy Sunflower Farmers Market Ventures Deep in the Heart of (Whole Foods Country) Texas....

December 3, 2008: Retail Memo: More on the Whole Foods Market-New Seasons Market Subpoena Issue; FTC Holding Firm For February, 2009 Hearing....December 2, 2008: Retail Memo: Whole Foods Market, Inc. Closes $425 Sale of Stock to Private Equity Firm; Adds Members of the Firm to its Board of Directors....December 2, 2008: Retail Memo: Portland, Oregon-Based New Seasons Market CEO Brian Rohter Responds to Whole Foods Market's Paige Brady....

December 2, 2008: Retail Memo: Whole Foods' Paige Brady Responds to Yesterday's New Seasons Market Piece; Lots of E-Mails; Issue Heats Up On the New Seasons Market Blog....December 1, 2008: Retail Memo: Whole Foods Wants A Court-Mandated Financial Records Dump from Portland-based New Seasons Market; it Says For its Battle Against the FTC.

Natural~Specialty Foods Memo (NSFM) Archives

FTC v. Whole Foods - Linkage from the NSFM archives:

Click here, here and here for stories about the FTC-Whole Foods issue from our archives, including pieces about mass market and natural foods class of trade retail competitors.

Retail Memo - Breaking: FTC Commissioner Jon Leibowitz Odds On Favorite to Be Named Chairman; Positive Development For Whole Foods' Settlement Talks

U.S. Federal Trade Commission Commissioner -- and likely new FTC Chariman -- Jon Lebowitz. Is he a Whole Foods Market shopper? [Photo Credit: FTC.]

Breaking News Analysis: FTC. v. Whole Foods Market, Inc.

Current U.S. Federal Trade Commission (FTC) member Jon Leibowitz is the odds on favorite to become the new chairman of the U.S federal regulatory agency responsible for antitrust issues and consumer protection, according to the Washington, D.C. rumor mill.

President Obama could name Commissioner Leibowitz, the only Democrat on the FTC, as soon as tomorrow, and most likely no later than by the end of the week, we believe. It's a pretty solid rumor, in other words.

The current four-member FTC consists of one Democrat (Leibowitz), two Republicans, and one Independent. The FTC is short one member, which President Obama likely should name soon. By statute, the FTC is a five-member Federal Commission.

Rumors that President Obama would choose Commissioner Leibowitz to head the FTC began circulating in earnest in the nations' capital the first week of this month. On February 3 the Capital Hill publication CongressDaily wrote this: "Federal Trade Commission member Jon Leibowitz might get a boost to the chairman's spot, sources say. Leibowitz, a former Hollywood lobbyist, leads the pack to be the next chairman now that former FTC member Christine Varney has been tapped to work at the Justice department. Mozelle Thompson, a former FTC member and current policy adviser for Facebook, also is a contender for the top position."

After reading the February 3 report in CongressDaily we talked to some of our Washington, D.C. sources who've been helpful in our coverage of the FTC. v. Whole Foods Market, Inc. antitrust case, in which the FTC is attempting to overturn the 2007 friendly acquisition by Whole Foods of Wild Oats' Market, Inc., and they all told us they believed Commissioner Leibowitz was the front-runner for the FTC Chairman slot, something we mentioned in a previous piece in Natural~Specialty Foods Memo (NSFM).

Since February 3 we haven't heard anything different; Leibowitz has remained the odds on choice as chairman by President Obama.

Yesterday, CongressDaily ran this brief report in which it said a member of the Obama Administration confirmed to the publication that current FTC Commissioner Leibowitz is the President's choice to chair the regulatory agency.

We talked to our sources today and they all agree with the CongressDaily report. Two of those sources said they expect the President to announce his choice of Mr. Leibowitz as FTC Chairman as soon as tomorrow, but no later than Friday.

Since Mr. Leibowitz is already an FTC Commissioner he doesn't have to go through a Senate confirmation process like an outside appointment by President Obama would have to. This means he can essentially take over the chair of the FTC as soon as he is named and sworn-in.

As chairman, Mr. Leibowitz would succeed Republican William E. Kovacic, who was named acting chairman last March by President George W. Bush after Deborah Majoras quit as chairman to take a job at consumer products giant Procter & Gamble. Mr. Kovacic will remain an FTC Commissioner, just not chairman.

FTC Commissioners are appointed for a seven year term by a sitting President. They aren't subject to being replaced by a new President as long as they have time remaining in their respective term. However, the new President does get to name the FTC Chairman, which is why President Obama is naming a new FTC chairman, who will most likely be Commissioner Leibowitz.

Although a Democrat, Mr. Leibowitz was named to the FTC in 2004 by Republican President George W. Bush.

Mr. Leibowitz, who is 50, formerly worked for the Motion Picture Association of America and is a former Democratic legal counsel for the Senate Judiciary Antitrust Subcommittee. He also once worked for Wisconsin Senator (Democrat) Herbert Kohl, who is a member of the Kohl's Department store family.

FTC Commissioner, and we believe soon to be chairman, Jon Leibowitz, also has a very close media connection -- his wife is the popular Washington Post newspaper columnist Ruth Marcus.

Leibowitz choice a net positive for settlement talks

President Obama's choice of Commissioner Leibowitz as the likely head of the FTC is positive news for Whole Foods Market, Inc.'s current negotiations with the FTC to reach a settlement deal in the regulatory agency's legal case against the natural grocery chain's 2007 friendly acquisition of Wild Oats Market, Inc..

As an FTC Commissioner Mr. Liebowitz hasn't been nearly as aggressive as the other commissioner's have, particularly two of the four, regarding wanting to completely overturn the acquisition-merger. In fact, it's our analysis that one of the key reasons the FTC has decided to negotiate with Whole Foods, postponing its legal action in the case until March 6, rather than just wait for the April 6 administrative trial it has set to hear and rule on the deal, is because of the fact it's been fairly well-known on the commission and in the nation's capital that Commissioner Leibowitz has been President Obama's leading candidate for the FTC Chairman's position.

Additionally, the FTC currently is short one commissioner. By statute there are five FTC Commissioners. Currently there are only four. That means, in addition to appointing a chairman, President Obama will soon pick a fifth member of the regulatory agency, likely a Democrat. This vacancy, and likely soon to be named new Commissioner, provides an added incentive to reach a settlement deal before the composition of the FTC changes, in our analysis.

In addition to Jon Leibowitz,,the other current FTC Commissioners are: soon to be outgoing Chairman, William E. Kovacic (Republican), Pamela Jones Harbour (Independent), and J. Thomas Rosch (Republican). Each FTC Commissioner serves a seven year term. No more than three of the five FTC Commissioners serving together can be from the same political party.

Commissioner Rosch and Commissioner Kovacic have been the most aggressive members in wanting to overturn the Whole Foods Market, Inc. friendly acquisition of Wild Oats, which is interesting because traditionally Republicans are far less concerned about antitrust issues as they relate to mergers and acquisitions than Democrats are. Commissioner Leibowitz is an antitrust hawk though. But he has seemed all along to be far more willing to work out a settlement deal.

Additionally, the Whole Foods Market, Inc. acquisition of Wild Oats was a small one -- $565 million -- compared to most corporate mergers and acquisitions that come before the FTC, making the FTC's focus on it even more surprising.

Further, since the merger is one in an industry, natural and organic foods retailing, in which a very small percentage of American consumers are affected (eg: only those consumers that buy and natural and organic foods at natural foods stores), the fact the FTC, and particularly its two Republican Commissioners, has so aggressively pursued overturning the deal remains a major mystery to many, including Natural~Specialty Foods Memo (NSFM).

Add to all that the fact Whole Foods Market, Inc.'s value has dropped about 75% since the Wild Oats' acquisition -- it did increase a little over 30% last Wednesday, following the company's release of first quarter financials that beat analysts' estimates (which means its value is now only down by about 45% from 52-weeks ago) -- and the FTC's continued claims that the natural grocery chain is a monopolist in 29 U.S. markets becomes not only more of a mystery but also a mystery wrapped in an enigma.

The FTC argues that a combined Whole Foods-Wild Oats is a monopolist in 29 U.S. markets in what the regulator has termed the "premium natural and organic retailing (PNOS) segment," a segment we've argued since the summer of 2007 that's essentially fiction because it doesn't reflect the reality of how natural and organic food and grocery products are retailed today in the U.S.

Natural and organic foods retailing today in the U.S. is a multi-company, multi-format business. Whole Foods' competitors include fast-growing natural foods class of trade grocery chains like Sunflower Farmers Market, Sprouts Farmers Market, Natural Grocers, Earth Fare, PCC in Washington state, New Seasons Market in Oregon, Henry's Farmers Market (which was bought from Whole Foods in 2007 after the Wild Oats acquisition by Los Angeles-based Smart & Final LLC), along with a number of others. It also includes hundreds of more upscale-oriented independent natural foods stores and co-ops located throughout the U.S.

In addition, Whole Foods greatest competition comes from the numerous supermarket chains and discounters -- Safeway Stores, Kroger Co, Supervalue, Inc. Wal-Mart, Costco, B.J,'s Wholesale, Target, Trader Joe's just to name a few -- that have moved increasingly into the natural and organic products retailing space, along with selling basic food and grocery products in their stores.

And all of these big retailers and many others are moving even deeper into the natural and organic retailing categories.

For example, in a conference call with analysts today during which it reported its quarterly financials, discount store giant Target Inc. announced it is moving into food and grocery retailing in a major way. It plans to remodel most of its Target discount stores, adding more food and grocery items, including fresh foods, and put a merchandising emphasis in its stores on food and groceries, including premium, natural and organic, in a way similar to what Wal-Mart does in its Supercenters.

Along with all this competition, add to the list the scores of big regional supermarket chains -- Wegmans in New York state, Raley's in Northern California, H-E-B in Texas, Public in Florida, United Supermarkets Market Street also in Texas, and dozens of others -- that operate supermarkets that sell massive selections of natural, organic, specialty and premium foods similar to the Whole Foods Market format.

And if this isn't enough competition, there are hundreds of multi and single-store independents throughout the U.S. with upscale stores that compete head-to-head with nearby Whole Foods Market stores. In many cases, the stores of these independents located near Whole Foods Market stores do as much or more in natural and organic product category sales as the Whole Foods' markets do.

The bottom line is: There's no shortage of competition for Whole Foods in any U.S. market. And if there is in a couple or even a few markets, that will change as fast as you can say: "The U.S. food and grocery retailing business is dynamic and every changing."

As an example of this, Target's announced plans today alone will change food retailing in many U.S. markets once the giant discount chain gets things up and running with its planned, new major focus on food and grocery retailing.

The market place, in the form of Whole Foods' competitors, doesn't agree with the FTC either. Just last week Sunflower Farmers Market opened its first store (under the Netflower banner) in Whole Foods Market's stronghold, headquarters city of Austin, Texas. Sunflower is planning a second store in Austin as well.

Sprouts Farmers Market also recently opened a store in Austin. And yesterday it announced it has signed a lease for a second Austin natural foods market.

Another fast-growing natural foods grocery chain, Colorado-based Natural Grocers, also is moving into Austin.

Would these three chains really move into what is arguably Whole Foods strongest market, the Austin, Texas Metropolitan region market, if they believed it held a monopoly in the "premium natural and organic retailing segment," a segment they believe is a fiction just like we do?

Of course they wouldn't. They are doing so because they see Whole Foods, and its format and model, as vulnerable to their more discount-priced natural and organic products retailing models, which is a focus all three of the fast-growing natural foods chains share. Note to the FTC: That's competition. Austin is an example of what scientists call empirical evidence and lawyers call demonstrable evidence. And the same evidence exists in pretty much all of those other 28 U.S. markets.

The naming of FTC Commissioner Leibowitz to head the agency, along with the fact that President Obama will soon name a fifth Commissioner, most likely a Democrat, is serving as an incentive for the FTC to get a settlement deal done with Whole Foods Market, Inc. This isn't so much because of the Whole Foods issue and case itself, although that's a part of it, but rather because with a new chairman the issues focus the FTC is going to change, something Commissioner Leibowitz seems already to be indicating in comments he has been making over the last couple weeks. We don't mean moving away from antitrust, that's the agency's mission, along with consumer protection. What we mean is that each chairman shapes what the FTC focuses on. And Mr. Leibowitz's focus and emphasis will be different than that of the current chairman in many respects.

As a result, its our analysis that the probability of a settlement deal being reached by the FTC and Whole Foods Market in the next few days has, as of today, gone up significantly primarily because the FTC wants to resolve such matters before the new chairman takes over and before the composition of the board changes. The FTC's halt of legal action regarding the merger case ends on March 6, which is just 10 days away.

Retail Memo: The 'Whole Analysis' - Whole Foods Market Inc's First Quarter Financials, FTC v. Whole Foods...The Natural Grocer At Home and Abroad

Whole Foods Market's flagship store and corporate headquarters in Austin, Texas. [Photo Credit: Whole Foods Market, Inc.]

Whole Foods Market, Inc. reported its first quarter fiscal year sales and profits on Wednesday afternoon (February 18), after the financial markets closed. [You can view Whole Foods' detailed financial release at the link here: Whole Foods Market Reports First Quarter Results.]

The good news

Whole Foods' beat stock analysts estimates in terms of its Q1 profits, despite the fact the natural foods grocery chain's profit dropped by 17% during its first quarter, to $32.3 million, compared to $39.1 million for the same quarter last year. Overall Q1 revenue increased by $2.5 billion over last year's first quarter revenue.

As a result of beating analysts estimates, Whole Foods Market, Inc's stock soared by a whopping 34% in trading on Thursday and Friday, following Wednesday's report. That's a much needed boost for Whole Foods' stock since its per-share value had dropped by about 75% (from its 52-week high) prior to Wednesday.

The bad news

In addition to the 17% Q1 net income loss, Whole Foods Market, Inc. experienced for the first time in the company's history a quarterly drop in same-store sales. Sales at stores open for at least one year decreased by 4% in the first quarter. Same-store sales are an important industry indicator of a retailer's performance.

Whole Foods' senior management has found great pride, as it should, in the fact that same-store sales has increased every quarter, until now, for the natural foods grocery chain.

But in the current severe economic recession, it isn't a surprise to Natural~Specialty Foods Memo (NSFM), nor should it be to investors and industry observers, that Whole Foods Market, Inc. experienced the decrease in same-store sales in its first quarter. Having said that, this is something the natural grocer must reverse in the second quarter.

As we've previously reported, Whole Foods Market made a number of cost-cutting moves last summer, including laying off about 100 employees at its corporate headquarters in Austin, Texas, in hope that in the face of reduced sales it could stem its loses. It's likely that without those cost-reductions the natural and organic foods grocer would have shown poorer Q1 results.

During a conference call with analysts on Wednesday, Whole Foods said it has enacted a salary and hiring freeze going forward as a way to further cut costs.

In the conference call, Whole Foods' CEO John Mackey said the company is seeing early signs that increased sales, do largely to more aggressive pricing and promotions by the retailer, may be stemming the same-store sales decrease experienced in the first quarter. Of course, with the recession continuing to get deeper and worse, it's near-impossible what the next couple of months will bring for more upscale, specialty-oriented grocers like Whole Foods Market.

It's our analysis that Whole Foods still likely has some cutting to do because we believe, as do most experts and analysts, that the recession is going to get worse before it gets better, even with the $787 billion economic stimulus package signed by President Obama, and that the remainder of 2009 will see cash-strapped consumers continuing to trade-down in terms of shopping more at discount food retailers, along with spending less money overall on food and groceries because the plain just have less to spend.

We do see some positive signs, based on store visits and interviews and discussions with shoppers, that Whole Foods' new value emphasis, in which it has lowered some prices, is offering better promotions, including coupons, focusing more on basic items, along with featuring less expensive store brands more often, is beginning to bare some sales fruit at store-level.

FTC v. Whole Foods: The FTC-induced bad news

As Natural~Specialty Foods Memo (NSFM) has been reporting on writing about regularly, Whole Foods Market, Inc. continues to battle the U.S. Federal Trade Commission (FTC) over the natural grocery chain's friendly 2007 acquisition of Wild Oats Market, Inc. At present, Whole Foods and the FTC are in negotiations over a possible settlement to the long and protracted FTC legal case against the deal.

The FTC has a halt of further legal proceedings in place until March 6, while the two parties are negotiating a possible settlement.

Should a settlement not be reached by then, the FTC will go forward with its legal challenge to the merger. The regulatory body has an April 6, 2009 date set to begin an Administrative trial in which an FTC Administrative Law Judge will hear arguments from Whole Foods and the FTC on the deal and rule on its outcome, which could include an order to break-up the now nearly-100% merged grocery chains.

Whole Foods Market, Inc. reported Wednesday that it spent a whopping $11 million in the first quarter alone on legal costs related to fighting the FTC challenge to the merger. This $11 million is a significant contributor to the natural and organic grocer's 17% income loss in Q1.

Since it's our argument that the FTC is wrong in its argument and legal case that a combined Whole Foods-Wild Oats represents a monopoly in 29 U.S. markets, in what the regulator calls the "premium natural and organic retailing segment (PNOS),"we strongly suggest this $11 million expense was an unnecessary one for Whole Foods. In fact, were we an investor in Whole Foods Market, Inc., we would protest the FTC's continued legal challenge to the merger to the President and Congress, arguing that doing so by the FTC is a misuse of taxpayer funds.

Because of the serious challenges Whole Foods is facing due in large part to the the bad economy, along with increased competition from other natural foods class of trade retailers, supermarket chains moving increasingly into the natural and organic products space, and discounters like Wal-Mart, Costco, Target, Trader Joe's and others, it could have used that $11 million for promotional and other merchandising purposes rather than having to spend it on legal counsel.

After all, do Whole Foods' first quarter financials look to any reasonable person reading them like the sales and income numbers of a retailer that holds a monopoly in any so called segment of the U.S. food and grocery retailing industry?

We think not. And just because the company's stock soared by 34% on Thursday and Friday, that means very little in the medium-to-long run. Wall Street plays the expectations game. Whole Foods Market's Q1 numbers were much better than many analysts thought they would be. Therefore, the natural and organic grocer's having beat these estimates, the stock soared. Remember, what goes up, particularly in the stock market, also comes down -- and often times nearly as rapidly as it went up. Investors also were looking hard for companies to invest in last week, which helped fuel a flight of cash into Whole Foods' stock.

It's our analysis and opinion that the FTC case against Whole Foods Market, Inc. has actually become an economically punishing one for the company and its shareholders. This at a time when the federal government is spending hundreds of billions of dollars of taxpayer money to keep companies in other industries -- financial services, automobile manufacturing -- alive.

General Motors is now asking Congress and President Obama for another $21 million and Chrysler, which is majority-owned by the Cerebus private equity firm (about 80% ownership) is asking for an additional $5 billion.

Meanwhile, an agency of this very same government, the FTC, is prosecuting a legal battle against Whole Foods Market, Inc. that cost the retailer and its investors $11 million in the first quarter, millions more before that, and possibly million more in the next couple months unless a settlement is reached with the FTC.

This is just wrong. The FTC argument is folly, in our analysis. And at a time when the federal government is bailing out a host of companies, it is doubly-wrong that the FTC is pursuing a course of action that is significantly contributing to severe struggles by Whole Foods Market, Inc., as well as costing its investors money.

There is some indication our argument, and those of others, has sunk into the heads of some of the FTC Commissioners -- and we hope it has -- which could be one of the reasons they've decided to work towards a settlement agreement with Whole Foods.

The 'whole' conference call

There were a number of other announcements and points of information of interest during the analysts' conference call with Whole Foods on Wednesday. Below is a summary of those key points of interest as stated in the conference call by the company's senior executives:

~"Although transaction count and basket count are still down, the decline in transaction count has improved slightly. While it is obviously still too early to say our sales are stabilizing, we (Whole Foods) are encouraged by these trends."

~"Competition continues to be a factor as retailers fight over fewer food dollars being spent. Cannibalization also remains a factor, but to a lesser degree."

~"Whole Foods Market private label SKU count increased 11% year-over-year, accounting for 22% of our total grocery and Whole Body sales."

~"We (Whole Foods) plan to roll out a 5-Step Animal Welfare Rating system beginning in our United States stores later this year."

~"We (Whole Foods) reduced our planned new store openings by 50% for fiscal year 2009 to 15 from a prior range of 25 to 30. We terminated 11 leases in development, totaling approximately 570,000 sq ft, and down-sized nine leases by an average of 10,000 sq ft each."

~"We (Whole Foods) spent a lot of time in Q1 really focusing on values especially in produce, meat and seafood. And we've seen a lot of very good reaction to our promotions that we've done in those areas."

~"We (Whole Foods) believe the long-term growth and return potential in the United Kingdom is much greater than Canada, and we're taking some proactive steps to improve our operations there."

Whole Foods United Kingdom

This last point about Whole Foods Market's favoring the long-term growth and return potential in the United Kingdom over that in Canada (those are the only two international markets the company operates in outside the U.S.) is extremely interesting.

During the conference call Whole Foods' said it is breaking up its UK stores into separate geographical regions, similar to what it does in the U.S. That shouldn't be too hard a task at present since all of its UK stores are located in London, England.

Whole Foods Market, Inc. currently operates five stores in the UK, all in London, England, as mentioned above. Only one of the five stores, its nearly 80,000 square foot natural-organic and premium food emporium in the huge The Barkers Building on 63-97 Kensington High Street in London, has operated under the Whole Foods banner since it was opened, which was in 2007. The other four London stores have operated under the Fresh & Wild banner. Fresh & Wild was a small, UK-based natural products chain Whole Foods Market, Inc. acquired a few years ago.

Whole Foods is in the process of changing the name of the remaining Fresh & Wild banner stores to its Whole Foods banner, so that all of its UK (read just London for now) stores operate under the same banner -- Whole Foods. The rebranding is set to be completed by the end of this month. [You can view a list of Whole Foods' UK-London stores here.]

The nearly 80,000 square foot Kensington High Street Whole Foods banner store the retailer opened about two years ago has been a struggle for the natural grocery chain. During its first year of operation, 2007, the aisles of the huge market were almost always empty. However, beginning towards about the end of the first quarter in 2008, business started to pick up considerably at the market, after Whole Foods made a number of changes to the store, along with initiating more aggressive promotions and other merchandising and marketing initiatives.

But beginning in about October of last year, business dropped at the upscale store, as it began doing at most all of Britain's premium and natural foods-focused food stores because of the financial-credit crisis and deepening of the global economic recession. The struggle in the down UK economy continues for the Kensington High Street Whole Foods, as it does for other natural grocers and upscale UK supermarket chains like Waitrose and Marks & Spencer.

Like in the U.S. at present, British consumers are flocking to discount stores where they can save money on their food and grocery purchases. The fastest-growing food retailer in the UK in terms of sales and market share growth over the last year has been Aldi-UK, the British division of the global small-format, hard-discount Aldi International chain, which is based in Germany.

Aldi's U.S. division, Aldi USA, which operates almost 1,000 small-format, hard-discount stores in the U.S., also has seen a dramatic increase in business during the recession. It's growing fast and plans to open 100 new stores in the U.S. this year, including moving into the new markets of New York and Texas, where Whole Foods market is based. Aldi USA also moved into Florida for the first time in late 2008.

Aldi-UK is increasingly (more so than Aldi USA) offering natural, organic, specialty and premium food and grocery products in its UK stores, in most cases under one or more of its various store brands. These items sell for 15% -to- 30% less everyday than comparable items at UK natural foods stores and upscale supermarkets like Waitrose. As a result, Aldi-UK is taking some share away from these format stores in the natural and specialty categories just like it's taking share away from leading UK supermarket chain Tesco in the basic food and grocery segment.

During the Wednesday conference call, Whole Foods Market, Inc. CEO John Mackey said the natural foods chain has determined that the nearly 80,000 square-foot Kensington High Street Whole Foods store is just plain too big, which he said is the primary reason for its struggles in the UK. Mr. Mackey announced that going forward, any new Whole Foods stores opened in the UK would be in the 20,000 square foot range, which by UK standards is still a good-sized food store.

Natural~Specialty Foods Memo (NSFM) reported and detailed last year in this March 4, 2008 piece [Retail Memo: Whole Foods Market to Dramatically Expand in the United Kingdom; Will Open Up To 30 New Stores in the U.S. in Fiscal 2009] how at the time Whole Foods Market was aggressively looking for new store sites in the UK, particularly in and around London. Those store locations-sites were closer to the nearly-80,000 square-foot size rather than the 20,000 square foot model the natural grocer now says it will follow in the UK. (Note to the March, 2008 linked piece. As we've reported since, Whole Foods Market reduced the number of planned new stores to about 15 for this year. Another cost-cutting move.)

But Whole Foods' aggressive search for new store locations in the UK has cooled dramatically in the current recessionary climate. As far as we are aware, the natural-organic grocer has no new UK store openings planned for 2009.

Further, we aren't sure a UK growth strategy, even long-term, is a good one for Whole Foods. The UK, particularly Britain, and especially England, is a very retailer brand loyal market. For example, just four grocery chains -- Tesco, Wal-Mart-owned Asda, Sainsbury's and Morrisons -- control a whopping 73%-75% of the total food and grocery sales market share.

If you add in the Cooperative Group chain, which last year acquired the Somerfield supermarket chain, making the Co-op the UK's fifth-largest grocer after number four Morrisons (Tesco is number one, Asda number two, Sainsbury's number three), the five chains control about 82% of all grocery sales in the country. All also sell plenty of natural, organic and specialty-premium food products.

There is room for niche players, such as upscale Waitrose and Marks & Spencer, which combined control about 9% of the remaining 18% of share in the nation -- that leaves about 9% for everybody else, and about half of that 18% is controlled by the UK hard-discount grocers Aldi, Lidl, Iceland and Netto -- but it's a tiny niche. And, there are numerous UK-based natural products retailers, such as Boots and others, filling a big part of that tiny niche.

Whole Foods could make it in the UK -- but not without spending a considerable amount of money on marketing and advertising, in our analysis. And the retailer needs to do a much better job of adapting to the British style of food retailing to do so. However, in its quarterly financial report, Whole Foods said its UK operations were a major contributor to the company's overall income loss, which isn't a good sign going forward right now.

And even if Whole Foods can do well in the UK down the road, one has to ask at what level? In other words, can the UK really contribute a significant amount of sales and profits to Whole Foods Market, Inc. over the next five, or even ten years, to make it worth the effort? The jury of course is out on that -- but we think it is something worth looking at closely by Whole Foods in its strategic planning process.

Whole Foods Canada

Last month we heard a rumor that Whole Foods Market, Inc. could be considering selling its stores in Canada, assuming of course it could find a buyer in the current frozen credit market. We have been unable to substantiate such rumors to date.

The conference call comments by CEO John Mackey -- that the UK holds far more long term promise for the natural foods grocery chain than Canada does -- are interesting ones though in light of those rumors.

The reason this is interesting -- and it is based on deductive reasoning and not source information -- is because Whole Foods has historically been a growth-based retailer in all of its markets. Therefore if it believes Canada holds minimal long-term growth potential then selling the stores there might make good sense. The natural-organic grocer could then use the cash from such a sale to grow the business in the UK and for other purposes.

Whole Foods Market, Inc. currently operates six stores in Canada. Four of the stores are located in Vancouver, British Columbia. The other two stores are in Ontario; one in Toronto and the other in Oakville. [Click here for a list of the Canada stores.]

With only six stores in the entire country of Canada, and in only two market regions (Vancouver and Ontario) to boot, Whole Foods' really can't make much of an impact in the country at present. And, based on the conference call comments, it doesn't sound like any additional stores are planned in Canada in the near or even medium-to-long term. Therefore, selling the stores starts to make even better sense.

One likely candidate, should Whole Foods decide to sell its stores in Canada, would be Canadian natural products retailer Planet Organic, Inc. Planet Organic has been growing fiarly rapidly in Canada and even entered U.S. natural foods retailing in 2008 when it acquired the Mrs. Green's chain of 11 natural foods stores based in upstate New York.

However, Planet Organic had to back out of a deal to acquire Santa Cruz, California-based New Leaf Natural Markets last year because it couldn't raise the about $15 million needed to do the deal. Planet Organic had floated a new stock offering on the Vancouver stock exchange for about that amount, which it was planning to use to make the acquisition, but decided to pull the offer because of the financial-credit crisis and the related drying up of investment capital, after it determined there wasn't an investor appetite for the new offering by the company.

But, since the Whole Foods stores are right in Planet Organic's backyard -- it just might be better able to find the money should the Austin, Texas-based natural foods grocery chain decide to unload its stores in British Columbia and Ontario, Canada.

FTC v. Whole Foods settlement deal

Meanwhile, Whole Foods Market, Inc. needs to come to a settlement agreement with the FTC so that it can get back to focusing on what it does best, merchandising and selling natural, organic and premium food and grocery products, rather than fighting legal battles. It also needs to reach a settlement, assuming one that's not to devistating to its acquisition of Wild oats, so that it can stop burning cash paying for legal fees related to the legal case.

We say this, that a settlement deal needs to be reached between Whole Foods and the FTC, despite the fact we believe the FTC's case is pure folly.

At this point though, reaching a decent settlement deal is far better for Whole Foods Market, Inc. than continuing to have to fight the FTC in court, the end result of which could be a break-up of the now combined Whole Foods-Wild Oats, which at this point in Whole Foods Market, Inc.'s nearly 100% integration of Wild Oats could be a very costly process and end result.

Independent Grocer Memo: Northern California Independent Ben Lomond Market Creates Job For 90-Year Old Man Scammed Out of $738,000 By Bernie Maddoff

From near-millionaire to $10 an hour, 30 hour per-week grocery store greeter: Ian Thiermann, who's motto is "You do what you have to do," at work in the Ben Lomond Market in Ben Lomond, California. [Photo Credit: KPIX Channel 5, San Francisco.]

Independent Food & Grocery Retailing USA - Independent Spirit

Ian Thiermann, a 90-year old retired businessman from Ben Lomond, California, a small town near the city of Santa Cruz on Northern California's coast, says he lost his entire life savings, $738,000, to the Wall Street financier and Ponzi Scheme crook Bernard Maddoff. The $738,000 was what Mr. Thiermann had saved and invested throughout his working life for his retirement.

As a result of losing it all, Ian Theirmann decided the only think he could do was to return to work at age 90, he told San Francisco-based KPIX, Channel 5 television for a recent report the station did about the Ben Lomond resident.

However, with the current job availability situation so poor, along with the fact he is 90-years of age, Ian Thiermann wasn't completely confident he could find a job in the small, coastal Northern California city where he lives.

But a local independent grocer, Ben Lomond Market, heard about Mr. Thiermann's plight and offered him a 30 hour a week job at $10 an hour as the store customer greeter, a position they created especially for the energetic and sociable 90-year old."This is not a woe is me kind of man.

This is a community coming together and helping each other out in times of need," Barbara Loffer of Ben Lomond Market told KPIX.In explaining his plight and decision to return to the work force as the official customer greeter at Ben Lomond Market, Ian Thiermann told KPIX reporter Kiet Do: "You meet a situation like this, what are you gonna do, fold up? Instead of crying, yelling or being mad about it, face it and move on."

That simple sentence and overall attitude from Mr. Thiermann, a man who at age 90 lost every cent he had saved throughout his working life and as a result did what he had to, which is to go back at work, is something we should all keep in mind as we struggle in the current bad economy.

Times are tough without a doubt -- but like Ian Thiermann, who was born in 1919 and has lived through wars and the Great Depression -- and survived -- says: "You meet a situation like this, what are you gonna do, fold up? Instead of crying, yelling or being mad about it, face it and move on."

That's a motto, and attitude, we all should follow. It's also the attitude that will get the country out of the current economic recession and malaise.[

[You can read the report from KPIX Channel 5 here.]

[You can view video of Ian Thiermann at the Ben Lomond Market at the link below: http://cosmos.bcst.yahoo.com/up/player/popup/?rn=3906861&cl=12126414&ch=4226713]

Independent grocer Ben Lomond Market demonstrates what we often say about America's independent grocers -- that they survive and thrive in the U.S. food and grocery retailing sector in large part because they focus on being an integral part of the communities where they operate their stores. They focus on the local -- local customers, products and issues. We call that the independent (grocer) spirit.

The independent supermarket, which in addition to selling basic food and grocery products specializes in merchandising lots of specialty, natural and organic food and grocery items, along with high-quality fresh, prepared foods, also demonstrates that the community focus we describe and write about America's independent grocers extends far beyond only selling groceries -- it's all about community and neighborhood in most cases. And that generally translates into increased business.

We wish Mr. Thiermann all the best in his new job. And we think he will be a great asset to the market, its owners, and its customers.

Marketing Memo: Global Food & Grocery Company-Brand Marketer CEO's Speaking Out Much More During These Bad Economic Times; Have Your Noticed?

The big, global food, grocery and consumer packaged goods companies and brand marketers are fairing better than similar global companies in other business sectors in the current recession and financial-credit crisis. In part this is because people do have to eat. But it's also because such companies have tended to follow business fundamentals much better than say global financial service firms, the auto industry and a few other sectors. Such fundamentals include not building up too much debt and, most importantly, focusing on being consumer-centric marketers, something the U.S. auto industry has failed to do, for example, but something most big consumer food and grocery companies-brand marketers focus on closely and do well at.

And although people have to eat, they don't have to buy (and eat) your brands, even if you are Nestle, Kraft, or Campbell Soup. Of course having the huge brand portfolios these three global consumer packaged goods marketers do have -- in categories ranging from the most basic food and grocery items on up to niche natural, organic and specialty brands, as well as being the global market leaders in most of those food, grocery and beverage categories -- does help.

And in this serious global recession, which finds consumers trading down and looking for the best price they can find for food and grocery products, even these big food marketers are having to adapt -- searching for ways to lower their cost of goods, reducing expenses, and spending more money on things like price promotion.

We've also noticed another way the CEO's of these big, global food and grocery companies have been dealing with the global recession of late is that they are speaking out much more in to the media (especially the financial press) about what they and the companies they lead are doing to maintain and increase sales and profits in these difficult economic times. We been noticing a significant increase in interviews and the like from food and grocery company CEO's in the last couple months. And not just before earnings report time.

And it's no secret that the big consumer packaged goods marketers are communicating more so because the companies they lead are publicly traded ones. In this economic climate (check the stock market this week), communicating what a company is doing to the stock analysts who follow the companies and the investors, both institutional and individual, who invest in them is paramount -- particularly in relation to what initiatives these CEO's and their teams are taking to keep the company growing during the recession, along with the cost-cutting measures that are being made. Wall Street loves cost-cutting almost as much as it does sales and profit growth.

Communicating more frequently in these bad economic times also is important for these global food and grocery companies in terms of speaking to the food and grocery retailing trade. Grocers and other format retailers are increasing their store brand portfolios -- and devoting more shelf space, shelf space often previously devoted to manufacturers' brands -- as a way to offer lower prices overall in their stores to shoppers. And shoppers are buying more private label brands in-turn in order to save on their grocery bills. Every time a consumer buys a store brand that means a lost sale for a manufacturers' brand -- be it canned milk or pet food (Nestle), canned or packaged soup (Campbell Soup), or salad dressing and marshmallows (Kraft).

These big, global consumer packaged goods marketers therefore want the trade to know about the initiatives they are undertaking to create more value for their brands, even though the respective company sales forces or broker reps communicate such messages one-on-one to the retail buyers.

By speaking out more frequently -- as the CEO's of Nestle, Kraft and Campbell have been doing of late -- they can reach the top of the food retailing chain, CEO's, senior executives, ect. -- as well as consumers. It's part of a multi-communications paradigm. But those stock analysts and investors are at the top of the multi-audience pyramid.

Below are three features from today about each of these major global food and grocery companies -- Nestle, Kraft and Campbell Soup.

~Nestle. Forbes.com: Nestle Feels Confident About 2009.
~Campbell Soup. Rueters: Campbell ready to shop.
~Kraft. PBS-Nightly Biz Report: Kraft CEO talks recession strategies.

A few comments. First, notice that basically all three of these leading global consumer packaged goods companies are planning to grow despite (or perhaps because of) the recession. Second, notice the stress on value -- not just price but value. That's major adaptation from just over a year ago, when value wasn't a real hot button in consumer packaged goods marketing -- or for that matter with consumers. As that old saying goes: "What a difference a year makes." Particularly when the bottom falls out of the credit markets and major world economies.

Third, notice the focus on markets other than the U.S. It's a big world out there. Many people, such as the Chinese, have yet to become big buyers and consumers of Campbell's Chicken Noodle Soup or Kraft Salad Dressing. Imagine the sales growth if they do? Lastly, when reading the three pieces, think about the various audiences the food and grocery marketers are trying to reach -- and why. Doing so makes the reading much more interesting, particularly from a marketing perspective.

Food Retailing, Society & Economics Memo: UK E-Commerce Salvage Grocer 'Approved Food' Sees Sales Boom As Shoppers Favor Saving Cash Over Code Dates

Food & Grocery Retailing in the Global Recession

The United Kingdom's (UK) "Approved Food & Drink" is an online, e-commerce grocery store and home delivery service with a unique twist. That unique twist is that unlike the e-commerce shopping and delivery operations of leading UK food retailers such as Tesco, Wal-Mart-owned Asda or the online-only grocery and delivery service Ocado, at which consumers order the same types of food and grocery products featured in supermarkets and then receive home delivery, "Approved Food & Drink" specializes strictly in closeout items and non-perishable food, grocery and beverage products that are either near or recently past the products' "best buy" code dates.

The online salvage grocer offers food and grocery products ranging from major global brands like Nestle, Heinz, Coca-Cola and Pepsi, to natural, organic, specialty and gourmet products, including iconic British specialty brands like Walkers, Marmite, Bovril and most others. "Approved Food," as it is called for short, offers the items at about 20% -to- 60% less than non-salvage items offered in UK supermarkets.

"Approved Food & Drink" is similar to what are commonly referred to in the United States as salvage grocers or close-out supermarkets -- accept it is an online operation, as well as the sister to a brick-and-mortar operation. These U.S. salvage grocers are brick-and-mortar retailers, such as the California-based Grocery Outlet chain and others like it, along with numerous independents located throughout the county, that specialize in selling "short-coded" goods, as well as manufacturer's overstocks and products with slightly blemished or mislabeled packaging. They sometimes are referred to as "Scratch & Dent" grocers.

The code-busting online salvage grocery store sells overstocks and blemished food and grocery products as well. But is specializes in the "short coded" and even past-"best buy" code date products.

Most salvage brick-and-mortar grocers in the U.S. don't sell food and grocery products that are past the "best buy" code dates, generally pulling any of the expired goods from the shelves and displays once they are past the date on the package. [We aren't aware of an online salvage grocer in the U.S. comparable to the UK's "Approved Food & Drink." If you are, let us know.]

The UK's "Approved Food" actually has an affiliation with a British version of a brick-and-mortar salvage grocer. The e-commerce grocer is the online division of Crag's Cash & Carry, a UK brick-and-mortar food and grocery wholesaler and retailer of salvage groceries and near and past-"best buy" code date expired goods. [You can learn more about Crags's Cash & Carry at its Web site here. You can learn more about "Approved Food & Drink's" philosophy at its e-commerce site here.]

Differing industry practices, differing social norms

Natural~Specialty Foods Memo (NSFM) readers not familiar with the norms and practices of food and grocery retailing in the UK might find the notion of an e-commerce grocer specializing in the selling of goods near, and particularly past the "best buy" package code dates bizarre.

However, the practice of marking down both fresh and shelf-stable packaged foods on a daily basis is a common one among UK supermarkets. Fresh foods like meats, produce and baked goods get marked down each day in UK food stores, often by as much as 50%. The same is the case with non--perishable, packaged food and grocery products. As the packaged goods items near their "best buy" code date, the grocers mark them down as a way to sell them and "salvage" some economic value on the items, as a regular practice.

In the U.S. supermarkets do some mark downs, particularly on fresh category items like meats, bakery and produce. But it's generally done on an ad-hoc and store-by-store (and even store department-by-department) basis rather than as a common industry practice, as it is in the UK. Some U.S. supermarkets also mark down shelf-stable grocery items, but generally only when a particular items is being discontinued, and often not even then.

The practice of marking down non-perishable packaged goods by U.S. supermarkets as a matter of policy is nearly non-existent. Instead, such items, as well as most all perishable products, are donated to food banks or food pantries (or thrown away) when they near their "best buy" expiration code dates rather then being marked-down. Some U.S. chains even have a company policy against stores doing any product markdowns at all.

Part of the reason the U.S. supermarket industry doesn't do markdowns on a systematic basis, as is the case in the UK, has to do with U.S. food safety laws. Retailers in the U.S. generally fear lawsuits if they sell food and grocery items that are close to or near the package expiration date.

Another reason has to do with the cost of labor. U.S. supermarket chains, many of which are unionized and pay a premium hourly wage, generally don't believe the benefit of having store employees devote time (and the company's money) to marking down products pays off in terms of the reduced profits and outright loss of profit that the sales of such products bring, particularly once the labor cost is factored in. As such, they prefer to donate the goods to food banks right from the start.

Additionally, most U.S. consumers, unlike most UK consumers, have a less liberal attitude towards buying goods near their expiration date, and an even stronger attitude against purchasing those past the expiration date. Although in the current recession that is changing as business at U.S. salvage grocers, those that sell near expired code date goods as well as the closeouts, is up considerably, as shoppers search for bargains.

So there are cultural differences between UK and U.S. consumers that account in part for the differences in the two countries regarding the practice of supermarket industry mark-downs. We think in the UK the severe food shortages the nation experienced for many years during two World Wars accounts in large part for the mark-down system in that country -- the concept that wasting food is culturally (and economically) wrong.

The U.S. also suffered some food shortages and had rationing during World War II, for example, but it wasn't as near-severe as what the UK experienced.

We think the two allied nations came out of that experience with different points of view. Two generations of UK consumers (post World War I and World War II) came out of the war experience stressing the relative importance of not wasting food, hence in part the adoption by the UK supermarket industry of the mark-down system, focused as the nation was on the severe shortages of food over a long period of time.

In contrast, the U.S. came out of the war experiences with an attitude of abundance, that the country would produce more food than it needed, which it has, and that food waste was a part of that abundance rather than something to be concerned with in an serious way. As a result, the concept of daily markdowns never caught on within the mainstream U.S. supermarket industry.

An additional reason for this cultural and industry difference we believe is the simple fact that the U.S. grows and produces so much food. It need not import any food if it chose as a matter of policy not to. On the other hand, although the UK produces a great amount of food for such a geographically small nation, it isn't able to be a self-producing nation like the U.S. is under current demand conditions.

None of this is to suggest food isn't wasted in the UK, as it is in the U.S. According to statistics publish by the British government, it's estimated that UK consumers throw away about 4.1 tons of food each year after they purchase it at the supermarket. That's lots of food waste for the population of the UK. What we are saying is that food and grocery items go through a formal, industry-wide step in the UK, the markdown process at the supermarket, that doesn't systematically occur at U.S. supermarkets and other food stores.

There is one exception to this rule though. UK-based Tesco, which operates about 111 small-format Fresh & Easy Neighborhood Market grocery and fresh foods stores in Southern California, Nevada and Arizona in the Western U.S., has brought the UK supermarket industry's "mark-down" process with it across the pond to America.

As part of the retailer's policy, Fresh & Easy store employees mark down near-expired fresh foods -- bakery, produce, meat, prepared foods -- each day, reducing the retail prices from about 20% -to- 50%, depending on how close to its expiration date the product is and how fast they want to move it. The stores regularly do the same thing with shelf-stable food and grocery products nearing their expiration dates. We haven't seen the Fresh & Easy stores selling any items that are past their "best buy" dates however.

Business appears to be booming at 'Approved Food'

The brief explanation of the markdown process and practice in the UK supermarket industry better helps explain the "Approved Foods'" business model, we think. We also think it demonstrates the model's potential to do well, particularly in bad economic times like the present.

The e-commerce, home delivery-based salvage grocery store was doing a steady but not earth shattering business until about September-October of 2008, when the financial-credit crisis and economic recession began to get severe in the UK, as it did in the U.S. and elsewhere throughout the world.

Along about that time the volume of orders to the Web site started to pick-up considerably. "Approved Food & Drink" says it's experienced an about ten-fold increase in business since September-October, 2008. And over the last few months that volume has kicked-up even higher. So much so in fact that on February 4 the online salvage grocer put a notice on the front page of its Web site in red font saying this:

Important information:

Due to the large number of orders that we continue to receive, there is a temporary backlog of about a week.

For those who plan to place an order with us we would like you to be aware of this delay for the time being.

The store is open daily for local customers who may wish to shop in person.

We ask for you to continue to be patient over this period whilst we work around the clock, literally, to ensure orders are sent out to you ASAP.

Thank you all for your support, especially Martin Lewis and all the Money Saving Experts at www.moneysavingexpert.com

Please visit Approved Foods again and feel free to register for our newsletter.

Regards
The Approved Food Team

[Click here to view the Web site front page.]

The e-commerce-based salvage grocer also has been so busy of late it has at times closed down for a day or two in order to catch up on its back orders, pulling workers from various parts of the operation to help fill the customer order backlog.

Additionally, "Approved Food" has recently put a notice on its Web site to UK-based food and grocery suppliers and supermarkets, letting them know it's looking to buy large quantities of closeout products as well as food and grocery items with short expiration "best buy" code dates.

In the UK, as in the U.S., the code dates don't mean the product has spoiled. Rather the dates mean just what they say -- that the product is "best" if purchased by that date. That's the legal definition in both countries.

Food retailing, economics and society

How people obtain their food and where they shop for it is a psychological, anthropological and social phenomenon as well as an economic one. But economics is arguably the most significant determinant of how and where most consumers get and buy the food they eat in bad economic times like the present. This is a cross-cultural and cross-societal phenomenon as well.

For example, in both the U.S. and UK the sales of fruit and vegetable seeds and plants are up considerably over about the last six months to a year. Numerous retailers are reporting sales of the fruit and veggie seeds and seedlings at the highest levels they've ever seen. Increasing numbers of consumers are taking to home gardening as a way to grow some of their own food and thus save money.

At retail, there's a significant shift going on from consumers shopping at higher-end and mid-range supermarkets, to discount food retailers.

In the U.S., chains like discounter Wal-Mart and Aldi USA (the U.S. division of Germany-based Aldi International) are doing well, for example. In terms of growth, both chains recently announced plans to open numerous new stores this year, and are even pushing into new market regions, while numerous higher-end and mid-range supermarket chains are struggling, postponing new store openings, in some cases closing stores, and even in a couple instances beginning to layoff employees. One of those examples is the privately-held Bashas chain in Arizona. Bashas, which operates about 159 supermarkets in Arizona, laid off 300 employees, or about 3% of its total workforce, last week, saying in a company statement that it had to do so because of the economic recession and increased competition in the Arizona market.

Wal-Mart said this week in a statement it plans to open about 125-145 new stores at home in the U.S. in 2009. The global retailer just acquired a food and grocery chain in Chile, is expanding its Asda chain in the UK, and is pushing into Russia, as well as growing its joint-venture retail operations in India, among other growth plans plans.

Germany-based Aldi International announced recently it plans to open about 100 new stores this year (on top of the about 1,000 it currently operates) in the U.S., and nearly that many new stores in the UK in 2009. Aldi USA also is moving into New York and Texas this year, two brand new markets for the small-format, hard-discount grocery chain. Aldi USA entered the Florida market for the first time in late 2008, as well.

The same is the case in the UK. Hard-discounters Aldi-UK and Lidl (also a German small-format, hard-discount grocery chain) are picking up market share largely at the expense of British chains like Tesco, Waitrose, Marks & Spencer and Sainsbury's. Wal-Mart's discount-focused Asda supermarket chain also is picking up share in the UK in the recession as it cut and continues to cut prices considerably.

Further, the use of manufacturers "cents off" coupons is at about an all-time high in usage among consumers in the U.S. and the UK, which is another indicator of how shoppers are striving to save even pennies at the supermarket in these tough economic times.

In the away-from-home eating space, global fast food chain MacDonald's is having one of its best years in recent times due largely to its low-price model, and recently announced it plans to open about 1,000 new stores globally this year. Meanwhile, higher-end and even mid-range restaurants are struggling as consumers throughout the world have cut back on meals eaten away from home.

It's in this recessionary socio-economic environment in which the UK's "Approved Food & Drink" is finding its business of selling salvage groceries, including those items with near-expired and even expired "best buy" dates, apparently booming.

It's all part of a new trend we've been observing among consumers that we call the "new frugality." It's a new frugality created primarily out of need (economic) rather than out of desire or choice. But it's a reality, despite the primary motivating cause. And from a historical perspective it isn't anything new. It's just new in the era of consumption.

It's also our analysis and view that this "new frugality" could last long after the recession ends because in prolonged periods of economic struggle like this one looks to be such new behavior patterns like frugality and searching out discounts tend to take stronger hold in terms of consumer behavior.

This changing consumer behavior is currently reshaping food and grocery retailing in numerous ways. The majority of those ways have to do with retailers of all formats having to more strongly and aggressively compete against one another other for fewer food dollars and among more tight-fisted shoppers, and as a result having to lowering prices, offer stronger promotions, and cut expenses to the bone.

Meanwhile, alternative format retailers like UK e-commerce salvage grocer "Approved Food & Drink," and the numerous brick-and-mortar salvage grocers in the U.S., are taking a greater piece of that food dollar pie as consumers seek out stores (and e-commerce grocers) where they can get more for their money (perceived or real) -- even if the food and grocery products happen to have nearly-expired or expired "best buy" code dates. And this phenomenon in turn adds an additional element to the ongoing reshaping of food and grocery retailing in these recessionary times.

Food, Society & Economics Memo USA: Numerous Provisions of the Government's $790 Billion Economic Stimulus Package Good For Grocers and Food-Makers

Numerous provisions in the massive $790 billion comprehensive economic stimulus package approved by a U.S. House-Senate Conference Committee and set to become law possibly as soon as tomorrow, offer significant sales-growth potential for the U.S. food and grocery industry -- retailers, food-makers and marketers. Many of the package's provisions also provide much needed help for American consumers.

It's not by any means a perfect package -- but it could be the nation's best hope right now. And if it builds some real business and consumer confidence, something that's most-lacking in the U.S. economy right now, that accomplishment in and of itself will go a long way towards making the package a successful piece of legislation.

But after all is said about which provisions of the stimulus package help which business sectors -- which we say below in terms of the food and grocery industry -- the most important thing to say is that we are all in this together. United we succeed, overly divided we fail.

It's apt that today we celebrate the real birthday of perhaps America's greatest President -- Abraham Lincoln -- the great unifier. Lincoln staked his Presidency and the country's future on what to him was a crystal clear premise and certain in his soul article of faith -- that America's best hope for the future was as a united nation -- not a confederacy or as a series of blue and red states, as President Obama likes to say, but as a "United States."

President Obama echoed Lincoln, the President he takes as his role model, in his speech today at the annual Lincoln Day event in Illinois. Both Presidents -- both from Illinois -- are right in having that crystal clear premise and certain article of faith that America's last best hope has and always is when her citizens are united. Let's not foget that in these bad economic times, especially.

The $790 billion economic stimulus package agreed upon by a conference committee of the U.S. House of Represenatives and U.S. Senate yesterday -- and which will be voted on and passed by the House today and is set to be voted on and most likely passed by the Senate tomorrow -- includes as one of its provisions a 14% increase in the amount of food stamps the U.S. Department of Agriculture (USDA) will distribute to the millions of Americans who are receiving the food assistance vouchers (food stamps actually come in the form of an EBT debit card these days) in this recessionary (or depression, you choose) economy.

The House-Senate bill allocates $20 billion out of the $790 billion package to increase the food stamp benefits by the 14% for the rest of this year. This is money that will go right into the economy as fast as it is received by food stamp users.

A 14% increase may not sound like much (or perhaps to some too much) but for consumers who are say surviving on say $300 a month in food stamps, that added $42 (14% increase) a month in benefits can go a long way in stretching what is an already very thin food budget.

The 14% increase in food stamp benefits also is good news for America's food and grocery retailers, as well as food manufacturing companies.

By there very nature food stamps can only be used to by food and grocery products, and there are limitations on certain things people can purchase using the stamps, such as alcoholic beverages, tobacco products and a few other products. As a result, consumers spend the food stamps at supermarkets, natural foods stores and other food and grocery format stores almost exclusively, which means added sales for grocers. And because it is food and grocery products in which the extra 14% ($20 billion extra) will be spent on, that offers some very significant added sales for manufacturers and marketers of consumer packaged goods as well.

Additionally, there is no saving of food stamps by users. They spend them as soon as they get them. This is the point of including them in the economic stimulus package -- along with doing so because the human need is so great -- because they are spent as soon as obtained, thereby hopefully provided a cash stimulus to the dead economy.

According to recent figures released by the USDA, there are currently about 31 million Americans, about 10 percent of the total population, (and growing) who need food stamps in order to be able to put food on the table each month.

And with about 1.7 million American workers having been laid off from their jobs from just November, 2008 -to- January, 2009, and likely another 500,000 -to- 7000,000 for February, applications for food stamp assistance are flooding USDA offices, according to the agency. Many Americans are receiving food stamps for the very first time in their lives at present, in large part because in this serious economic downturn it's becoming increasingly likely that both household bread winners in a family are losing their jobs, where as in more recent passed recessions that didn't happen to the degree it is happening now.

CNN newsman launches a food stamp survival experiment

As a way of offering readers a flavor for what it's like to reley on food stamps in order to put food on the table in these bad economic times, CNN's Sean Caleb, who appears on the cable news network's "American Morning" morning news program, has launched an experiment in which he is using the current government allocated amount of food stamps as his only source of food and grocery purchases for a month.

CNN's Caleb is then chronicling his food stamp experiment in his Blog -- Blog: Living On Food Stamps -- at the CNN Website. He has learned much about what it is like to have to get by with just food stamps so far in his month long experiement and is sharing his self-insights in posts on the Blog. Of course, at the end of his one month experiment newsman Sean Caleb gets to go back to using the fine salary provided him by CNN to purchase his food with -- assuming he keeps his job. None of us are immune from losing our jobs in this economy, except perhaps CNN's iron horse of interviewers and network cash cow Larry King.

[You can read Sean Caleb's Blog posts about his life living on food stamps so far at his CNN Blog here.]

Food retailer and food-maker stimulation

The $790 billion economic stimulus bill, which could land on President Obama's desk for his signature as soon as tomorrow, contains a number of other provisions in it that should benefit America's food and grocery retailers, and food and grocery product manufacturers and marketers.

These provisions of the package are the most direct cash-oriented benefits and most immediate tangible ones to consumers, that also it is hoped will begin providing some immediate stimulus to the overall economy shortly after they are distributed.

The provisions of the $790 billion House-Senate economic stimulus package pushed by President Obama we think will benefit the food and grocery industry the most, and the most rapidly, are:

1. AID TO POOR AND UNEMPLOYED
$40 billion to provide extended unemployment benefits through Dec. 31, and increase them by $25 a week; $20 billion to increase food stamp benefits by 14 percent; $4 billion for job training; $3 billion in temporary welfare payments.

The extended unemployment benefits (and $25 a week increase), food stamp increase and $3 billion in temporary welfare payments are likely to provide the biggest and most immediate benefits to food and grocery retailers and food makers. The reason is because people on unemployment, food stamps and welfare spend pretty much every cent they get right away on basic needs like food and groceries. The fact consumers in all three of these categories are getting extensions and increases means more money will be spent, and rapidly, at America's food and grocery stores. The job training provision is a good one but won't have any immediate direct benefit to the food and grocery industry in terms of sales increases.

2. DIRECT CASH PAYMENTS
$14.2 billion to give one-time $250 payments to Social Security recipients (per receipient), poor people on Supplemental Security Income (SSI), and veterans receiving disability and pensions.

Folks receiving SSI benefits are among the poorest of the poor. They spend pretty much all the income they receive. They also spend most of that income on the basics like food and groceries. We suspect they will spend most of the $250 payment on food and groceries, along with using part of it to pay things like the utility bill. Additionally, a great majority of retired folks on Social Security get most of their monthly income from the retirement program. They tend to spend what they get each month, also primarily on the basics like food and groceries, as do veterans living off of disability payments.

There are many people collecting social security who also have substantial additional income from pensions, 401-K plans and investments. The federal government estimates about 40% of retired Americans today obtain all or nearly all of their monthly income from Social Security. Another about 30% rely on Social Security for 50%-75% of their total monthly income. So even if just 40% and 50%-75% of America's about 30 million Social Security receipients spend half of their $250 check on food and groceries, that will provide a nice shot in the arm to grocers and food makers. (Note: People receieving Social Security have to pay income tax if their adjusted gross income is over $30,000 a year. Those folks in that bracket qualify in the stimulus package for the higher tax rebates listed below, rather than the $250 check.)

3. TAX CREDITS
About $116 billion for a $400 per-worker, $800 per-couple tax credits in 2009 and 2010. For the last half of 2009, workers could expect to see about $13 a week less withheld from their paychecks starting around June. Millions of Americans who don't make enough money to pay federal income taxes could file returns next year and receive checks. Individuals making more than $75,000 and couples making more than $150,000 would receive reduced amounts.

This is much needed money in the pocket for most Americans. We suspect consumes will do three things with their $400 (single filers) and their $800 (joint filers). First, we think they will take about one-third -to- half of the total check amount and use it to pay off past do bills: credit cards, utility bills, cable TV, ect. Many consumers are a month or two behind in these areas, and the utilities and companies are letting them make payments. Therefore we think this is one area where many Americans will first apply their tax rebate monies to.

Second, we think people will then use a third or more of the check amount to buy mostly basic items (read food and groceries and related items) that they've been doing without, along with buying a few more endulgent food items they have been avoiding because of the bad economy. Consumers spending a third or half of their rebate checks at the grocery store will be a big shot in the arm for food retailers and a good one for many food makers and marketers.

Lastly, we think most Americans will attempt to save about a third of their tax rebate checks for emergencies. They know they are going to need it the month after they get it, or the month after that, for example.

4. ALTERNATIVE MINIMUM TAX
About $70 billion to spare about 24 million taxpayers from being hit with the alternative minimum tax in 2009. The change would save a family of four an average of $2,300. The tax was designed to make sure wealthy taxpayers can't use credits and deductions to avoid paying any taxes. But it was never indexed to inflation, so families making as little as $45,000 could get significant increases without the change. Congress addresses it each year, usually in the fall.

This provision will put money in the pockets of a number of tax payers. It won't be enough to buy a new car, or perhaps even a new big screen television. But it will be enough to pay off some bills, buy better and more groceries, and perhaps have a little left over for clothing and a blender or new toaster for the kitchen. It's important to note that this provision only effects a small percentage of America taxpayers. But it still helps.

COLLEGE TUITION TAX CREDIT
5. About $14 billion to provide a $2,500 expanded tax credit for college tuition and related expenses for 2009 and 2010. The credit is phased out for couples making more than $160,000.

Those consumers who can take advantage of this tax provision will end up with more cash in their pockets. That means a bit more disposable income. That's good for grocers and food makers. Many of these folks are married couples with a kid or two at college. They've been really cutting back because of the added tuition and related college expenses. They might take some of the tax savings and buy some premium organic and gourmet foods items, along with some higher-priced wines and craft beers, for example. A little affordable indulgence.

6. CHILD TAX CREDIT
About $15 billion to provide the $1,000 child tax credit to more families that don't make enough money to pay income taxes.

Again, not significant, and not applicable to all consumers. But the amount those who can take advantage of it save is good news to grocers and food makers in that it's not enough to make a major purchase but is enough to spend a bit more at the supermarket.

7. EARNED INCOME TAX CREDIT
$4.7 billion to expand the Earned Income Tax Credit for low-income families with three or more children.

This provision also puts cash into the hands of those consumers who quilify can take advantage of it. And added benefit to grocers and food makers is that those people it applies to are in the lower income segment. This means they tend to spend most of the income they take in. Therefore they are a consumer segment most-likely to spend much of this money at the supermarket for basic needs and essentials like food, groceries and houshold items. They will spend most of the savings rather than save it.

The end-game: Get private sector moving once again

Our focus in this piece is on the provisions of the $790 billion economic stimulus package that in our experience and analysis offer the best opportunity to food and grocery retailers and food markers to gain some increased sales in an overall industry sense . Adding increased profits and income will be tough because retail price and thus margin pressure is intense. And it will get even more competitive and intense.

We say overall because even with the extra cash in their hands consumers will choose where they shop and what brands they buy carefully, as they've been doing for months now. We suspect most shoppers will also continue to shop at food stores that offer them the best value. We also believe shoppers will continue to buy the brands (including store brands increasingly) that also offer them the best price and value.

They also will continue to seek out the best deals and promotions available at retail.

As a result, while the extra cash and food stamps consumers get from the stimulus package provisions will increase sales overall for food retailers and food makers, it won't for all of them. Consumers will continue to go where they perceive the value is, in our analysis.

Aggressive promotion even more important with stimulus

Aggressive marketing and promotion for both food and grocery retailers and food-makers and marketers is even more important now that an economic stimulus package with all of the benefits offered the industry is at hand. Why? because as we mentioned above, shoppers with a little extra cash in their hand don't have to shop at your store or buy your food product brand.

Additionally, consumers have learned some very frugal food and grocery shopping habits over the last six months to a year and they aren't about to dump those money saving habits just because of some extra cash, unemployment benefits or food stamps in their pockets. In our analysis it's the complete opposite in fact. We think shoppers will be looking for even better deals and prices so they can stretch their new found cash from the economic stimulus package.

Therefore, it will be the retailers and food marketers that aggressively launched promotions and related programs tied to the benefits from the stimulus program that will be the winners.

For example, retailers that offer consumers 10% bonuses if they cash their tax rebate checks at their stores, like Wal-Mart, Safeway, Kroger Co, and a few others did with the Bush Administration tax rebate checks, will be the ones that get the lions share of those dollars. Cash the $400 check, get an extra $40 in the form of a store gift card. Cash the $800 check, get an $80 gift card. That's big money to consumers right now.

Wal-Mart, Safeway and Kroger cashed many extra checks than they otherwise would have had not they offered that 10% stimulus bonus package of their own last time around. And most of those conumers who cashed their checks in the stores spent money on food and groceries at the stores.

Retailer's also need to launch promotions with an economic stimulus theme. Disocunted prices under the tag line "An economic stimulus package from Whole Foods," for example. Or "Deals to stimulate your pocketbook," from Safeway, as another example. These need to be product promotions, line drives, in-ad coupons, all sorts of "stimulus" croos-promoted means to get more of the dollar then your competitor.

Food makers and marketers need to do the same, even more so since many shoppers are buying store brands rather than manufacturer brands. Companies need to offer coupons tied to when the tax rebate checks come out. Call the product "cents off" coupons "stimulus extenders," or "stimulus helper," for example.

Additionally, create store-specific product or item promotions with various retailers; the promotions timed with when the rebate checks hit. Play up the "stimulus extender" theme. Do so with item price disounts but also on the company Web site and in public relations efforts. Make it real and it will work. Offer real value not just hype. Get creative. Let the bad economy and the promise the added cash will bring to consumers be your canvas. Encourage confidence with good deals.

It's all about grabbing a share of the extra dollars and doing so by giving consumers a better deal. Help them extend their stimulus money and they will reward you with their business.

We are all in this together. Retailers and food makers can't survive without consumers who have money to buy the goods they offer. Consumers can't survive without jobs. Business can create them with drmatically reduced sales and profits.

The end-game of the mega economic stimulus package is to put some money in the hands of hard-pressed Americans, create some added business for companies, start to improve consumer and business sector confidence, create jobs, and jump-start the private sector so it can get the nation's economic engine going again. It's a social as well as economic package in reality.

Below is a summary of the other provisions in the $790 billion House-Senate economic stimulus package bill that's set to become law, perhaps as soon as tomorrow:

HOMEBUYER CREDIT
> $6.6 billion to repeal a requirement that a $8,000 first-time home buyer tax credit be paid back over time for homes purchased from Jan. 1 to Nov. 30, unless the home is sold within three years.

AUTO SALES
>$1.7 billion to makes sales taxes on paid on new cars, light trucks, recreational vehicles and motorcycles tax deductible through the end of the year.

RENEWABLE ENERGY INCENTIVES
>About 20 billion in tax incentives for renewable energy and energy efficiency over 10 years, including extending tax credits for energy produced from wind, geothermal, hydropower and landfill gas; grants to build renewable energy facilities; tax credits for purchases of energy-efficient furnaces, windows and doors, or insulation; tax credit for families that purchase plug-in hybrid vehicles.

BONUS DEPRECIATION
>$5 billion to extend a provision allowing businesses buying equipment such as computers to speed up its depreciation through 2009.

BANK CREDIT REPEAL
>Repeal a Treasury provision that allowed firms that buy money-losing banks to use more of the losses as tax credits to offset the profits of the merged banks for tax purposes. The change would increase taxes on the merged banks by $7 billion over 10 years.

HEALTH CARE
>$24.7 billion to provide a 65 percent subsidy of health care insurance premiums for the unemployed under the COBRA program; $86.6 billion to help states with Medicaid; $19 billion to modernize health information technology systems; $10 billion for health research and construction of National Institutes of Health facilities; $1 billion for prevention and wellness programs.

INFRASTRUCTURE
>$46 billion for transportation projects, including $27.5 billion for highway and bridge construction and repair; $8.4 billion for mass transit; $8 billion for construction of high-speed railways and $1.3 billion for Amtrak; $4.6 billion for the Army Corps of Engineers; $4 billion for public housing improvements; $6 billion for clean and drinking water projects; $7.2 billion to bring broadband Internet service to underserved areas; $4.2 billion to repair and modernize Defense Department facilities.

ENERGY
>About $50 billion for energy programs, focused chiefly on efficiency and renewable energy, including $5 billion to weatherize modest-income homes; $6.4 billion to clean up nuclear weapons production sites; $11 billion toward a so-called "smart electricity grid" to reduce waste; $6 billion to subsidize loans for renewable energy projects; $6.3 billion in state energy efficiency and clean energy grants; and $4.5 billion make federal buildings more energy efficient; $2 billion in grants for advanced batteries for electric vehicles.

STATE BLOCK GRANTS
> $8.8 billion in aid to states to defray budget cuts.

EDUCATION
>$44.5 billion in aid to local school districts to prevent layoffs and cutbacks, with flexibility to use the funds for school modernization and repair; $25.2 billion to school districts to fund special education and the No Child Left Behind law for students in K-12; $15.6 billion to boost the maximum Pell Grant by $500 to $5,350; $2 billion for Head Start.

HOUSING PROGRAMS
>$4 billion to repair and make more energy efficient public housing projects; $2 billion for the redevelop foreclosed and abandoned homes; $1.5 billion for homeless shelters; $2 billion to pay off a looming shortfall in public housing accounts.

SCIENCE PROGRAMS
>$3 billion for the National Science Foundation for basic science and engineering research; $1 billion for NASA; $1.6 billion for research in areas such as climate science, biofuels, high-energy physics and nuclear physics.

LAW ENFORCEMENT
>$4 billion in grants to state and local law enforcement to hire officers and purchase equipment.

HOMELAND SECURITY
>$2.8 billion for homeland security programs, including $1 billion for airport screening equipment.

DEBT LIMIT INCREASE
>Increases the statutory limit on the national debt by $789 billion, to $12.1 trillion.

The whole must be greater then the sum of its parts

A number of these provisions also offer benefits to the food and grocery industry, albeit more indirect ones. The Renewable energy, bonus depreciation, energy and health care provisions particularly offer some strong benefits to the food and grocery industry on the investment and expense side of the balance sheet.

But our main focus in this piece is on the provisions that in our analysis offer the most direct benefits to food retailers and food makers on the sales and income side of the ledger. That's why we have separated the various provisions the way we did.

And, of course, overall the goal and hope of the $790 billion comprehensive economic stimulus package (the whole) is that once the spending in its various parts starts happening, all of the provisions (the total sum of the package's parts) will work together and began stimulating the economy, thereby giving a jump-start to the private sector, and to consumers, so that eventually job creation can begin on the business side and increased consumer confidence will start coming back so that people are more willing to spend (of course they have to have the money to spend it). And key to all this is that the credit markets must thaw -- and if and when they will is the $64,000 question?

Lastly, this all comes at an obvious cost -- a bigger deficit and more national debt. Notice the very last provision of the package we listed above -- the Debt Limit Increase -- which increases the statutory limit on the national debt by $789 billion (an interesting number), to $12.1 trillion. That provision, and the $789 billion, is needed in order to create the new government securities (debt) and print the money so the federal government can pay for this $790 billion spending package.

Notice how the debt increase amount is $1 billion less ($789 billion) than the total $790 billion stimulus package? We hope that's because the federal government has that extra billion on hand to apply to the $789 billion to get to the $790 billion, rather than being yet another example of how the government gets the math wrong when it comes to government spending, even on the stimulus package, which we approve of as just about the only alternative available right now to keep the U.S. economy from going all the way over the cliff. But it must be nice to be able to create a line item in your spending plan that pays for your deficit spending.

And once this $790 billion is spent and the debt added to the deficit and the already multi-trillion dollar national debt, President Obama and Congress are going to need going to ask the American people and business community, to paraphrase former President John F. Kennedy: "Ask not what your country can do to stimulate you, but ask what you can do to stimulate your country."

Green Packaging Memo: Design Firm Says its New, Paper Water Bottle Could Revolutionize How Bottled Water is Packaged

The word "innovation" is used far to casually and often today when it comes to new food, grocery and beverage products and new types of product packaging. In the case of consumer packaged goods packaging (wet or dry), "new" doesn't automatically mean innovative, after all.

We think in order for a new type of packaging to be "innovative," one of the things such packaging must do is to address a need (keeps a product fresher, for longer, for example) or help provide a solution to an existing packaging problem (recycling, source reduction, ect., for example.)

And of course, one of the most pressing issues and problems in the food, grocery and beverage packaging/container realm today is waste vs. recycling vs. reuse; "green" packaging issues in other words. The quest is about how to create more environmentally positive types of packaging that still do there job containing consumer packaged goods in a safe and efficient way, and do so at a reasonable cost to the user.

Using this two-part definition, packaging innovation is the exception rather than than norm.

But we think a design firm called Brandimage might be on to something in the beverage container innovation department with what is says is a new paper water bottle that could replace the plastic bottles used throughout the bottled water industry.

The design firm calls its "innovation" the 360 Paper Water Bottle (pictured at the top, left of this piece). It's made from pressed renewable-plant fibers coated with a thin film of PLA plastic - all 100% recyclable, according to Brandimage. Labels can be printed directly on the material using soy- or water-based dyes. The bottles are designed to bundle together, eliminating the need for separate multipack carriers, the design firm says.

"We have undertaken this program without the support of a manufacturing and/or materials supplier partner," Brandimage writes on its website. "We intend to find the 360 Paper Water Bottle a branded home." You can view the Web site here, where Brandimage writes more about the 360 Paper Water Bottle.

"Some of the world's largest brands" have already expressed interest in the 360 Paper Water Bottle, Brandimage also writes on its Web site. It doesn't offer any names of those brands however.

Obviously the jury is still way out on the design firm's paper water bottle. Little things like: has it been tested yet in a real world situation, in the distribution chain and on the store shelf, for example? FDA approval? Finding a bottled water company willing to use it to package its brand?

But having pointed to those obvious reality-based facts, we think the idea has merit in the packaging innovation realm.

If it works, and is affordable, it also could help solve one of the most heated issues and debates among consumers, environmental groups and the bottled water industry (with retailers right in the middle of the fight), which is the environmental consequences of all the plastic waste generated by all of the plastic bottled water bottles disposed of each year -- or month, week, day -- in the countries throughout the world -- read primarily the U.S., Europe and parts of Asia -- where the marketing of and purchasing of water in plastic bottles is super-high. And where a proper infrastructure for recycling these bottles is lacking in most of these countries, particularly in the U.S.

Additionally, if it works and is reasonable in terms of cost, the first bottled water company to use the 360 Paper Water Bottle, even in a test, could get major props -- and thus sales -- from "green" consumers for using the alternative paper container for its water.

So, we give Brandimage major packaging innovation points for merely coming up with the paper water bottle concept and designing the bottle.

And if they can turn it into a usable and reasonably priced bottle, such innovation could lead to not only a "greener" water bottle (and we would think it might be used for other beverages as well like organic and new age drinks to start), but also to a bunch of that other kind of green -- money -- for the design firm. If the paper water bottle hits store shelves, it also will add an additional element to that frequently asked question at the grocery store -- "paper or plastic"

More on the 360 paper Water Bottle here at the Brandimage Web site.

[Reader Note: You can follow Natural~Specialty Foods Memo (NSFM) on Twitter.com at: www.twitter.com/nsfoodsmemo]

Retail Memo: 'God And Man at Yale' - The FTC-Whole Foods Settlement Talks: Whole Foods CEO John Mackey Speaks Out at Yale University

FTC. v. Whole Foods Market, Inc. - Settlement Talks

In a series of recent stories on the U.S. Federal Trade Commission (FTC) v. Whole Foods Market, Inc. case, in which the FTC is attempting to break-up Whole Foods' 2007 friendly acquisition of then rival Wild Oats Market, Inc., we reported that based on our sources the current negotiations between Whole Foods and the FTC are proceeding well, and that the probability of the two parties reaching a settlement are looking good.

You can read those stories here: [Thursday, February 5, 2009: Retail Memo - Breaking: FTC Delays Whole Foods Merger Opposition Case Another 30-Days For Settlement Talks; Progress Towards A Deal Remains Positive.] [Tuesday, February 3, 2009: Retail Memo - Breaking Developments: FTC, Whole Foods Market, Inc. Progressing in Settlement Talks; Could the Negotiated End-Game Be Near?] [January 29, 2009: Retail Memo - Breaking: Whole Foods Makes Settlement Offer to FTC; FTC Halts Action For 5 Days; Natural~Specialty Foods Memo Calls For A Settlement.] Note in the January 29 piece, before full settlement talks began, Natural~Specialty Foods Memo (NSFM) called for both sides to work out a deal.

As we've reported, the FTC has halted all of its legal activity designed to overturn the Whole Foods-Wild oats merger until March 6, 2009, so that the two sides can continue their settlement talks and resolve the deal outside of court. The FTC has an Administrative trial set for April 6 which will result in a ruling by the federal regulator on the merger. Whole Foods is hoping to work out a deal with the FTC before the April 6 trial date.

John Mackey Speaks at Yale

Natural~Specialty Foods Memo (NSFM) recently found out from a reader that Whole Foods Market, Inc. co-founder and CEO John Mackey was giving two speeches or lectures at Yale University yesterday, Tuesday, February 10.

The topics of the lectures, which Mr. Mackey did give at Yale yesterday, were "Conscious Capitalism," in which he talks about the philosophy the principles of Whole Foods Market's business philosophy which he has gleaned from various thinkers, and "A Vision of Sustainable Agriculture and Healthy Eating in the 21st Century." Mr. Mackey has given speeches and lectures on the two topics at a number of other U.S. Universities, as well as to various groups.

Because we've been covering, reporting on, writing about and offering analysis on the FTC v. Whole Foods Market merger case and issue, and because Whole Foods' CEO John Mackey seldom ever disappoints when it comes to talking about hot button issues (like FTC v. Whole Foods) regarding Whole Foods Market when he does speak publicly, Natural~Specialty Foods Memo (NSFM) had a correspondent attend the two lectures and provide notes on what if anything CEO Mackey said about Whole Foods' current settlement negotiations with the FTC over the 2007 merger.

And John Mackey didn't disappoint.

At Yale University yesterday, Whole Foods' CEO Mackey told the lecture crowd that he is anticipating that there will be a settlement reached between the natural foods grocery chain and the FTC soon.

"Hopefully, there will be an announcement in the next couple of weeks," Mr. Mackey said. That's just about how long is left in the FTC's legal halt order, which expires on March 6.

Beyond that John Mackey didn't offer any details of the current settlement negotiations. He did say during a lecture that Whole Foods brought an initial offer to the FTC to get the ball rolling, which is something we've previously reported.

However, the fact that Mr. Mackey would offer such optimism about a settlement likely being reached in the next couple weeks suggests strongly to us he is rather confident that will be the case. If not, he wouldn't likely have even brought it up considering how serious and important the current negotiations are for the natural foods grocery chain. Would he?

In fact, John Mackey has taken a back seat in the entire FTC v. Whole Foods case since it began heating up again in late November of last year -- to the present. Instead he has let his top executives, Jim Sud and Walter Robb, be the Whole Foods' corporate faces and voices on the issue and legal case. Yesterday, during the Yale University lectures, was one of the few times the Whole Foods Market, Inc. CEO has said anything publicly about the issue in many months.

One of the reasons this is the case is because there is bad blood between a couple of the FTC Commissioners and Mackey over public statements he's made over the years about wanting to dominate U.S. natural foods retailing, as well as over the highly publicized news that came to light in 2007 that for at least a couple years prior as CEO of Whole Foods Market John Mackey had used the pseudonym "rahodeb" to post negative comments about Wild Oats Market, Inc. and its then CEO on Yahoo Finance message boards and other finance-related Internet chat boards. Mr. Mackey has explained that "rahodeb" was a variation of his wife's first name -- Deborah.

The nature of the posts "talked down" Wild Oats as a natural products retailer and included posts suggesting the company needed to be acquired by a superior natural foods retailer, that its stock was overvalued, and that it was headed for bankruptcy, among other things.

Mr. Mackey made such posts right up to the 2007 merger deal between Whole Foods and Wild Oats. After it was discovered that John Mackey was "rahodeb," the U.S. Securities and Exchange Commission (SEC) launched an investigation of the CEO's postings on the finance-related message board. The SEC found he had broken no laws and ended the investigation.

Below (in italics) are a couple of the "rahodeb" post he made on Yahoo Finance:

March 26, 2006: "OATS has lost their way and no longer has a sense of mission or even a well-thought-out theory of the business. They lack a viable business model that they can replicate. They are floundering around hoping to find a viable strategy that may stop their erosion. Problem is that they lack the time and the capital now.”

Another post John Mackey made on Yahoo Finance as "rahodeb": "Would Whole Foods buy OATS? Almost surely not at current prices…What would they gain? OATS locations are too small. Wild Oats’ management clearly doesn’t know what it is doing." The company, he wrote:, "Has no value and no future."

At least one of the FTC Commissioners appears to believe that Mr. Mackey skated on the "rahodeb" postings in which he "talked down" Wild Oats, which was being operated in a less than stellar manner and doing poorly. But since nobody reading the "rahodeb" posts knew at the time they were being made by the Whole Foods' CEO, it's hard to believe, despite the fact we think his doing so was a bit foolish, that the negative comments about Wild Oats had any material effect on the company. After all, for the comments to have any influence, investors and others would have to take seriously the postings of "rahodeb" on Yahoo Finance.

Its our analysis though that this incident, along with public comments John Mackey had made for many years about wanting to dominate natural foods retailing with Whole Foods, has influenced the hard line against the merger the FTC has taken. We have no proof of that but believe it to be the case based on our extensive reporting, research and analysis of the issue. Such comments though aren't legal grounds to influence the FTC, and we have no evidence that they have. It's our observation and analysis only.

John Mackey takes ownership of 'rahodeb' at Yale

During on of his Yale lectures yesterday, a audience member asked John Mackey if he thought his Internet posting as "rahodeb" has played any part in the FTC's aggressive, and expensive to Whole Foods Market, Inc., challenge of the Wild Oats' acquisition.

His answer: "No. Well, I don't know. You'd have to ask the FTC."

Sounds like he at least agrees with 50% of our analysis on the issue.

The Whole Foods' CEO then went on to further answer the question, telling the Yale graduate students, professors and others attending the lecture that he feels he didn't do anything wrong in making the Internet postings about Wild Oats. He commented that it was sort of like a "Warren Buffett opportunity" for him, likening the postings to the witty and insightful comments the billionaire investor and chairman of the Berkshire Hathaway holding company is famous for making each year in the company's annual report to stockholders. [You can read a selection of Warren Buffett's letters to Berkshire Hathaway shareholders at this link: Warren Buffett's Letters to Berkshire Shareholders.]

He then finished up discussing the topic by saying: "I'm actually proud of my postings on Yahoo."

However, he added, the episode taught him a lesson that as the CEO of a major, public company his doing such things could land him on the front page of newspapers. (He really didn't know this simple fact before the postings incident, we wonder?) "I suppose I've kind of grown up. I'm a man now," Mr. Mackey concluded.

Natural~Specialty Foods Memo NSFM) is on the record in the Blog as agreeing with the SEC's decision that John Mackey broke no laws regarding the "rahodeb" posts, as well as writing in a post in May 2008 that we believed the incident should be considered "water under the bridge" post the SEC's decision. A few readers, including a columnist for Conde Naste Portfolio (Felix) took us on a bit on that one. We stick to our original position on the issue and Mr. Mackey. [That post is at this link: Retail Memo: Whole Foods Market CEO John Mackey is 'Back to Blogging'; As Well as Being 'Back in Town.']

But -- did CEO John Mackey, who's been called "Wacky Mackey" at times in the press and elsewhere (a nickname we've always refrained from using and continue to do so accept in pointing out that others have used it), really need to share with the crowd at Yale that he is "proud" of the "rahodeb" Wild Oats' postings at the exact same time Whole Foods' legal counsel is engaged in settlement talks with the FTC. That same outside legal counsel (high-paid lawyers from three different top Washington, D.C. law firms) that, along with the high-priced Washington, D.C. lobbying firm, The Glover Park Group, retained by the company to defend it to Congress and the public against the FTC, is costing Whole Foods' stockholders tons of money at a time when the company's stock share value is at a 52-week low, having dropped in value by about 70% in the last year?

Or as another example, Whole Foods Market, Inc. acquired Wild Oats for $18.50 a share in the summer of 2007 (the $565 million acquisition). At the close of the market today, Whole Foods' stock was trading at $10.36 a share. You can view the details at Yahoo Finance here. We intend no "rahodeb" karma in suggesting readers view the Whole Foods Market, Inc. stock details at Yahoo Finance.

Speaking about interesting karma, in a few of his about 1,400 "rahodeb" Internet postings about Wild Oats Market, Inc. from 1999 -to- 2006, John Mackey wrote about how much Wild Oats' stock was dropping, saying it would fall below $5 a share at one point, as well as suggesting the stock could sink so low the company would have to file for bankruptcy.

We say this without any hubris or glee, but Whole Foods' stock share price only needs to drop by a little over half its current share price to hit that magic under $5 a share value.

And now that 24% of Whole Foods is owned by two investment groups, the private equity firm Leonard Green & Partners (17% stake), and Yuciapia Companies (7% stake), owned by longtime supermarket industry investor Ron Burkle, it's our analysis that if Whole Foods' share price starts dropping much more, it's likely that some type of merger or other similar move led by these two investor groups just might materialize.

Or perhaps Ron Burkle, who owned 18% of Wild Oats and helped engineer the 2007 deal with Whole Foods Market, Inc., might buy up another seven or so percent of Whole Foods, since the current share price is even less than it was when he bought his 7% stake not so many weeks ago.[Suggested reading: Retail Memo: Whole Foods Market, Inc. Closes $425 Sale of Stock to Private Equity Firm; Adds Members of the Firm to its Board of Directors.] [January 16, 2009: Retail Memo - Exclusive: Supermarket Industry Investor Ron Burkle Looking For A Seat On Whole Foods Market's Board of Directors.]

God and Man, and John Mackey, at Yale

The famous Conservative thinker and writer, novelist, host for many years of the PBS public affairs program "Firing Line," master sailor and all around raconteur William F. Buckley Jr., who passed away last year, was a proud graduate of Yale College at Yale University back in the days when a guy could become successful with a mere bachelors degree. While at Yale, Buckley wrote his first book, "God and Man at Yale," (published in 1951), in which he chronicled his undergraduate years at the Ivy League institution of higher learning and set the tone for his long career as a conservative thinker and writer, as well as a polymath.

We wonder, if Whole Foods Market and the FTC fail to reach a settlement before the April 6 start of the FTC Administrative Trial on the merger, and if the conclusion of that trial results in the break-up of the combined Whole Foods-Wild Oats, if John Mackey's first book, published in his 55th (current age) or 56th year of life, might be titled: "God, Did I Have to Say Everything That Came to My Mind at Yale."? But then, there also is a certain charm about Mr. Mackey being himself, even in such times for the company.

Of course, time will tell. And the clock is ticking rather fast until the FTC legal halt ends on March 6. According to our sources, as of Monday afternoon (February 10), the Whole Foods-FTC merger case settlement talks were progressing well. But as always -- stay tuned.

Independent Grocer Memo: Tradition, Local Focus, Customer Service and More Keeps Central Oregon USA's Erickson's Thriftway in the Game

All in the family: Erickson's Thriftway managing partner Doug Schmidt (center) towers over two veteran employees at the Bend, Oregon flagship store -- head checker Debbie Huber (left) and assistant manager Marlena Lohman (right) -- only in physcial height and not in the way the independent grocer relates to its employees, which is as part of the family. Debbie Huber has worked at the Bend, Oregon store for 32 years. Marlena Lohman has worked at the store for 29 years. Doug Schmidt is the rookie among the three, having worked for Erickson's Thriftway for a mere 28 years, starting out on the store floor. [Photo Credit/Andy Tullis - The Bulletin.]

Independent Food and Grocery Retailing USA: Guest Memo

A regular reader of Natural~Specialty Foods Memo (NSFM), who also happens to be an independent grocer in the USA, sent us an e-mail note today saying he enjoys when we write about independent food and grocery retailing and independent grocers, commenting in his note that he wished more publications would write about his fellow independents, which are an important segment of food and grocery retailing, be they discount grocers, upscale grocers or natural and specialty foods retailers.

Our independent grocer-reader included a link to a story published in today's Bend, Oregon-based The Bulletin, the daily newspaper of record for the Central Oregon region in the Pacific Northwest USA region.

The story, by staff writer Andrew Moore, is about a local Central Oregon four-store independent grocer, Erickson's Thriftway, and how the independent is not only surviving but doing well despite the bad economy and the strong competition in the market from big chains like Safeway, Fred Meyer (owned by Kroger Co.) and Albertsons, along with intense competition from other regional grocers.

The very first Erickson's Thriftway grocery store opened in downtown Bend, Oregon in 1915. Today the four-store operation is no longer owned by the founding Erickson family but rather by a partnership (privately-held) headed by Doug Schmidt, the managing partner for Erickson's Thriftway.

The four Erickson's Thriftway stores are neighborhood supermarkets, averaging about 20,000 -to- 25,000 square feet. But the grocer packs the stores with nearly as strong of a selection of products as supermarkets twice the size of the Erickson's Thriftway stores do, Doug Schmidt says in the The Bulletin story.

The piece in today's The Bulletin includes a Q&A interview by the writer with Erickson's Thriftway managing partner Doug Schmidt. The interview offers a nice look at just what and how one of the many independent grocery retailing companies in the U.S. is dealing with the current recession and intense competition from mega-chains on its home turf.

We enjoyed reading the story, thank our independent grocer-regular reader for passing it on, and decided to run a link to the story below because we think it will be of interest to Natural~Specialty Foods Memo (NSFM) readers.

The story:

A grocery chain with local roots
The first of the Erickson's stores was established in 1915

By Andrew Moore / The Bulletin February 10, 2009

Doug Schmidt is the managing partner of the Erickson’s Thriftway grocery store chain in Central Oregon, a chain that traces its roots back to its first store opening in downtown Bend in 1915.

Though the four-store chain is no longer owned by the original Erickson family, Schmidt sees to it that the name still stands for service.

"There have been lots of changes in the supermarket business, but it’s no different from other businesses: Take care of your customers and your customers take care of you," said Schmidt.

[Click here to read the full story.]

Retail Memo - Breaking: FTC Delays Whole Foods Merger Opposition Case Another 30-Days For Settlement Talks; Progress Towards A Deal Remains Positive

FTC. v. Whole Foods Market, Inc. - Settlement Negotiations

In this Tuesday, February 2 story [Retail Memo - Breaking Developments: FTC, Whole Foods Market, Inc. Progressing in Settlement Talks; Could the Negotiated End-Game Be Near?], in which we reported that a source close to the settlement discussions between Whole Foods Market, Inc. and the U.S. Federal Trade Commission (FTC) told Natural~Specialty Foods Memo (NSFM) progress was being made towards reaching a potential agreement over the FTC's legal challenge of the 2007 Whole Foods-Wild Oats merger, we said the FTC would likely extend its current five business day halt order in its antitrust challenge of the deal if it felt negotiations were promising.

The FTC did just that late yesterday afternoon.

David P. Wales, the acting director of the FTC's Bureau of Competition, issued a one paragraph statement late yesterday afternoon in which he announced the regulatory agency was extending by an additional 30-days it's order to halt the antitrust proceedings so that Whole Foods and the FTC could continue the ongoing settlement negotiations. The FTC's challenge is now on hold until March 6, 2009. The five business day halt order was set to expire this morning.

This is all the FTC's Wales said in his statement extending the halt order until March 6: "We look forward to continuing our discussions with Whole Foods to determine whether we can reach a mutually agreeable settlement that would be in the best interest of consumers." [Link to the full FTC statement.]

The 30-day extension allows both parties more time to negotiate, and possibly come to a settlement deal over the $565 million friendly acquisition by Whole Foods of Wild Oats Market, Inc., before the scheduled FTC administrative trial designed to decide the fate of the combined Whole Foods-Wild Oats starts on April 6, just 30-days after the FTC's 30-day extension of proceedings ends.

Based on what our sources have been telling us, as well as yesterdays decision by the FTC to extend the order to halt proceedings, its our analysis that both parties are hoping to reach a settlement agreement before that April 6 FTC trial start date.

In fact, in this January 29, 2009 piece [ Retail Memo - Breaking: Whole Foods Makes Settlement Offer to FTC; FTC Halts Action For 5 Days; Natural~Specialty Foods Memo Calls For A Settlement] NSFM called for the FTC and Whole Foods Market, Inc. to reach a settlement, suggesting the time has come for a meeting of the minds. We also set forth a simple blueprint both parties could use to aid them in negotiations.

In our Tuesday piece [Retail Memo - Breaking Developments: FTC, Whole Foods Market, Inc. Progressing in Settlement Talks; Could the Negotiated End-Game Be Near?] we said this:

"Here is what we've learned thus far: Our source tells us the FTC has reviewed Whole Foods' initial settlement offer but wasn't completely satisfied by what it contained. We are told one element of the offer involves a willingness on Whole Foods' part to sell a number of the former Wild Oats stores, now rebranded under the Whole Foods Market banner, in some of the 29 U.S. markets where the FTC says a combined Whole Foods-Wild Oats is a monopoly in what the regulator calls the "premium natural and organic retailing segment (PNOS).

After reviewing the Whole Foods' settlement offer, we're told the FTC sent the natural grocery chain's outside legal counsel back to company CEO John Mackey and his top executives, suggesting the grocer needs to sharpen its pencil a bit more regarding its settlement offer. We were unable thus far to find out if the FTC has made any specific suggestions to Whole Foods' lawyers regarding in what specific ways Whole Foods Market, Inc. needs to sharpen the settlement offer."

Based on our source information we believe it was this turn of events, elaborated on more fully in the Tuesday story, which led to the FTC's decision late yesterday to extend its order to halt for an additional 30-days.

At the core of the FTC's legal challenge of the 2007 merger is that it argues a combined Whole Foods-Wild Oats is a monopoly in what the regulatory agency calls the "premium natural and organic retailing segment (PNOS)." This segment as defined by the FTC includes "premium natural and organic foods retailers" like Whole Foods Market, Inc., Portland, Oregon-based New Seasons Market (9 stores) and Ashville, South Carolina-based 15-store Earth Fare, Inc.

The fact Whole Foods Market and New Seasons Market have qualitatively different retail formats and focuses -- something that shouldn't be lost on those of you reading this who have experience in or with natural foods retailing and know about both retailers' formats and positioning -- apparently hasn't stopped the FTC from lumping the two natural grocers together in its PNOS category, which is a category we've argued in stories like this one [ Retail Memo: Natural-Organic Foods and U.S. Retail Marketplace Realities; Why the FTC's Case Against the Whole Foods-Wild Oats Merger is Pure Folly] is irrelevant because it doesn't describe the way natural and organic foods and related consumer packaged goods products are retailed in the U.S. in 2009.

This central argument, despite the fact it fails to describe the reality of the market, forms the core of the FTC's antitrust action against Whole Foods Market, Inc. post merger with Wild Oats. It's the fulcrum, so to speak.

And despite the folly of the argument -- the FTC is sticking to it. Therefore, as we suggested in our January 29 piece, the best course of action for Whole Foods Market, Inc. (and for the FTC) is to attempt to obtain a settlement deal, thereby saving it from further legal proceedings, which it has done.

We also believe it's in the best interest of the FTC to work out a settlement deal with Whole Foods Market, Inc. Fighting the merger has become much to much of a priority, perhaps even an obsession, for the FTC in the larger scheme of its mission as one of the U.S. Federal Government's antitrust watchdog agencies, even if it believes a combined Whole Foods-Wild Oats is a monopoly in what we argue is an artificial category -- PNOS -- which in our analysis is irrelevant to how natural and organic food and grocery products are retailed in the U.S. today. [We describe the multi-format retailing of natural and organic products in this piece, as well as in numerous others linked at the "recent bibliography at the end of this story.]

Therefore, we believe the 30-day extension by the FTC is a positive and wise move for both parties, as well as consumers. In 11 days, February 16, Whole Foods Market, Inc. will report its financials for the company's first fiscal quarter of the year. Those numbers aren't going to be very good. And they won't reflect the sort of income one would expect a monopolist retailer to turn in. As a result, the Q-1 numbers will add an additional and current argument to the "Whole Foods isn't a category monopolist" argument, in our analysis and viewpoint.

Meanwhile, our sources tell us the settlement negotiations between Whole Foods and the FTC are thus far progressing in a positive way. Stay tuned.

Natural~Specialty Foods Memo (NSFM) Linkage

FTC. v. Whole Foods Market: Recent Bibliography From NSFM

February, 2009

February 3, 2009: Retail Memo - Breaking Developments: FTC, Whole Foods Market, Inc. Progressing in Settlement Talks; Could the Negotiated End-Game Be Near?... February 1, 2009: Promotional Merchandising Memo: Whole Foods Market's Super Bowl In-Store Promotional Merchandising Message: 'Value'....

January, 2009

January 31, 2009: Store Brands - Private Label Memo: Smart & Final-Owned Henry's Farmers Market Preparing to Debut New Natural & Organic 'Sun Harvest' Store Brand....January 29, 2009: Retail Memo - Breaking: Whole Foods Makes Settlement Offer to FTC; FTC Halts Action For 5 Days; Natural~Specialty Foods Memo Calls For A Settlement....January 25, 2009: Retail Memo: Judge Sets February Hearing Dates On FTC Motion That Could Result in Whole Foods Market Having to Rebrand 100 Former Wild Oats Units....

January 24, 2009: Retail Memo: Despite its Battle With the FTC and Other Struggles, Whole Foods Market Still Ranked 22nd 'Best Place' to Work in America By Fortune....January 24, 2009: Retail Memo - News & Analysis: Gelson's Chain Challenges Whole Foods' Subpoena For Trade Secrets; FTC Says No Like it said to New Seasons Market....

January 23, 2008: Retail Memo: Three Judge Federal Appeals Court Panel Rules Against Whole Foods' FTC Lawsuit Today; What's Next?.... January 21, 2008: Retail Memo: An Argument in Favor of the FTC in FTC v. Whole Foods Market, Inc. -- Or At Least Against Whole Foods' Legal Tactics....

January 19, 2009: Retail Memo: Concerned With Fast-Looming FTC Hearing Date Whole Foods Re-Files Lawsuit Taking it Directly to Washington, D.C. Federal Appeals Court....January 19, 2009: Retail Memo - Breaking News: Portland's New Seasons Market and Whole Foods Market, Inc. Reach Agreement; New Seasons Will Provide Trade Secrets....

January 16, 2009: Read Memo: Colorado Newspaper Columnist Joins NSFM's 'Whole Foods Market Isn't A Monopoly' Bandwagon....Friday, January 16, 2009: Retail Memo - Exclusive: Supermarket Industry Investor Ron Burkle Looking For A Seat On Whole Foods Market's Board of Directors....Thursday, January 15, 2009: Retail Memo: Natural-Organic Foods and U.S. Retail Marketplace Realities; Why the FTC's Case Against the Whole Foods-Wild Oats Merger is Pure Folly....

January 15, 2009: Retail Memo: Fresh & Wholesome Market Fears Not A Whole Foods Market Monopoly; In Fact Part of its Competitive Strategy is to Be the Anti-Whole FoodsRetail Memo: Whole Foods Offers Carrot and Stick to Retailers That Have Yet to Comply to Subpoena For Trade Secret Data and Information....

December, 2008

December 29, 2008: Retail Memo - Breaking News: New Seasons Market Doesn't Turn Over Trade Secrets to Whole Foods Market Despite Deadline to Do So Being Today....December 29, 2008: Independent Grocer Memo: Natural-Organic, Local, Fresh and Premium Keys to Pacific Northwest USA's Haggen Foods; Now Adding Value....December 28, 2008: Retail Memo: Web Site and Blog-Driven Viral Boycott of Whole Foods Market Stores in Portland, Oregon Region Going On; Could it Intensify?....December 28, 2008: Retail Memo: Tomorrow Deadline For Portland, Oregon's New Seasons Market to Turn Over Trade Secrets to Whole Foods Market's Legal Counsel....

December 24, 2008: Christmas Eve Memo 2008: 'Twas the Night Before Christmas' - FTC v. Whole Foods Market, Inc. Version....December 24, 2008: Independent Grocer Memo: From Mrs. Gooch's to the Auto Body Business, Then Back to Retail, Chris Kysar is On A Healthy Organic Foods Retailing Roll....December 24, 2008: Retail Memo: It's 'Deja Vu All Over Again' - Judge Paul Friedman to Whole Foods Market, FTC: 'What's My Role Here?'....

December 23, 2008: Retail Memo: FTC Postpones Scheduled February 16 Administrative Hearing on Whole Foods-Wild Oats Deal Break-Up Until April 6, 2009....December 23, 2008: Independent Grocer Memo: National Grocers' Association Asks President-Elect Obama to Look Out For Independent Grocers When He takes Office in January....December 22, 2008: Retail Memo: Only Slightly More Than Half the 93 Natural Foods Retailers Issued Subpoenas By Whole Foods in its Case against the FTC Have Complied....

December 22, 2008: Retail Memo: Whole Foods Market Wants to Depose and Obtain Internal E-Mails From FTC Commissioner, Suggesting Possible Conflict of Interest Situation....December 22, 2008: Retail Memo: At Hearing Today Judge Tells FTC to Provide Road Map of How Whole Foods Could Take About Merged Companies Should Ruling Go In its Favor....December 19, 2008: Retail Memo: Whole Foods' Lobbying Effort Baring More Fruit - House Committee Leaders Send Letter to FTC Chair Similar to One Sent By Senate Leaders....

December 18, 2008: Retail Memo: 'This Isn't Over Yet' - New Seasons Market CEO On Judge's Decision the Natural Gorcer Must Turn Over Trade Secrets to Whole Foods Market.... December 18, 2008: Retail Memo: The 'Whole Primary Source Scoop' -- FTC and U.S. Federal Court Documents on the FTC v. Whole Foods Market, Inc. Case....December 17, 2008: Breaking News: Judge Orders New Seasons Market to Comply With Whole Foods' Subpoena and Submit Sales Data, Financial Records and Other Trade Secrets....

December 16, 2008: Retail Memo: Whole Foods, Wild Oats and Boulder, CO...And the Rocky Mountain News' Editorial Take On FTC v. Whole Foods Market, Inc....December, 15, 2008: Retail Memo: Eight Members of U.S. Senate Judiciary Committee Send Letter to FTC Chairman Regarding FTC's Legal Case Against Wild Oats' Acquisition....December, 13, 2008: Retail Memo - Analysis & Commentary: More On FTC v. Whole Foods Market, Inc. and Whole Foods Market, Inc. v. FTC....

December 9, 2008: Organics Category Memo: Wither Organics? Organic Food & Grocery Category Sales Down; But Double-Digit Growth Still Likley With Mass Market Lift....December 9, 2008: Retail Memo: Whole Foods Markets' 'Whole Legal Paycheck:' Three Top Washington, D.C. Law Firms Teaming Up On The Natural Grocery Chain's FTC Lawsuit....December 9, 2008: Retail Memo: Whole Foods Market CEO John Mackey and Team Launch First Aggressive Attack Against the FTC's Legal Case at Press Conference This Morning....

December 8, 2008: Retail Memo: Mr. Mackey (and the Whole Foods Market Troops) Goes to Washington....December 8, 2008: Retail Memo: Breaking News - Whole Foods Market, Inc. Files Lawsuit Against the FTC; Argues the Regulator Violated the Company's Due Process Rights....December 7, 2008: Retail Memo: New Seasons Market CEO Brian Rohter and Whole Foods Market Co-President Walter Robb Discuss and Debate the Subpoena Issue Online....

December 7, 2008: Retail Memo: New Seasons Market CEO Brian Rohter Speaks Out Again Today on the Whole Foods Market, Inc. Subpoena of His Company's Data....December 7, 2008: Retail Memo: Whole Foods Market Retains Top Washington D.C. lawyers and Politically-Connected Lobbyists to Plead its Case Against the FTC....December 6, 2008: Retail Memo: Fast-Growing and Scrappy Sunflower Farmers Market Ventures Deep in the Heart of (Whole Foods Country) Texas....

December 3, 2008: Retail Memo: More on the Whole Foods Market-New Seasons Market Subpoena Issue; FTC Holding Firm For February, 2009 Hearing....December 2, 2008: Retail Memo: Whole Foods Market, Inc. Closes $425 Sale of Stock to Private Equity Firm; Adds Members of the Firm to its Board of Directors....December 2, 2008: Retail Memo: Portland, Oregon-Based New Seasons Market CEO Brian Rohter Responds to Whole Foods Market's Paige Brady....

December 2, 2008: Retail Memo: Whole Foods' Paige Brady Responds to Yesterday's New Seasons Market Piece; Lots of E-Mails; Issue Heats Up On the New Seasons Market Blog....December 1, 2008: Retail Memo: Whole Foods Wants A Court-Mandated Financial Records Dump from Portland-based New Seasons Market; it Says For its Battle Against the FTC.

Natural~Specialty Foods Memo (NSFM) Archives

FTC v. Whole Foods - Linkage from the NSFM archives:

Click here, here and here for stories about the FTC-Whole Foods issue from our archives, including pieces about mass market and natural foods class of trade retail competitors.

Farm-Food Policy Memo USA: The New Secretary of Agriculture Tom Vilsack Speaks; And His First Message is An Interesting One

Shortly after Barack Obama was elected the 44th President of the United States in early November, 2008, a group of U.S. food and agriculture policy reformers that included the well known author and food policy reformist Michael Pollan ("In Defense of Food" and other books) and "foodie," organic and local foods activist, cookbook author and restaurant-owner Alice Waters, sent the then President-Elect a letter asking him to appoint a Secretary of Agriculture who would "put eaters first" in U.S. agriculture and food policy. The group also created an online petition in which they urged Americans who agreed with their position for an "eaters' first" Ag Secretary to post their names on it. The petition was then sent to the team Obama.

[Here are two links to the petition and related information from the farm-food policy activists: [Pollan Events Petition letter] [Pollan Events] 40,000 names!]

In early January of this year, then President-Elect Obama nominated former Iowa Governor Tom Vilsack to be his Secretary of Agriculture. As Governor of Iowa Vilsack was a solid supporter of the state's agribusiness industry, as well as a "go-getter" in bringing ethanol fuel plants, production and refineries to the Midwestern, farm-belt state, as one would suspect the Governor of Iowa to do if he wanted to get re-elected.

Vilsack was also a strong supporter of now Secretary of State Hillary Clinton for the Democratic nomination for President rather than President Obama. However, as soon as Barack Obama cinched the nomination, Vilsack was on board as a major supporter. It was Iowa in fact, where the President won the crucial first-in-the-nation key Presidential primary, that Barack Obama says was key to his victory in November, 2008.

Following the announcement that Vilsack would be the nominee for Secretary of Agriculture, feelings and opinions among the members of the U.S. ag-food policy reform movement ranged from outright indignation, to reservation that it would be "business as usual." For others, including Obama supporters, it wasn't such a shock. After all President Obama campaigned from day one as a moderate Democrat. He advocated change for sure but in a more evolutionary rather than revolutionary manner. Vilsack is a moderate Democrat, just like the President.

A few folks in the farm-food policy reform movement urged the others to give Vilsack (and President Obama since the Secretary carries out the President's policies) a chance. Michael Pollan has been one of those taking a more moderate voice regarding the Vilsack selection. Natural~Specialty Foods Memo (NSFM) has been urging the same. Seldom are things so black and white as it's either "Eaters First" or "Agribusiness First."

Vilsack, who was confirmed by the U.S. Senate just a little over two weeks ago, hasn't offered much publicly in terms of how he views the Department of Agriculture and U.S. ag-farm policy -- until now. That's probably good because we appreciate cabinet secretaries who take a couple-to-three weeks to first figure out where the bathrooms are before speaking out. And there are many bathrooms in the huge U.S. Department of Agriculture building where Vilsack now works.

In today's Washington Post, Secretary Vilsack gives his first full interview since being confirmed. The interview is written as a feature piece by Washington Post staff writer Jane Black.

And in the interview piece, the Secretary of Agriculture addresses just the issue the farm-food policy reformers are most concerned with: The focus and balance in U.S. agricultural and food policy between "eaters" (consumers), farmers and agribusiness. We toss in food companies and retailers of all shapes and sizes as well. They need to be at the table.

In fact, the story's headline is: "Vilsack: USDA Must Serve Eaters as Well as Farmers." Rather on-message for those looking to hear that message, we must say. And keep this in mind: If a U.S. Secretary of Agriculture who didn't have the trust and respect of agribusiness took the position Vilsack takes in the Washington Post interview piece, he or she likely would be the subject of tons of political backlash, as would the President that appointed that Secretary.

While Vilsack probably wouldn't have been our first choice for a variety of reasons, those who dismiss him out of hand should think about the fact that merely having a head of the U.S. Department of Agricultural who agrees across the board on the goals of the farm-food policy reformist movement doesn't mean he or she could get anything done. It's all about that credibility issue we mentioned. There are multiple constituencies to address, not just one. And like it or not that cuts both ways -- reformist and agribusiness (constituencies), along with a couple others.

Below is how Washington Post staff writer Jane Black begins her story about the new head of the massive U.S. Department of Agriculture, who she interviewed this week:

"When former Iowa governor Tom Vilsack was nominated as secretary of agriculture, many food policy activists, noting his reputation as a friend to corporate agriculture and ethanol producers, rendered a verdict that was swift and harsh: agribusiness as usual.

But Vilsack, newly installed in his regal but still-undecorated office on Independence Avenue, is out to redefine himself and his vision. In an interview this week, he called for a "new day" for the U.S. Department of Agriculture's sprawling bureaucracy, which he believes should champion not only farmers but also everyone who eats.

'This is a department that intersects the lives of Americans two to three times a day. Every single American,'he said. 'o I absolutely see the constituency of this department as broader than those who produce our food -- it extends to those who consume it."

The writer also quotes Michael Pollan in the piece, presumably after reading him the comments Secretary Vilsack made in the interview, published above and elsewhere in the story. In response, Ms. Black quotes Pollan: "He's definitely sounding a different note than his predecessors," said Michael Pollan, the reform-minded author of the bestseller "In Defense of Food." "Whether they'll be reflected in policies remains to be seen."

[Click here to read the full story from today's Washington Post: "Vilsack: USDA Must Serve Eaters as Well as Farmers."]

Indeed Vilsack is sounding considerably different than his predecessors. The mere fact he is speaking out makes him completely different than the George W. Bush Administration Secretary's of Agriculture the past eight years. Quick quiz: Can you name the last Secretary of Agriculture; the one who left with the outgoing Bush Administration? Not easy to do, is it?

Additionally, the fact that Vilsack is speaking out so early and so clearly (such clarity, which isn't a Washington D.C. trait, leaves him very little wiggle room later on) means he's going to have to follow-through on much of what he is advocating. Of course, keep in mind that Congress, with its power of the purse, will ultimately decide the direction of U.S. farm-food policy, which is something reformist need to always keep top-of-mind. In other words, don't just focus on and put all your hopes in President Obama.

But the Administration can certainly lead. Set the course. And it is a course that needs balancing. It's not about good "eaters" and small-growers and bad agribusiness and global food companies. If only it were so simple.

But balance indeed is needed. And as President Obama has been advocating, and so far walking the walk on, it's time to put aside the heavy partisanship. We suggest the same when it comes to farm and food policy. A little cooperation and a meeting of the minds from all sides will go a very long way.

[NSFM Editor's Note: The artwork at the top of this post is titled "The American Farm." It's by American artist Warren Kimble. You can learn more about the artist and his work here.]

Wine & Spirits Category Memo: 'Three Olives' Vodka Launching $15 Million Ad Campaign Designed to Create Smiles (and Sales) Amid Recessionary Blues

One of the hottest trends in the retail spirits category over the last couple years has been flavored "ultra-premium" vodka. And one of the hottest brands in the flavored "ultra-premium" vodka segment is "Three Olives," which is based in the United Kingdom but owned by a Jacksonville, Florida USA company called Proximo Spirits, Inc. The vodka is distilled in the UK and bottled in Maine, in the U.S.

"Three-O," as its called by its fans, has captured the flavored vodka craze among consumers that started some years ago at hip bars and nightclubs where flavors of all kinds -- chocolate, pomegranate, cherry and more -- found their way into Vodka Martini's designed by creative bartenders.

"Three Olives" brand Vodka figured that what's hot at the clubs and bars also should be hot -- and fun -- at home. The "ultra-premium" vodka, which comes in a 750-ml bottle and sells for $19.99 per bottle and up, comes in 16 different flavors, including: cherry, grape, root beer, orange and chocolate. It's the "Vodka-tini" in a bottle.

"Three Olives" brand and Proximo's product development and marketing strategy seems to be working. According to Nielsen data for the 52 weeks ending Jan. 10, 2009, "Three Olives" brand Vodka looks to be the fastest-growing "ultra-premium" imported flavored vodka brand in the U.S.

Now Proximo is betting that Americans will continue to buy (and buy even more) of its flavored vodka, even in the current recession, and is launching a $15 million dollar marketing, advertising and promotional campaign, which includes a complete redesign of the "Three Olives" Vodka bottle, according to a story today in Marketing Daily, a marketing publication produced by Media Post.

The Marketing Daily story says: " The multifaceted campaign, created by award-winning boutique agency Agent 16, conveys 'Three-O's' message that drinking premium vodka should be 'fun and exciting' by featuring a series of models showing delight at the various flavors, with the headline: "What's Your O-Face?" (One of those models is depicted at the top of this post in what is a reproduction of a full-page ad for the brand set to run in numerous U.S. consumer magazines starting next month.)

[You can read the entire story from today's Marketing Daily here.]

Economic recessions and spirits' sales

In recessions past in the U.S., sales of alcoholic beverages have remained steady, and even have shown growth. Most analysts attribute this to a couple factors: First, that in bad economic times a drink (or two or three) can be an affordable indulgence. Consumers might not be able to afford a new TV, computer or car (or even a nice sweater currently), but they can spring for a $20 bottle of "Three Olives" flavored Vodka, for example. The second a suggestion is that essentially bad economic times breed increased drinking, sort of a form of self-medication if you will. There's likely a bit of truth to both of these arguments.

Sales of spirits, wine and beer have largely held steady in this current recession. However there are signs that sales are slipping a bit. Recent reports show a drop of about 3-5% on average across the segments. That's not much of a drop though when you consider how much more severe the current recession is compared to say the one in 2001 and the recession of the early 1990's.

One can reasonably argue that those spirits brands like "Three Olives" Vodka, which market and advertise aggressively and creatively in bad economic times, stand a much better chance of not only preventing sales from declining but in actually increasing sales After all, in tough economic times, like in good times, it's all about stealing share from competitors' brands -- and for that matter from makers of other kinds of spirits, within reason of course. It's tough to turn a life-long whiskey drinker into a flavored vodka drinker, after all.

Proximo's brand "Three Olives" multi-media marketing and advertising campaign, which launches in March, is taking a very fun and light approach. Perhaps economically hard-pressed consumers will respond to that message and buy. After all, where else can you get all that fun (and taste) for about $20 a bottle in this severe recession? And as this recession gets even worse, which it will, even non-drinkers might want just a taste of chocolate vodka to help them remember what the good life was like a mere year ago.

Retail Memo - Breaking Developments: FTC, Whole Foods Market, Inc. Progressing in Settlement Talks; Could the Negotiated End-Game Be Near?

FTC. v. Whole Foods Market, Inc. - Settlement Negotiations

A source close to the settlement negotiations between the U.S. Federal Trade Commission (FTC) and Whole Foods Market, Inc. over the FTC's attempt to overturn Whole Foods' 2007 friendly $565 million acquisition of Wild Oats Market, Inc. on anti-trust grounds tells Natural~Specialty Foods Memo (NSFM) that the two parties are possibly getting close to an agreement that could end the legal battle over the merger.

As we reported in this January 29 story [Retail Memo - Breaking: Whole Foods Makes Settlement Offer to FTC; FTC Halts Action For 5 Days; Natural~Specialty Foods Memo Calls For A Settlement], Whole Foods Market, Inc. made a settlement offer to the FTC that if excepted by the regulator would end the near-18 month legal battle over the merger. In return, the FTC called a five day halt of action in its administrative process designed to overturn the deal.

That five day "cooling off period" ends on Thursday, February 5, just two days from today.

Here is what we've learned thus far: Our source tells us the FTC has reviewed Whole Foods' initial settlement offer but wasn't completely satisfied by what it contained. We are told one element of the offer involves a willingness on Whole Foods' part to sell a number of the former Wild Oats stores, now rebranded under the Whole Foods Market banner, in some of the 29 U.S. markets where the FTC says a combined Whole Foods-Wild Oats is a monopoly in what the regulator calls the "premium natural and organic retailing segment (PNOS).

After reviewing the Whole Foods' settlement offer, we're told the FTC sent the natural grocery chain's outside legal counsel back to company CEO John Mackey and his top executives, suggesting the grocer needs to sharpen its pencil a bit more regarding its settlement offer. We were unable thus far to find out if the FTC has made any specific suggestions to Whole Foods' lawyers regarding in what specific ways Whole Foods Market, Inc. needs to sharpen the settlement offer.

But it appears to be positive news that the FTC's first review of the offer is such that it wants to continue the negotiations. Although the five day FTC halt ends on Thursday, February 5, the regulator has the power if it desires to extend it if it believes negotiations are moving along in a positive direction.

Judge Friedman cancels upcoming hearings

In another development today that tends to reinforce what we're being told by our source -- that Whole Foods Market and the FTC could be near a settlement -- U.S. Federal Judge Paul Friedman has canceled a two day hearing he had previously scheduled on his court calendar for February 17-18, in which he had planned to hear arguments from the FTC and Whole Foods on a motion filed by the FTC, asking the judge to order the natural grocery chain to: (1) stop rebranding all remaining former Wild Oats stores to the Whole Foods banner, (2) have Whole Foods rebrand about 100 of the former Wild Oats stores its already rebranded to Whole Foods Market back to the Wild Oats name, and (3) put the operations of those about 100 stores in the hands of a third party entity, so that they would remain separate from Whole Foods Market, Inc.'s corporate ownership until the merger is resolved. [Read our January 25 story on the hearings here: Retail Memo: Judge Sets February Hearing Dates On FTC Motion That Could Result in Whole Foods Market Having to Rebrand 100 Former Wild Oats Units]

Judge Friedman's decision to cancel (not postpone) the February 17-18 hearings was the result of a joint request by the FTC and lawyers for Whole Foods Market, Inc. he said today in his announcement.

The fact that the FTC and Whole Foods jointly made this request of Judge Friedman, who has been hearing most aspects of FTC. v. Whole Foods Market, Inc. case since the regulator first opposed the deal in the summer of 2007 (and ruled in favor of Whole Foods before the FTC got that decision reversed by a federal appeals court), suggests to us strongly that the two parties are progressing in the settlement talks.

Additionally, although Judge Friedman offered no public explanation today about his decision to postpone the upcoming February 17-18 hearings other than to announce it, based on our close observation of the judge's behavior and his rulings in the case, we doubt he would have postponed the hearings had he not been given information from the FTC and Whole Foods Market that solid progress is being made in terms of negotiating a settlement of the merger case. Judge Friedman's canceling the hearings is a major indicator to us that a negotiated settlement could be forthcoming very soon.

Rumblings on Capital Hill & Whole Foods' D.C. team leader

Natural~Specialty Foods Memo (NSFM) also talked today to a Congressional staff member who works on a Congressional committee on Capital Hill in Washington, D.C. that deals regularly with the FTC. The senior staffer, who has been following our coverage in the Blog of FTC v. Whole Foods Market, Inc. since early December, 2008, said that although the merger case isn't a "hot button issue" at present on Capital Hill because of the "big hot button" issues of passing an economic stimulus package, solving the ongoing financial crisis, and the hearings on President Obama's various cabinet nominees, that there is a feeling among many members of the U.S. House and Senate that overturning the Whole Foods-Wild Oats merger has become far too significant of a priority for the FTC.

These members, Democrats and Republicans, have been lobbied on the issue by Whole Foods' Washington, D.C. lobbying firm, the Glover Park Group, which is connected heavily with Democrats on the Hill, as well as in some cases been talked to personally by Whole Foods Market's lead outside legal counsel on the case, former Clinton Administration special counsel Lanny Davis, who is a partner in the Washington, D.C. office of the Orrick Law Firm, where he specializes in the political aspects of legal issues like FTC. v. Whole Foods Market, Inc.

Lanny Davis is very well connected in Washington, D.C. political circles, most strongly with Democrats but also with many Republicans. Davis is sort of a "Political Zelig (Woody Allen's movie) or the political version of " Chance the Gardner" from the book and movie "Being There," in that he seems to have "been everywhere" and connected closely with powerful political figures throughout his life. Like 'Zelig" and "Chance," Lanny Davis appears to always be in the picture.

For example, Davis was a fraternity brother of former President George W. Bush when both were undergraduates many decades ago at Yale College at Yale University, where the two shared the same fraternity house. Later, as a law student at Yale Law School, Davis met and became best friends (to this day) with Hillary Rodham Clinton (then just Hillary Rodham). As a result of his close friendship with now Secretary of State Hillary Clinton, Davis became a close friend many decades ago of her husband, the former two-term President of the United States. (Perhaps there's something to that notion about making important connections at Ivy League schools after all?)

And it was to Lanny Davis that in the mid-to-late 1990's then President Clinton and former First Lady and now U.S. Secretary of State Hillary Clinton turned to as White House Special Counsel when they were neck-deep in a series of White House legal messes and scandals that to this day can be identified by single words -- "Whitewater," "Travelgate," "Troopergate" (brought back from the dead from when President Clinton was Governor of Arkansas), "Monica" and eventually the biggest Kuhuna of all: "Impeachment."

The Clintons' survived these legal scandals, including in the case of President Clinton not being impeached, with the help of Lanny Davis.

President Clinton has since gone on to be a widely respected and very popular former President, both at home and internationally, and former First Lady Hillary Clinton nearly won her party's nomination for President and is now President Obama's chief foreign policy voice as Secretary of State. Whole Foods Market, Inc. hired Lanny Davis to head up its legal and lobbying team in hopes that he can work some of that same magic in the case of FTC v. Whole Foods Market, Inc.

Davis also played a key role in Hillary Clinton's run for the Democratic party nomination for President. And as soon as she dropped out of the race and supported President Barack Obama, it was Lanny Davis who fast became the most vocal advocate in private to the Obama camp and in public on the cable news programs, for then Senator Clinton's being the Vice Presidential nominee. And when President Obama named then Senator from Delaware Joe Biden as his Vice Presidential nominee rather than Senator Clinton, it was Lanny Davis who behind the scenes and publicly started advocating Hillary Clinton for Secretary of State, a post she was officially sworn into today by Vice President Joe Biden.

The Congressional senior staffer told us today numerous members of Congress have made their feelings known to the FTC in one way or another that they would like to see a settlement of the merger rather than seeing it drag on and go to trial. The FTC has an administrative trial set on the merger for April 6, 2009. Of course, nobody will publicly confirm such messages being sent because of the potential political land mines associated with saying so in public. We should add that we have no information or evidence that any messages sent by members of Congress are or might influence FTC Commissioners, who once appointed hold their positions for a set term.

What we do feel confident in reporting is, based on our sources, it appears that progress is being made in the settlement talks between the FTC and Whole Foods Market, Inc. We asked our key source today (the one initially sighted in the lead paragraph of the story) to handicap the odds of the FTC and Whole Foods Market, Inc. reaching a settlement by Thursday, February 5, when the five day FTC halt ends. He initially said that was impossible for him to do. However with some gentle encouragement (we explained since he was talking to us on the condition we wouldn't print his name it was fine to handicap it) he gave it a 60%-40% as of this afternoon in favor of the two parties reaching a settlement by Thursday.

Of course there's no way to determine right now if those 60-40 odds are indeed real. But whether its a 60%-40% or a 50%-50% proposition (or even if there's a mere 10% chance of settlement), the state of negotiations between the FTC and Whole Foods is 100% beyond where it was just one week ago when there were no negotiations going on, and for that matter far beyond what the promise of a negotiated settlement has been since the FTC first opposed the merger in the summer of 2007.

In our analysis, a settlement, and thus the negotiated end-game to the long-running case of FTC v. Whole Foods Market, Inc., could well be near. Stay tuned.

Promotional Merchandising Memo: Whole Foods Market's Super Bowl In-Store Promotional Merchandising Message: 'Value'

Merchandising: Super Bowl Sunday is 'Game-Day' For Food Retailers

Today, Super Bowl Sunday, is America's most "official" unofficial holiday. It's celebrated by more Americans -- who either gather around the living room or family room TV with family and friends, the coffee tables filled with snacks and beverages, or go to a pub or pizza parlor to view the game there with a gang of fellow celebrants -- than probably all of the official or federal U. S. holidays accept Thanksgiving, Christmas and New Years.

And a small percentage of Americans, as well as even a few folks from other nations, travel to wherever the Super Bowl is being held in order to watch the big game live. And in Tampa, Florida, where this year's Super Bowl is being held, it's a two or three day (OK, even four days for some) "holiday celebration," with pre-game festivities that started yesterday and a full schedule of events leading up to the big game later today.

For those watching the game at home, at a pub or live at the stadium, the celebration doesn't usually end when the game is over either -- it tends to go on until late Sunday night. The Super Bowl is an "event" that happens to include a major football game along with it rather than a football game that also has some celebrating before and after it.

Super Bowl as a retail merchandising promotional event

Super Bowl Sunday is a major merchandising and promotional event for food and grocery retailers. Beginning early in the week, leading up to today's game, grocers bring out their Super Bowl Sunday in-store displays -- snack foods, beverages, prepared foods, snack-related fresh meats and produce, non-foods, you name it -- and signage. Most retailers also focus and lead their weekly advertising circulars (and Web sites) and other media on Super Bowl Week with game related food, beverage and related items.

The event offers a great opportunity for food and grocery retailers to sell lots of higher-margin impulse items -- and more items in general -- that they would normally be able to sell in late January and Early February were the Super Bowl not happening. But because it is happening today, Super Bowl Sunday week is a grocer's (sales) holiday as well.

A pre-Super Bowl field trip to a few Whole Foods Market stores

Since Natural~Specialty Foods Memo (NSFM) has been writing regularly about Whole Foods Market, Inc.'s battle against the U.S. Federal Trade Commission's (FTC) legal challenge to overturn its friendly 2007 acquisition of Wild Oats Market, Inc. (just scroll down the Blog for numerous recent posts and links to past posts), along with the natural grocery chain's struggles of late, including a 71% drop in its stock value over the last 52 weeks, a 40% drop in quarterly income in its last reported fiscal quarter, and other negatives, we decided to visit and check out a few Whole Foods Market stores and see what the leading natural-organic foods' class of trade retailer in the U.S. was up to in terms of Super Bowl Sunday in-store merchandising and promotional activity.

Therefore, on Friday and Saturday we visited a number of Whole Foods Market stores, our eyes and merchandising radar focused on Super Bowl-related in-store merchandising and promotional themes, concepts and product displays.

Below are the highlights of what we found during our field trip:

~First, Whole Foods Market is using an overall theme of "value" in-store with its Super Bowl Sunday promotions and product displays. Regardless of the product displayed, there is a tie-in to the natural grocery chain's ongoing "value-based" merchandising and marketing that it started last year.

For example, in a number of Whole Foods stores we visited, the stores' prepared foods departments were featuring party platters marketed as "Ready to Save Value Packs." The value packs, which included ready-to-heat-and-then-eat Buffalo chicken wings, deviled eggs, celery sticks (no heating on those two, just ready-to-eat) with dipping sauce and other related game day snacks, were placed in dedicated freestanding coolers in both the prepared foods departments, as well as in other parts of the store. The message and pricing was all about "value." The "value pack" items were basics rather than gourmet fare, as described above.

~Value also was apparent in the choice of displays throughout the stores. Many of the Super Bowl-related food and beverage items we saw in the stores were Whole Foods' private label products, including its more "value-oriented" "365-Everyday" store brand. The store brand was discount priced (with signage indicating that fact), and in many cases the retail prices were comparable to similar conventional game day food and drink items being promoted at conventional supermarkets nearby the stores. The Whole Foods private label product displays were all over the stores -- on end-caps, in the aisles, ect. The message was one of "value," be it the pricing on a jar of natural salsa, a package of snack chips or on a can of olives.

~We also noticed Whole Foods' heavily promoting natural snack items from big company vendors like PepsiCo's Frito Lay. Two of the stores we toured had massive "in-aisle" displays of the company's Stacy's brand All-Natural Pita Chips, priced at a substantial discount. The message: "value."

~Pretty much all of the branded and private label snack, party food, beverage and related game day items displayed in the stores had a "value theme." And instead of numerous higher-end or premium organic items like we saw during last year's Super Bowl displays in Whole Foods' stores, this year there was a real focus on more basic and more inexpensive "value-oriented" items, this included reduced-priced micro-brew beer brands as well, rather than numerous higher-priced craft beers like we observed last year.

~In terms of Super Bowl themes and signage, we noticed in-store signs and banners featuring "game-day" slogans and tag lines such as: "It's Game Time," "Get in the Game" and "The Game Plan." The signage took the form of hanging ceiling signs, shelf talkers, display headers, posters, aisle violators and more. No two stores had the exact same signage or combination of signs, which makes sense because of Whole Foods' decentralized merchandising philosophy and program.

~We also saw lots of creativity in the stores around the Super Bowl theme, everything from graphically attractive hand-lettered and hand-drawn signage to more commercially-produced graphics, as well as a mix of both in a couple stores we visited.

~We also observed lots of great cross-merchandising tie-ins -- snacks and beverages, cheeses and crackers and the like. In one store we liked a display that incorporated non-foods items like eco-napkins, eco-cups and other related items with snacks and food and beverage items, all tied-in on the display with signage touting the value message.

Summary:

It's apparent to Natural~Specialty Foods Memo (NSFM), based on the Whole Foods Market stores we visited, that the natural grocer gets it that it needed a value proposition and message for its Super Bowl promotion this year, which is something all retailers, of all formats, need this year in this severe recession, in our analysis.

We found the particular focus on the Whole Foods' store brand items in the displays interesting but not surprising. There's a much more extensive representation of the store brands, particularly the "365-Everyday" value brand, this year in the stores compared to the Super Bowl Sunday promotional displays we saw last year. We aren't surprised because it is with these store brands, especially "365-Everyday," along with branded natural and organic items from bigger suppliers who offer greater promotional allowances, where Whole Foods can best make its 'value statement" (read price-impact) right now, in most cases.

But the stores we visited also had numerous artisan and specialty brands displayed as well, particularly in cross-merchandising-type displays. These included cheeses, craft beers, sodas-beverages and a number of other game-day related food and drink items. These higher-margin items, cross merchandised among lower-priced ones, can, if bought by shoppers, add some margin enhancement for a grocer. And because the Super Bowl is such a once-a-year "special event," many shoppers (mostly men) likely splurged a bit and bought the higher-end items, even though they might have kicked themselves (or were kicked by the significant other) for doing so later at home.

Lastly, we noticed shoppers gravitating considerably to the "value oriented" Super Bowl displays, grabbing multiple items in the snack, prepared foods value pack and other displayed selections. it was clear to us in observing, that these shoppers were responding to the "value message." After all, most of us have to right now. And grocers, regardless of format, need to emphasise "value" at every turn, in our analysis.

We don't know how good overall pre-Super Bowl Sunday (and Super Bowl Sunday) promotional sales were this year for Whole Foods Market -- and the individual stores won't know until the end of business today -- and the grocery chain eon't know fully until Monday morning.

But based on the "value-oriented" themes we found in the stores we visited, along with the numerous reduced-price displays in those stores, it's likely Super Bowl-related sales for the natural grocery chain will be much better for the Super Bowl event this year than had the grocer not focused so much on the "value proposition" and the more "value-based items" in its stores for 2009, instead of promoting more higher-end and premium products and themes. Doing the former ("value-based") could portend a good Super Bowl event selling weekend for Whole Foods Market.