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    Published on: October 17, 2002

    We wrote earlier this week about a promotion we saw at Stew Leonard’s where the store’s ice cream parlor offered a free ice cream cone for every “A” that students bring into the store on their report cards. Well, according to Kate Lawten, a member of the MNB community, there is a caveat:

    “I also noticed this promotion at Stew's, and last night I was there and happened to have my recent college transcript in my purse- I went up to the counter and the manager rejected my A's from last semester saying it was for eighth graders and under- I guess their # 1 philosophy, "The customer is
    always right," doesn't apply at the ice cream parlor.”


    We suspect that one of two things will change when the folks at Stew Leonard’s read this comment. Someone will re-word the sign, or someone in the ice cream parlor will be given the gentle word about how to handle college students with ice cream cravings and good grades.




    Regarding the move toward irradiated ground beef, which seems to be picking up extraordinary momentum at stores around the country, MNB user Don Sutton wrote:

    “Both the grocery and the beef industries need to take a look at the labeling of the irradiated product and the critics who are wading in with fear as a substitute for science. The word irradiated sounds too much like radiation. It gives the fear mongers a couple of quick points right off the bat.

    “I would suggest that they come up with a better name for the process. Considering the mechanics of the Hy-Vee process, something slightly friendlier, like electro-sterilized might be worth looking into. This reminds me of the Regan name switch in the 80's when he changed the name of the MX missile to the Peacekeeper. It worked. Think about it.”


    We’re not sure we agree on this one. For us, a missile is a missile, and we’re not fooled by benign names given tools of destruction.

    And we think there may be something to be said for the word “irradiation” actually being understood as not being scary, but beneficial.




    On the subject of healthier foods being available in supermarkets, one MNB user wrote:

    “One of the interesting things I DON'T see in most retail grocery outlets is the utilization of information products: books, videos, CDs, etc. Why do we rarely find cookbooks in grocery stores? I've been waiting for someone to write and distribute (in stores) a book on healthy eating in a hurry AND on a budget. Maybe if the brick and mortar operations continue to ignore this, Internet marketers can get the ball rolling.”



    We reported yesterday that it looks like Krispy Kreme is going to Japan. Which prompted an email from one MNB user:

    “You will have just died and gone to heaven when they have Krispy Kremes everywhere. Then you can do your interval training for your marathon by sprinting from location to location.”

    Maybe it’ll make the aching tendons in our knee hurt a little less…



    Yesterday’s report about Superquinn getting an award for its environmentally friendly reusable grocery bag generated an email from a member of the MNB community:

    “Re your enthusiasm about the bags at Superquinn's---There has been absolutely nothing stopping you, or anyone else who is concerned about the environmental impact of bags, from taking your own bags with you to the store. I can remember back in the early days of the current save the earth movement when canvas bags were being promoted. And there were a few establishments that used to offer a few cents per bag as a rebate for every bag you brought along to reuse. I think there are even a couple of places such as Lillian Vernon's catalog that have been offering personalized bags.

    “In the end it all boils down to the fact that it is just not always convenient to remember to bring your bags along, until there is a financial incentive sufficiently large to get your attention.”


    We agree that until people get charged for plastic bags, reusable bags won’t get any traction in the US.




    On the self-checkout issue, one MNB user wrote:

    “I find the instances where there are self-checkouts installed but never available to use the most irritating. I have yet to be in a Kroger's when the area wasn't roped off; however, it's only fair to say that I'm not there that often and not at peak hours. And just this past week I was in a Wal-Mart with long lines, and all the self-checkout screens were displaying a Not Available message. That was on a weekend at midday.”




    Finally, we reported yesterday about a study from Prevention magazine and the Food Marketing Institute that says "...more than a third of shoppers (35 percent) claim that a major reason they don‚t eat a healthy diet is because nutritious food options are not available from fast food and take-out restaurants, and preparing healthy meals at home requires too much time." Which got MNB user Kate Munson to send us an email:

    “Ah, the myth of the healthy meal. In the time it takes to load a family into the car, place your order at the drive through and drive back home, a three
    course healthy meal could be prepared. No one's teaching the consumer to do this - at least no one's throwing money at educating the consumer the way the fast food chains throw money at keeping the consumer hooked on fat-filled convenience.

    “Besides struggling with the fast food industry, the consumer must also battle themselves. It's the consumer who talks with one side of their mouth about healthy eating while the other side eats the cheeseburger. You have to please both.”
    KC's View:

    Published on: October 17, 2002


    • Kraft Foods Inc. posted third quarter results. Pro forma worldwide volume was up 3.3 percent, with Kraft Foods North America up 3.0 percent and Kraft Foods International up 4.2 percent. Worldwide volume increased 6.9 percent. Net earnings were up 72.8 percent to $869 million.


    • Coca-Cola Enterprises today reported that third-quarter 2002 net income applicable to common shareowners was $190 million. Third-quarter 2002 EBITDA totaled $704 million, up 18 percent versus comparable 2001 results. Net income applicable to common shareowners totaled $414 million for the first nine months of 2002, with EBITDA of $1.88 billion, up 16 percent versus 2001.


    • Wal-Mart Mexico (Wal-Mex) reported net profit up 12.1 percent compared with the same quarter a year ago and EBITDA up 17.5 percent. Total sales for the quarter reached 24.258 billion pesos, up 13.4 percent from the third quarter of 2001. Same-store sales, which measure only those stores open at least a year, grew 3.5 percent in the quarter.

    KC's View:

    Published on: October 17, 2002

    The Grocery Manufacturers of America (GMA) and NACS announced they will launch a new pilot to test the NACS version of eXtensible Markup Language called NAXML in mid-November.

    NAXML improves on the existing eXtensible Mark-up Language, a set of number codes that describes text within a document to convey information electronically. The process provides a more user-friendly Web-based technology to small and mid-sized companies that virtually eliminates paper-based transactions while offering daily product activity broken out per store location. More than half of the nearly 125,000 convenience stores in the United States are operated by small businesses.

    "Flash Foods is looking for efficiencies around labor in terms of inputting data into our information system," said Jenny Bullard, CIO of Flash Foods, which is participating in the pilot. "We want to acquire more accurate data and the ability to process information in a way that allows for ad hoc reporting."

    "This pilot program represents a major step forward for the NAXML program and we are very pleased to have Flash Foods as the NACS participant," said John Hervey, NACS' chief technology officer. "We look forward to reporting results at NACStech 2003 next April."
    KC's View:

    Published on: October 17, 2002

    Approximately 47 percent of out-of-stocks are caused by inadequate store ordering and forecasting and 25 percent by poor shelf management, according to a new study by GMA, Food Marketing Institute and CIES – The Food Business Forum, that examines the issue globally. This means that 70-75 percent of worldwide out-of-stock products are triggered – and must be fixed – at the retail level.

    The study gathered data from 52 previously published reports to develop an overall picture of the out-of-stocks situation on a global scale. The out-of-stock rate has not declined from earlier reports, although there have been advances in supply chain management, category management and inventory-tracking technology. The study found that the world average rate for out-of-stocks is 8.3 percent, with Southeastern Europe showing the highest out-of-stock rate at nearly 11 percent on average and Northwestern Europe with the lowest out-of-stock rate at an average of more than 7 percent.

    Other study findings include:

    • When faced with an out-of-stock situation, an average of 31 percent of consumers worldwide said they go to another store and 26 percent said they substitute a different brand. Nine percent said they do not purchase any items at all.

    • Although the retailer, manufacturer and industry as a whole are impacted by the consumer’s reaction to an out-of-stock product, the study revealed the implications for a typical retailer are greater than originally thought with an average loss of four percent of sales when consumers cannot find the product they are shopping for because it is out-of-stock.

    The study, funded by a grant from The Procter & Gamble Company and conducted by researchers at Emory University, the University of St. Gallen and the University of Colorado, examined 661 retail outlets, 32 consumer goods categories and surveyed 71,000 consumers in 29 countries
    KC's View:

    Published on: October 17, 2002

    Drugstore.com, the online retailer of health, beauty, wellness and pharmacy products, announced that it recently served its three millionth customer.

    "This is a huge milestone for drugstore.com," said Kal Raman, president and CEO for drugstore.com, inc. "Not only have we served our three millionth customer just three and half years from the store's launch, but we've done so while making major improvements to our bottom line and despite tough economic conditions."
    KC's View:
    These are important milestones in the dot-com biz. And it shows that companies like Drugstore.com are in business for the long haul.

    Published on: October 17, 2002

    Wal-Mart Mexico (Wal-Mex) announced that it is resigning from ANTAD, a Mexican trade group, because the group wants to prohibit its members from advertising prices by name.
    KC's View:

    Published on: October 17, 2002

    The Associated Press reports that Kmart Corp. is testing a new logo, replacing its trademark red and blue sign with a large gray and lime-green `K,' with the word `mart' scrawled in white inside the upper diagonal of the `K..’;

    The new sign is on one of the bankrupt retailer's stores north of Detroit, the interior of which also serves as a prototype - with changes that include brighter lighting, wider aisles and a different floor plan.

    Kmart management says that the new logo is just being tested.
    KC's View:
    Green. The color of money? The color of envy?

    You decide.

    Published on: October 17, 2002

    Newsday reports that a new study from Whole Foods Market suggests that 55 percent of households use at least some organic products, and six percent eat organics regularly.

    The study reportedly also showed that consumers bought organic because they preferred it for perceived superior taste, quality and freshness.

    The study was released just days before the US Department of Agriculture (USDA) new organic labels start appearing in stores, establishing standards for what can be labeled as organic.
    KC's View:

    Published on: October 17, 2002

    The US Department of Agriculture (USDA) reportedly has received a complaint questioning the integrity of the new organic labeling requirements going into effect next week.

    The complaint, filed on behalf of a number of activist groups, challenges the USDA because no independent scientific panel has been named to review the certification process.
    KC's View:

    Published on: October 17, 2002

    The Kansas City Star reports that Wal-Mart plans to open two Neighborhood Market units in Overland Park, Kansas, in 2004.

    The plan is the latest suggestion that Wal-Mart has gotten the 43,000 square-foot Neighborhood Market format closer to where it feels an extensive, national roll-out is possible. There are about 35 open now, with another 25 announced for next year.
    KC's View:
    Let’s repeat the story that MNB carried and that virtually nobody else reported…

    …That a list exists of more than 200 specific addresses where Wal-Mart would like to have Neighborhood Markets open by the end of next year.

    …That the company would like to have more than 500 of them open by the end of 2006.

    Wal-Mart doesn’t go into these kinds of details when it is talking about its global expansion plans, but we know somebody who has seen the list. It is national in scope, and has the potential to affect supermarkets and c-stores…and to change the face of the retailing landscape.

    Published on: October 17, 2002

    Pathmark Stores, Inc. announced that Eileen Scott, the company’s executive vice president of store operations, has been named the new CEO of the supermarket retailer, replacing Jim Donald, who has departed for Starbucks Coffee Company.

    Frank Vitrano, currently executive vice president, treasurer and CFO, has been named President and Chief Administrative Officer.

    Steven Volla, a member of Pathmark's Board of Directors for the last 8 years, will become Pathmark's non-executive Chairman.
    KC's View:

    Published on: October 17, 2002

    Jim Donald, the former Wal-Mart, Albertsons and Safeway executive who has led Pathmark Stores as the company’s CEO since 1996, has decided to leave the supermarket retailers and join the Starbucks Coffee Company as president of Starbucks North America.

    Donald is generally given credit for helping to rescue Pathmark from being over-leveraged and under-shopped just a few years ago, and piloting its emergence as a public company in 2000.

    Donald will succeed Howard Behar, the former head of Starbucks Coffee International who came out of retirement to run the North American division of the company in 2001. He will report to Orin Smith, president and CEO of Starbucks Coffee Company.

    "Jim's 32 years of experience in the retail and food industry will be of great value to Starbucks as we increase our offerings and expand our store base in North America," Smith said "He has exceptionally strong skills in running a multiple-unit distribution system as well as in-depth knowledge of the food industry."

    Howard Schultz, Starbucks’ chairman, said, "Jim is an exceptional leader and a world-class merchant. He is well known for his people-oriented style, which makes him a perfect fit with our culture, values and guiding principles."
    KC's View:
    We saw Jim Donald speak at Raphel Marketing’s Supermarket College just a couple of months ago, and were mightily impressed with his passion, energy and enthusiasm for the supermarket business in general, and the associates who work at Pathmark in particular. This is certainly a big loss for Pathmark, and a big gain for Starbucks.

    The addition of Donald to Starbucks’ executive suite speaks volumes about the company’s intentions about both retail and the foodservice industry. Just yesterday, MNB reported on how the company continues to work to develop new foodservice concepts that it hopes will launch it into an entirely new realm.

    Clearly, Starbucks is looking in new directions. It is going to put cafes in every new Target that gets opened, and just yesterday it announced that it has signed a deal with Pittsburgh-based Giant Eagle that will allow it to open freestanding 900-square-foot Starbucks licensed locations inside five of its stores. And, it announced that Briazz, the Seattle-based sandwich chain, will supply sandwiches and soups to 40 Chicago-area Starbucks stores in a test program for both companies.

    None of this is new strategy. But it seems to have extraordinary momentum.

    Jim Donald’s move to Starbucks suggests that as aggressive and ambitious as the coffee retailer has been, there are plenty of surprises still in store for the companies that compete with it.