business news in context, analysis with attitude

Lots of reaction to yesterday’s ‘Hot Rumor” story about Safeway in the US. Several sources told MNB that Safeway has cancelled all travel plans for its executives, leading the rumor mill to buzz about exactly what’s happening with the nation’s third biggest food retailer.

One member of the MNB community wrote:

“Going into Safeway locations in Colorado and Wyoming, it’s pretty evident they're losing business to every major competitor. Even Albertsons, which is not the cheapest, still beats Safeway on price…

“The Safeway I was in last night was over priced and just plain out of touch with reality. I tend to think some of the problem is Safeway hasn't reacted
yet to Wal-Mart's entry into the food business. Safeway on most things I saw was 10-20% higher than Albertsons (which as of now does not require a
card to get its best deals in this market)

“Employee morale at Safeway seems to be lower than anywhere I've seen. I think knowing that the company has to sell Dominick's and will likely end up
divesting Philly stings badly.

“I'm going to go out on a limb and guess that Dominick's might end up being sold to Meijer or possibly even Kroger. (Kroger is itching to get into Chicago, and Meijer wants to expand, and although the Dominick's locations are small, they're still usable for some of Meijer's ambitions)

“As for the future of Dallas, since Winn-Dixie pulled out, the only logical buyer for Tom Thumb/Randalls would be HEB or Minyards. Kroger couldn't buy the Winn-Dixie locations in Texas, and I believe Albertsons is already maxed out as well, but the two regional ones would be able to.

“The Chicago, Dallas, and Philly problems stem from Safeway's lack of understanding of the markets they're in. Chicago is a two-grocer town. Dominick's had a LOT of loyal customers and watching Safeway's gutting of the stores has sent that business to Jewel/Osco-Albertsons.

“Safeway needs to basically leave the chains alone they bought and let them run as they did prior to the takeover.

“Basically what I'm feeling come out of Safeway is a major change in business philosophy. Cutting expenses at the top is a good way to start, but why they left that division on the east coast is beyond me. I suspect the end of Safeway is coming. More than likely it’s going to be broken up and sold
to various operators in various markets.”

These kinds of comments are fairly representative of what we’re hearing in the marketplace.

Another MNB user wrote:

“Maybe they can't fly because they saw the figures that came out yesterday stating that " Wal-Mart's grocery sales are up 25% in the last year. In my opinion, what they have done to Genuardis, Tom Thumb, Randalls and Dominicks is total mis-management and now they are going to pay for it big time.”

According to another MNB user, there may be another reason for the Safeway travel ban:

“Maybe Safeway is afraid of terrorist activity and they do not want their top executives traveling via airlines or corporate planes due to code orange.”

To be honest, we never thought of that…and none of our sources raised it as a possibility.

And there was at least one member of the MNB community, Bob Schuller, who felt that we were treading on thin ice with the “Hot Rumor” approach:

“Irresponsible speculation on your part. Smacks of ‘yellow journalism’ at its best.”

Objection noted. And taken seriously.

We wrote yesterday about a new Skippy-peanut-butter-in-a-tube product, which prompted the following email from MNB user Cheri Barker:

“My kids have been using peanut butter in a tube for years for backpacking. The product is called Squeezers and comes not only in peanut butter, but jelly and cheese versions as well. It's much easier to carry around in your pack than a jar as the small tubes fit in nooks and crannies that the jar won't.

“It'll be nice to get the same type product locally instead of via mail order....and hopefully the peanut butter will taste more like real peanut butter. But hey when you're on a 50 mile backpacking trip in 5 days, just about anything tastes good when you’re hungry and not a store in sight!”

Regarding Wal-Mart’s new export office, MNB user George Morrow wrote:

“I have found their International and Export people to be the same as everyone else in Bentonville - professional and just wanting to get the job done. I have seen nothing to indicate that they would ask for lower prices based on FOB programs.”

We noted yesterday about Supervalu converting Metro stores to its Shoppers Food Warehouse name, which got MNB user Glenn Cantor thinking:

“The announcement that Supervalu is converting its Baltimore-based Metro stores to their Shoppers Food Warehouse banner is curious, given the equity that was earned on the Metro brand name.

“At some point only 3 or 4 years ago, Metro was promoting itself as the #2 food chain in the Baltimore market, and #1 in customer satisfaction. Then came the Supervalu purchase of RichFoods. Once again, local marketing expertise gave way to efficiencies and cost cutting, and the erosion of brand value, thereby proving the point that you must continually invest in your brand and not take anything for granted. What a shame!”

We wrote the other day about California-based Peet’s Coffee opening up a café in Seattle, facing off with Starbucks in its home market. This prompted one MNB user to write that Seattle is not completely unaware of the Peet’s charm – its coffee has been sold for years at Larry’s Markets there.

We posted an email yesterday from an MNB user about how retailers could help consumers deal with obesity issues…which in turn prompted an email from MNB user Susan Kemp:

“I strongly agree with David Whitesel's comments regarding retailers offering cooking demonstrations featuring their products. I have been an enthusiastic Whole Foods Shopper for many years, but always passed by the "alternative protein" section, i.e, tofu, seitan and tempeh. Whole Foods offered cooking classes featuring tofu and now tofu is in my cart every week. Offering samples is great, but if I can't recreate it at home, it won't become a staple in my pantry.

"Give me tofu and I eat for a day, but teach me to cook tofu..."

And, we got an email about Tops Markets’ new affiliation with Montana Mills:

“Maybe what we are seeing is the use of basket surveys by this retailer. This is exactly what was presented to a leading grocer in Texas, and was looked at side ways, like they didn't understand. What Tops is saying is, we have evaluated our top quintile of customers, and note the trip incidence of fresh and perishable products in the basket. We also see that our customers are going and shopping other channels (Channel Blurring). Armed with this information we can make an assessment that our customers shop us for fresh/perishable products and buy them more in our account than other channels. You want a point of difference vs. Wal-Mart, this is it. If they can convert 1/10th of there top quintile shoppers to not go to other channels, and increase their trips to Tops they have won the game, and found their consumer niche. Very nice job by Tops Markets!!!”

Yesterday’s MNB featured a piece about McDonald’s removing its Big N’ Tasty burger from its Dollar Menu, saying that sales weren’t strong enough to compensate for low margins. It’ll be replaced by a Double Cheeseburger, which the company says is smaller and cheaper to make, and therefore more profitable. We suggested that the flagging sales of the Big N’ Tasty actually are an indication that it was anything but tasty.

One MNB user disagreed:

“Aren't you burying this a bit too soon?

“Done correctly, it's the best tasting burger at its price on the market. Done sloppily, as does happen too often, it's just another fast food joint hamburger.

“I read the removal from the $1 menu as their stop to giving it away in an attempt to get more customers to try it, and to stop losing a great deal of money in so doing. Now, whether or not enough will buy it at the regular price is another question for them. I have never like their "Big Mac" so this was a welcome addition as I had tired of Burger King's fiddling with their offerings.”

MNB user Richard Sokolnicki came up with a line that we wish we’d written:

“The real problem with the Big N' Tasty is that McDonalds is having a tough time getting a cardboard supply with the right fat content.”
KC's View: