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    Published on: February 21, 2003

    Lots of reaction to yesterday’s essay about the need for the food industry to develop new formats that cater to a new generation of consumers, as opposed to depending on traditional formats to lure this new demographic target.

    MNB user Terry Shirley wrote:

    “Excellent point regarding changing habits in lifestyle and impact on food stores. This is a great opportunity for niche, and independent operators to take the lead, and many probably are. As usual, the big chains will follow suit once they've seen success from the innovators.”

    MNB user Norma Gilliam added:

    “You are absolutely right on the money! Those younger consumers will buy food, they just may change where they buy it. Take a look at where the fast, casual restaurant business has grown. When retailers are looking at their competition, they need to take a look at the local popular restaurant menus. Not only do these young people not know how to cook, many of them either don't have the time, or choose to spend their time elsewhere.

    “By utilizing demographic information and keeping a close look at the competition the retailer can compete, but they may have to make some changes to the way they do business with this group. Offering cooking classes and convenient foods will help, but they had better do a more efficient job with customer service as well. This is an impatient group of young consumers that have not learned to be "loyal" to the old ways and brands. They have money to spend and will choose to spend it in places that deliver the goods and services they desire.

    “It's not easy for any retailer to market to just one group of traditional consumers. Tomorrow's success will come from those who can creatively, effectively and efficiently (profitably) market to several generations at one time.”

    MNB user Bryant Wynes brought another perspective:

    “I wholeheartedly agree with your observations - and your challenge to the food industry to address the needs of various demographics, especially younger consumers, if it is to enjoy a viable future. Unique or new prototypes have to be explored.

    “But as a friend of mine from the Ozarks used to say, "I'm not sure this dog will hunt."

    “The industry's roots are set deeply in a "one size fits all" approach compounded by an unwavering belief that all consumers are the target audience. We've spent decades building an infrastructure of stores, distribution, operations and merchandising which is financially dependent on large sales volumes - sales that have inherently come from appealing to mass markets. Too often we hesitate to target one demographic group, fearing we'll turn off others, thus turning our backs on large chunks of potential volume.

    “Developing alternative formats which appeal to specific customer segments, requires a leap of faith that only a few are willing to exhibit. Even fewer give such entrepreneurial ventures the support, commitment and, most importantly, the time necessary to prove their worth. Remember HMR?

    “We need to view these efforts with "new eyes," evaluating every aspect of the business by different standards than those traditionally used to measure success. We must be willing to learn from our experiments and integrate our learnings into the store. We've got to give them the time to develop. (Wal-Mart’s Neighborhood Market concept is a great example. How long did they take and how many stores did they open before they "got it right?" Are we sure they're finished yet?)

    “There is certainly no lack of new ideas. Great opportunities abound, and there are true sparks of ingenuity among some of the more marketing-savvy chains and independents. But we'll not make the kind of strides Crate & Barrel has exhibited by trying to put a round peg in a square hole.”

    Well, we never said it would be easy.

    In a commentary linked to one of our stores yesterday, we noted thatFortune had ranked Wal-Mart as the most admired company in America, while another survey from the American Customer Satisfaction Index (ACSI) suggested that the Bentonville Behemoth had declined a bit in consumers’ opinions.

    One member of the MNB community (who happens to be a Safeway executive) wrote:

    “I believe the Fortune survey was for investors and the ACSI was for shoppers. The interesting part is that Safeway's shoppers say they are increasingly satisfied with their experience, contrary to the inaccurate depictions of the company frequently seen in this space.”

    It was precisely our point that different groups see the same company differently…it was, in fact, comparing apples to oranges.

    As for inaccurate depictions of Safeway, we would refer you to the “Department of Clarification” story above.

    Our story about possible problems at Target prompted the following email from MNB user Roxanne Diaz:

    “As a native of Minneapolis and all around bargain shopper, I am a big fan and frequent shopper of Target (or as I fondly say with feeble French accent, "Targe' Boutique").
    “I have a different perspective, however, on Target missing the mark. They are with out a doubt the higher-end retailer amongst the competition, which seems to leave them more vulnerable to economic downturns in general. But where they've really lost ground is in customer service.

    “Long before you could buy Calphalon or Liz Claiborne at Target, back in the days when there really wasn't much in the way of merchandise to distinguish them from Kmart, there was customer service. Simple, old fashioned and pretty consistently good customer service. Clerks smiled and greeted customers at check out, they put bags into your cart, they exchanged niceties, and you had a sense that employees knew this was expected of them.

    “As much as I have really enjoyed the expanded merchandise and higher quality items at very competitive prices, I really miss the helpful, friendly attitude that used to be the standard at Target stores everywhere. I wish I could say that the slip in recent years was isolated to my area, but I travel for business frequently. I have been known to visit Target stores in different states in the same day (lets not even discuss why) and across the board they have lost a critical distinguishing factor: service.

    “If Target has forgotten how important it is for customers to feel like employees are helpful and friendly, maybe they should ask Kmart for a little first hand experience.”

    That’s a cautionary note not just for Target, but for retailers everywhere.

    Our story about the possibility of a new chain of Juan Valdez-themed coffee shops generated the following email from an MNB user:

    “Oh goodie! Finally a boutique coffee store for folks who like a weak brew!”

    Obviously a Starbucks fan…

    And on that caffeinated note, we wish you a terrific weekend. We'll be back Monday morning with an all-new edition of MorningNewsBeat, when we'll be on location at FMI's MarkeTechnics conference in Dallas, Texas.
    KC's View:

    Published on: February 21, 2003

    • Bruno's Supermarkets, a division of Ahold USA, announced that it will begin selling irradiated case-ready ground beef processed using the SureBeam electron beam technology.

    KC's View:

    Published on: February 21, 2003

    • Seattle-based Larry's Markets named Jackie Davidson to be its new CFO, replacing Ron Matasich, who left to pursue other opportunities. The six-store chain also said that it hopes to acquire new store sites as early as next year.

    • Longs Drug Stores announced that COO Terry Burnside has resigned, effective immediately.

      Warren Bryant, president and CEO of the company since last October, will assume the COO duties as well.

    KC's View:

    Published on: February 21, 2003

    • Target Corp. posted fourth quarter earnings of $688 million, compared with earnings of $658 million in the year-ago period.

      Quarterly revenues rose 6.4 percent to $14.1 billion, but same-store sales dropped 2.2 percent.

    KC's View:

    Published on: February 21, 2003

    The Minneapolis Star Tribune reports that Target has begun running full page advertisements in Minnesota and elsewhere, offering consumers a $10 gift card if they’ll move their prescription business from closing Kmart stores to Target units with pharmacies.
    KC's View:
    It is called swooping in for the kill.

    Published on: February 21, 2003

    We spoke to Brian Dowling of Safeway (US) yesterday, and he offered a clarification of a rumor we reported on earlier this week, that Safeway had cancelled all travel plans for its executives.

    This was not the case, he said. The company merely did what most companies do in tough economic times, which is to urge its staffers to examine every expense and cut back on travel plans that might be considered unnecessary.

    Told that there were Safeway executives telling people that all executive travel plans had been cancelled, Dowling said that this would signal a “misinterpretation” of the memo on their part.
    KC's View:
    We’ll accept Brian’s word on this.

    Safeway’s been beaten up pretty good in MNB lately, with a lot of questions raised about its operations in various markets. While we think it is entirely legitimate to raise these issues in forums like these -- it is, after all, the reason MNB exists -- it probably makes sense to avoid a sense that we’re “piling on” the company. We suspect that there is a kind of domino effect at work here; Safeway has some issues, which creates uncertainty in the ranks, which maybe fosters some more problems, which leads to a memo urging a careful look at costs, which then leads some people to think that the sky is falling.

    Doesn’t mean that the company doesn’t have issues. But it also doesn’t mean that a collapse is imminent.

    So we’ll keep watching. And listening. And commenting. And trying to be both fair and provocative.

    Published on: February 21, 2003

    USAToday reports that during Sunday’s Grammy Awards, a Spanish language commercial from Procter & Gamble will air on US television, a reflection of the gaining strength of the Hispanic market in the US.

    It is estimated that there are some 37 million Hispanic consumers in the US who represent a total of a half-trillion dollars in buying power; spending to target Hispanic consumers reached $2.5 billion during 2002, an 11 percent increase over the previous year.

    The P& G commercial, for Crest, shows a young Hispanic couple, with the husband kissing his wife goodbye in the morning — and speaking in Spanish. The spot closes with an English voice-over that says: "White teeth and fresh breath in any language."
    KC's View:
    We’re going to see a lot more of these kinds of commercials, simply because they reflect the reality of the marketplace.

    This is another area where retailers have to make sure they don’t get caught behind the curve, because an aggressive company can turn a sensitivity to the Hispanic market into a real differentiated advantage.

    Published on: February 21, 2003

    Published reports say that Greenpeace USA protestors blocked the gates of Shaw’s Supermarkets’ distribution center yesterday, and entered the lobby of the chain’s corporate headquarters in what appeared to be an attempt to videotape employees on the subject of genetically modified organisms (GMOs).

    Greenpeace has been engaged in a battle with Shaw’s on the subject of genetic engineering, in part keyed to the fact that the company’s parent, J. Sainsbury, does not sell them in the UK but Shaw’s does in the US.

    Shaw’s maintains that it follows US food industry guidelines in its sale of biotech food products.
    KC's View:

    Published on: February 21, 2003

    Target Corp. announced that it is scheduled to open 32 new supercenters under the SuperTarget banner during 2003.

    The company has 94 SuperTargets at present, so the new openings represent a slightly less than 30 percent increase.

    Target plans a total of 94 new stores this year, so the supercenter contingent also represents just under 30 percent of its total new store plans for the year.
    KC's View:
    Just as a point of comparison, Wal-Mart currently operates more than 1200 supercenters in the US, and plans to open another 200 this year.

    And Target will have 126.

    Published on: February 21, 2003

    The International Herald-Tribune reports this morning that farmers In China, India, and Indonesia -- Asia’s three largest countries -- are getting into the biotech business in a big way, planting millions of acres of genetically modified cotton.

    "This is a significant development in the acceptance of genetically modified crops," Nicholas Kalaitzandonakes, a professor of agribusiness at the University of Missouri, tells the paper. "This is not only a region where most of the population growth is, it's a region where most of the food growth is."

    The report notes that the GM cotton plantings are just a harbinger of things to come in the food side, as governments tread softly because of European trepidation about foods containing GMOs. Nevertheless, there is speculation that nations like China could dominate the world of GM food production because of the steps they have been taking to lay the groundwork in this arena.

    Part of the attraction of GM farming is that it is seen as a boon to countries where agriculture is an economic mainstay. And, the herald-Tribune notes, “Biotechnology advocates in Asia believe that genetically modified crops will increase food production, significantly reduce the use of pesticides and insecticides and even create drought-resistant crops that can grow on land now regarded as nonarable. Poor farmers' incomes will rise, they claim, with the greatest benefits in the poorest regions. China has more than 20,000 people employed in government-led research at about 200 labs. Government spending on biotech research has tripled in recent years and could top $1.5 billion for the five years ending in 2005, making China second only to the United States.”
    KC's View:
    Seems to us that while the US is squabbling with the EU over products that contain GMOs, the real battle may be fought and won on the other side of the globe.

    We don’t believe in the inherent goodness or evil of GMOs. We simply believe that research must be exhaustive and careful, and that the existence of non-GMO crops and products must be carefully nurtured as well.

    Published on: February 21, 2003

    The Associated Press reports that tax collectors from 42 Florida counties and the city of Philadelphia are objecting to Kmart’s filed reorganization plan, saying that it does not adequately disclose how the company will settle its tax bills with the various governments.

    The reorganization plan is supposed to give a company’s creditors sufficient information to know whether it is acceptable, but these specific objections claim that Kmart’s does not.
    KC's View:
    Death and taxes. It’s always death and taxes.

    Though in Kmart’s case, not necessarily in that order.

    Published on: February 21, 2003

    A month after a federal judge tossed out a so-called “obesity lawsuit” that had been filed against McDonald’s, the lawyer representing two New York teens has refilled an amended lawsuit charging the fast food chain with “deceptive practices” in its promotion and sale of fast food products.

    The judge who dismissed the earlier suit had left open the possibility that a refilled complaint could focus on the health risk inherent in McDonald’s procedures.

    McDonald’s, saying it would not settle the case as a matter of principle, said that “this senseless lawsuit's selective focus on only one food organization is not only absurd when you look at the facts, but is a serious disservice to anyone who is looking for real answers and information about healthy lifestyles, energy balance and personal responsibility."
    KC's View:
    Forget principle in refusing to settle. Giving this case any sort of validity would open a Pandora’s box in which only one thing ultimately would be found.