business news in context, analysis with attitude

One member of the MNB community, who happens to be a Fleming employee, objected to some of our characterizations yesterday of the company’s current situation:

“You tend to try to report accurate information. Apparently it is nearly all second-hand information. Fleming has long been discussing the selling of the retail operation. This was not a spontaneous decision. It was made because of input from our customers and the decision to enter the c-store business segment. YOU also elevated, in your terms, the inquiry (investigation) into "accounting problems". These are inquiries into "allegations" brought by disgruntled investors. This is the trend in the world we live in following Enron and others. It is being done at nearly all wholesale and large retail operations at this time. This I have learned from reading YOUR articles.

“On the implication that independent grocers will flock to a Wal-Mart wholesale operation, it has been my experience in this business that independent grocers are way-too-smart to enter into an "agreement with the devil" (just an expression). What correct thinking grocer is going to count on getting supplies from the company that wants to put competition to him on every corner. We tend to give our customers and your readers more credit than that…

Criticism noted. Not to be defensive, but may we respond on a couple of points?

    1. When we referred to Fleming’s decision to pull out of the retailing business and get into the c-store business, we were taking a certain amount of dramatic license when we characterized them as sudden shifts. Our point was that there are a number of people in the industry who have felt that there wasn’t a firm hand on the rudder at Fleming, which led to what appeared to be a random series of decisions. We’ll grant you that our language was imprecise and that we should have been a little more careful with our adjectives; however, the decision to change CEOs would certainly support the “no firm hand on the rudder” theory.

    2. We honestly think it is fair to say the federal investigation is into accounting problems. Certainly, the probe has been elevated from informal to formal, and there’s enough smoke out there (at Fleming and other companies) to suggest that somewhere there’s a fire burning. In fact, it is difficult to find anyone anywhere who will say that the financial underpinnings of the supermarket industry are strong, fair and durable.

    3. Finally, we've been surprised by the number of independent retailers who have told us that if offered wholesaling services by Wal-Mart, they would go with them because they'd feel they could not turn down the better price. We would tend to agree with your "deal with the devil" metaphor and have been surprised by this reaction.

    The argument made to us by a number of usually intelligent and perceptive independents (who are customers of both Fleming and Supervalu, as well as other wholesalers) is that they feel that the services they are getting now would be dwarfed by the price advantages offered by Wal-Mart.

    The decision may not be black-and-white. It's a very gray world out there...

    Another MNB user had a different perspective:

    “I retired from the consumer foods business last year and watched Fleming take good solid companies and with their characteristic arrogance, try to mold those folks into their own likeness. The chickens are coming home to roost.”

    The story continues to unfold…

    Continuing comment regarding the Ahold story, including this email from a member of the MNB community:

    “Perhaps the cause of Ahold's downfall doesn't lie in its traditional culture but rather in a modern management paradigm in which short-term profits are valued more that long-term value. Managers' are compensated based on last quarter's P & L performance and so are companies' stocks. Compensation theory suggests we pay employees for desirable behavior. I can only deduce that boards of directors engaged in compensation committees made the decision to value the "now" more then the "forever".

    “Individuals who manage only in order to squeeze every penny of immediate profit will sacrifice on investment in strategies that don't offer immediate gratification. We in corporate management are guilty of becoming a "hunter/gatherer" society, vulnerable to changing environments. There are far too few "farmers", willing to wait to harvest the fruits of their labor.”


    “As one that was always impressed with the intelligence, and quick mind of a CEO, I find it extremely sad of what these people have done to solid companies that grew each year, provided a very nice lifestyle for upper and middle management, and provided jobs and kept the working person going. After seeing what we have the past couple of years, I can no longer be shocked with stories concerning CEO's. The scenario is unbelievable. They make big bucks, screw up the company, then get paid big bucks to leave and the company is left high and dry to immediately find someone to replace the CEO and in most cases it is someone who knows nothing about the industry the company is in. Who gets hurt? The middle management that cares, and the poor working stiff that just wanted to earn a living, raise a family and just retire with a nice pension to enjoy life a little. Very Sad.”


    “In response to the person who wrote in that ‘you measure a great leader not by how a business does while he is in charge but by what is accomplished
    after he leaves’ - I agree wholeheartedly…thanks to the person who sent it in for reminding me...

    We got a surprising number of emails regarding the debate about loyalty marketing cards.

    MNB user Martin Wimmer wrote:

    “I used to be a faithful, regular customer of Kroger. When they started using the "loyalty card", I stopped shopping there. And I will never go back even for a loaf of bread as long as they used that hated card. It makes me feel totally unwelcome and it increases the costs of the products they sell. There is no savings in their store anymore!”

    Another MNB user wrote:

    “I have to take the side of the folks at on this one. These shopper cards ARE an invasion of my privacy. Look at the cost to implement them. Then there's the cost of keeping them running, and if that's not enough, then look at how Wal-Mart is making a killing at the grocery business.

    “In markets where Wal-Mart has launched the supercenter, they've taken market share from EVERY major grocer in the country. How? Low prices, no cards, no bull. The cards are nothing more than a gimmick designed to invade the customer's privacy and the fact that the things the folks at CASPIAN state
    are true.

    “Why should you have to pay a store for the privilege of saving money? Case in point. A well-known grocer in Colorado had a case of Coca-Cola for $13.79, and on their 'savings' program, you could get it for $5.99. A trip to Wal-Mart has an every day price of $5. That should be a pretty good sign that someone's out of touch with reality. Why should I have to pay a penalty of $9 for not letting them build a profile of me that they can 'partner' with someone to provide?

    “It doesn't take a math genius to figure out that shopper cards cost everyone (consumers and grocers) more than they're worth. If you can't figure out by what is going out the door the things your customers want, then you need to find a new business to be in.”

    Two things here.

    First, any grocer that posts a price for a case of Coke that is nine bucks above the Wal-Mart price needs to have his/her head examined. Card or no card, that kind of differential just doesn’t make any sense.

    Second, you are right when you say that you shouldn’t have to pay a store for the privilege of saving money. You don’t have to. You can just shop elsewhere…

    We think there is a place for loyalty marketing if done correctly. And we don’t think every store should use it.

    This isn’t us being wishy-washy (though indecision may or may not be our problem). This is us supporting diversity.

    Regarding yesterday’s story about McDonald’s delaying its shift to a healthier cooking oil, we got a number of emails.

    One MNB user wrote:

    “This "healthy oil" thing is a cop-out. Even if they move to the highest-grade most expensive olive oils (which by the way would not be appropriate for frying) or canola or whatever, they are still 100% fat - hence will still make people fat - and frying will still produce acrylamides. Which are being questioned in the news.”

    Another MNB user wrote:

    “Switching to a "healthier" oil has absolutely nothing to do with giving the consumer a better choice. Try again, Mickey D.”

    We called the delay “dumb.” Not everyone agreed:

    “This is not necessarily dumb. The blurb doesn't say WHY they're delaying. If it's because all the healthier oils they've tested so far have done horribly in taste tests, they'd be dumber to move forward. Besides, anyone who actually cares about their health knows that changing oil will not make a French fry anything but junk food. Period. Offering separate, healthy menu items to people who want to go in there with the rest of a group, like their family, and still get something worthwhile is one thing. But changing their menu to all-healthy will just lead to bankruptcy. Unfortunate as it is, most people are still not as focused (lip service doesn't count) on healthy eating as you are, and it's neither practical nor right to try to mandate either consumers or retailers to change that.”

    We’re not actually mandating anything…just expressing an opinion.

    We got an email questioning the buying partnership being established between Superquinn and Stonehouse in Ireland:

    “This partnership could be a failure. Our company did the same several years ago and had to terminate the agreement after the first year. Retailing and wholesaling are different businesses and require different things from the same supplier. We were not able to generate enough synergies to offset the myriad of problems that arose. I greatly admire Superquinn and I hope they get a better deal.”

    We hope so, too.

    Finally, we spoke the other day about possible successors to deposed Ahold CEO Cees van der Hoeven. MNB user Bill White chimed in:

    “How about Allen Noddle, recently retired from Ahold, but still retained by them on a consulting basis?”

    Good idea. Consider him nominated…
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