business news in context, analysis with attitude

The discussion of the quality of food retailing in the Minneapolis/St. Paul area continues…

One MNB user writes:

“As part of my CPG career I spent several enjoyable years living in the Twin Cities. This area of the country (corporate home of Supervalu) has probably the greatest concentration of top quality independent grocery retailers. The majority of these retailers compete with clean well-designed stores, incredible product assortments, highly developed perimeter departments, top quality dine in restaurants and attention to customer service. The majority of residents in the Twin Cites have been spoiled by their grocery shopping experience. I do not think any of the major chains could economically justify the investment to compete at this level.

“You are right -- it is really cold there -- but you can be certain on a really cold day you can go into any of these stores and sample the best wild rice soup on the planet and without asking somebody "good chance they will be the owner or related to him" they will offer to take your groceries out to your car and if it is snowing even help you clean it off.

“Until "chain" retailers understand that they have to insert some level of real "ownership" at the store / customer level, they are doomed to repeat their mistakes. It still amazes me that these organizations will place a "manager" in charge of a store generating tens of millions of dollars and ask him to work 60+ hours a week managing hundreds of employees and then compensate him peanuts relative to their responsibilities.

“The point of my example -- the closer a real "owner" is to his business and his customer -- the more likely his continued success - All those store visits Sam Walton made speak volumes today.

“One other quick thought regarding these independent retailers - they have to make their money marketing and selling to the customer - the buy side games pervasive in the industry do not distract them since they rarely can impact this side of the equation - to survive they have to be marketers.”

Another MNB user wrote:

“I did a 5 year stint in the frozen wonderland of Minneapolis-St Paul, and one thing I also new was that I paid a fair price for my groceries. Having a retailer such as Cub Foods control the retail pricing is a blessing to most of us hard working middle Americans. This person should compare pricing in Denver, Pittsburgh or anywhere on the west coast. I think that this may be a major case of "be careful what you wish for". Enjoy the savings while you're there and pick-up some Byerly's Blue Cheese dressing for me!!

We’ve been surprised by complaints about the quality of retailers in the Twin Cities. Any market that features Byerly’s/Lund’s and Kowalski’s, as well as options like Cub, sounds like a pretty good place to go food shopping to us.

There have been questions asked and answered this week about the profitability of e-grocery. The discussion continues, as one MNB user writes:

“In response to the gentleman's question about e-grocers and
profitability, Tesco's online operation, specifically in the grocery sector, has been and is profitable. At the Macro level, not just through creative accounting.

“It starts with store EBITDA, then progresses to store contribution, then to regional contribution and ultimately to true profitability. It's the reason Tesco's model works. Get the kinks worked out on a store by store basis then grow big enough (is $500M a year big enough? I think so) to get to regional and true profitability.

“In this environment of EXTREME sensitivity to accounting missteps, I can assure you that no one is in a hurry to publish false reports about even a small piece of their business.

“Unfortunately, as most e-grocers are children of a larger parent, they are not required to publish separate books to the public. Therefore it's difficult to truly know...”

Another MNB user puts it in perspective:

“From my experience what goes up fast, goes down fast! Not many are able to survive. Slow and steady like the turtle is what make success!”

We’ve always been a proponent of the “slow and steady wins the race” theory. It sort of describes our career…

We had a story yesterday about a unionization rally at Genuardi’s in Pennsylvania. One MNB user writes:

"Two comments on the item regarding the UFCW incident at Genuardi's. First, you wrote that Safeway, which owns Genuardi's, is unionized. Actually, Safeway's employees in Texas and some other areas are not represented by a union. Second, it would be a stretch, or at least a pro-union spin, to write as you did that the union held a rally to support Genuardi's employees who want to unionize. They held a rally because they want to organize Genuardi's employees, who have for 80 years consistently voted to reject the notion of being represented by a union."

Fair enough.

We should have been more specific in our characterization of Safeway’s employees elsewhere in the company.

However, we should note that we are neither pro-union nor anti-union. The press reports we read about the rally all said pretty much the same thing. For example, the Philadelphia Business Journal reports that “Genuardi's Supermarket employees rallied Wednesday at the company's Plymouth Meeting, Pa., regional headquarters demanding union representation.”

How about we agree that there is no unanimity on the subject, and that we’ll have to see how a vote turns out?

We got a lot of email in response to a story we ran earlier this week about smaller retailers sourcing products from Wal-Mart, and a commentary in which we told the true story of a guy we know who buys towels at Wal-Mart and then marks them up and sells them at a significant profit through a niche catalog business.

Part of the reason this person buys the towels at Wal-Mart is because he can’t seem to find them elsewhere for a price that seems reasonable. Which prompted the following letter from an MNB user:

“American business has the attitude that if the items they make/sell don't make big numbers at the bottom of the page, they will not continue to make or carry the item. Case in point, bath sheet towels. I consider the traditional bath towel to be a postage stamp when it comes to using it following a shower. During the 80's and 90's bath sheets were available at reasonable prices in many locations. Today, unless one wishes to take out a bank loan, they are not readily available. Manufacturers ultimately control what I use following a shower. Because of their size, careful use, and purchasing neutral colors, I do not need to buy new ones often. The market is pretty empty on those towels now.

“It is a mystery to me why it is assumed that huge volumes must sell, or it is not necessary to carry the item. I realize that store owners need to move merchandise and cannot have huge stockpiles of non-moving merchandise, but smaller amounts could be carried and these items would sell, just not huge volumes. Selling smaller amounts of many items will add up to profit, just not all on one product. At my age, I remember a time when a merchant was providing a service to a community and actually was appreciative of customers business. Somehow, the merchants send the message today, "If I open a store they will come and buy what I put out" rather than having their fingers on the pulse of what people need and want. Instead, advertising creates need in the mind of the consumer.

“I realize that creativity in all areas of life keeps it interesting and leads to improvement in products and standards of life. But lest we throw the baby out with the bathwater, old standby products are still needed.”
KC's View: