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    Published on: June 11, 2003

    In response to our story about Tesco making an acquisition in Japan, MNB user Gary Breissinger wrote:

    This is just another step in Tesco's proven model for successful international expansion. They carefully research markets, identify the best potential joint venture partners or make strategic acquisitions to gain experience. Once they are confident they understand the market, they move to create scale and market share that can lead to profitable operations within 4-5 years.

    Tesco's success in Central and Eastern Europe, as well as their outstanding success in Thailand, shows that they can compete very successfully with the likes of Carrefour and Ahold. They are also probably the only grocery retailer in the world who has the intense focus on delivering consumer value fed by supply chain efficiency to effectively compete with Wal-Mart when they enter a market at the same time.

    I'd bet that Tesco will be successful and profitable in Japan within 5 years!

    We wouldn't bet against it.

    We also got a couple of Wal-Mart-related emails yesterday.

    One MNB user wrote:

    Not beating up on Wal-Mart but another true human resources story…

    My stepdaughter works at a Wal-Mart in NH and just went out on maternity leave. After her six weeks, she thought that she would have her old job back in the lingerie dept. When she notified store management that she was ready to come back, she was told that the shift for which her availability was stated on her application -7AM-2PM - had no hours available. How is that for treatment of your associates?

    I just can`t fathom how this company attracts workers for sub-standard wages and benefits and yet America flocks to their stores for, make no mistake about it, low prices - not the shopping experience. Notice how service levels have gone down since they have buried Bradlees, Ames, Caldor, etc.? This giant talks a good game about how happy their associates are (ever see the commercials?) but the proof is in the pudding - all the small stories like mine popping up all over the country. And now my stepdaughter with a newborn and no job.

    And a different sort of story from MNB user Bob McMath:

    We have a new Wal-Mart near here in Watkins Glen -- about 25 miles from here. We are impressed and plan to go again this week. As my wife says, we found lower prices for things we know about from other stores that are priced higher. And the stores is bright and clean, and appears well stocked with choices from among the things we want to purchase. Yes, its a drive, but then so is Ithaca from our new home on Seneca Lake.

    We did not like the store in Ann Arbor while we were there for two years and did not go more than twice because it was dirty, unkempt, badly managed and just generally a "bad" experience. Shelves were empty in many places, with misplaced merchandise in the wrong places. A mess on the floor in the detergent aisle was called to the management's attention four times in the 45 minutes we spent there -- while it remained there as we left the store, untouched. It was even a dangerous situation because of its location where someone could have slipped and fallen. We did, however, frequent a somewhat closer Target a great many times. Ithaca now has a new Target, but we like the new Wal-Mart better.

    We think Wal-Mart has been growing too fast overall, without paying attention to some of the management problems of its older stores to make sure they are as up-to-date as the newest ones. Not an easy task, but one that will cause them problems in the future unless the situation is corrected. We are in the middle of the two Wal-Mart stores in either direction. Those in the Seneca Falls will certainly not travel twice the distance to go to the new one -- but it has to be vulnerable to the newer stores from other chains that are bound to get there in due course. One can't always grow by adding new and clean, bright stores, and let the older ones languish in disrepair with poor management.

    We also went the other way recently and stopped at Wal-Mart in Seneca Falls. That didn't impress us as much as the new one the other way! It looked a bit unkempt, and we had trouble identifying areas we wanted to go to from the signage above.

    Thanks for the reports…

    And we'll see you tomorrow.
    KC's View:

    Published on: June 11, 2003

    • Marsh Supermarkets Inc. posted a net loss of $824,000 for the fourth quarter ended March 29, versus net income of $1.9 million a year ago. Total revenue was virtually unchanged at $373.3 million. Same-store sales were off 2.2 percent.

    • Wal-Mart de Mexico (Walmex) reported that same-store sales grew a healthy 6.9% in May over the same month last year.

      Total sales were the month were the equivalent of $909 million (US) up 12.3% from May 2002.

    • Rite Aid Corp. reported that total drugstore sales for the five weeks ended May 31 rose 3.5 percent to $1.57 billion from $1.51 billion a year ago, with May same-store sales up 4.5 percent. Pharmacy same-store sales rose 5.9 percent, while front-end same-store sales were up 2 percent.

      Total drugstore sales for the quarter ended May 31 rose 3.1 percent to $4.03 billion from $3.91 billion a year ago.

    KC's View:

    Published on: June 11, 2003

    Published reports say that the 1,000 store Co-op food retail chain in the UK will not be allowed to sell any copies of the new "Harry Potter and the Order of the Phoenix" novel that comes out on June 21 and already is a global best seller, with millions of children anxiously awaiting its arrival in stores.

    Why? Well, the chain apparently blew it when the last novel in the series, "Harry Potter and the Goblet of Fire," came out in July 2000. Co-op jumped the gun then and started selling the book before the official publication date, and now is being punished for its transgression.

    Co-op says the mistake was innocent, that some of its managers simply didn’t understand the embargo rules.
    KC's View:
    Well, they won’t be making that mistake again, will they?

    We've already made all the arrangements in the Coupe household. We have two sons who are huge fans of the books, so we bought two copies from that will arrive at the house first thing in the morning on June 21.

    No crazy light night visits to book stores for us! (in fact, we'll be in Spain when this all happens…thousands of miles away, and still reaping the credit!

    Published on: June 11, 2003

    The Sacramento Bee reports that the California capital is about to see the opening of its first Whole Foods store - with a difference.

    The 37,000-sq.-ft. unit will feature something unique for the company - a 40-foot-wide wall devoted to 500 kinds of beer, with roughly half of them from Northern California micro and craft breweries.

    "This looks like a very good beer-drinking community, our research shows," said Ray Bair, who oversees wine, beer, cheese and housewares for Whole Foods' Northern Pacific region. "And it's hot here."

    In addition to catering to Sacramento's taste for beer, the store also is expected to create an expanded taste in the community for natural and organic foods. The company expects to open two more stores there, probably by 2005 or 2006.
    KC's View:
    A wall of beer? That's our idea of whole foods…

    Published on: June 11, 2003

    7-Eleven, Inc. announced it is testing a co-branding opportunity with Chevron U.S.A., Inc., selecting 20 7-Eleven and Chevron locations in Florida, Texas, and California to feature both brands in a test beginning this summer. Plans call for 11 7-Eleven stores to offer Chevron-branded gasoline and nine Chevron sites to convert their convenience-store format to 7-Eleven.

    Currently, there are 30 7-Eleven convenience stores in the United States and Canada that have been selling Chevron-branded gasoline for varying lengths of time and under a number of different arrangements. This summer's test is a more integrated effort to better assess consumer acceptance of the combined offerings.

    The terms and conditions of the agreement have not been disclosed.
    KC's View:

    Published on: June 11, 2003

    There have been numerous reports in the Irish press about how Superquinn, the Dublin-based food retailer, has announced plans for 300 voluntary redundancies, mainly in managerial and administrative staff across its 19 stores.

    In an interview yesterday with MNB, deputy chairman Eamonn Quinn said that the reductions had been in the works for more than two years, as the company dealt with the reality of its distribution network becoming more centralized, making it less necessary for individual department managers in each of the company's stores.

    Quinn said that a new job level has been created within the company that actually creates managers with responsibility for several departments -- one person with oversight responsibility for produce and meat, for example, or another for dairy and deli. This cuts down on the bureaucracy as well as creating greater flexibility in terms of personnel. The changes, Quinn said, are being instituted on a shop-by-shop basis, with management structures being created within the needs of individual stores.

    Despite reports that the changes had been necessitated by increased competition from the likes of Aldi, Quinn said that they had been in the works for some time, and only just got publicity because the unions had recently voted to support the changes at Superquinn.
    KC's View:
    Quinn is an extremely savvy guy, and he told us that until these changes, the Superquinn shops had pretty much had the same management structure for the past 40 years…so a change was due. "Customers won’t see a thing," he said, and we believe him -- because Superquinn would never do anything to affect its hard-won and treasured relationship with shoppers and global reputation for superb customer service.

    Published on: June 11, 2003

    The Los Angeles Times reports this morning that Nestle has reached an agreement with the US Federal Trade Commission to resolve antitrust concerns and allow its $2.8-billion acquisition of Dreyer's Grand Ice Cream Inc. as early as next week.

    To make the deal happen, Nestle will sell three of Dreyer's "super-premium" brands — Dreamery, Whole Fruit sorbet and Godiva — to CoolBrands International, which also will take over eight markets in Dreyer's distribution network, which delivers ice cream for rival companies.

    Nestle also will be forced to dissolve a Dreyer's joint venture with Mars Inc. that makes Mars brand ice cream flavored with Snickers, M&Ms and other candy.

    The deal still requires approval by members of the FTC, which voted 5-0 in March to block the acquisition, but is expected to reverse itself, probably as early as next Monday.
    KC's View:
    We'll believe it when we see it. Seems like we've written several versions of this same story over the last few months…

    Published on: June 11, 2003

    UK retailer Marks & Spencer has announced that it will open its first Simply Food convenience store inside a gas station.

    The outlet will open this summer in southern England, as is part of the company's plan to expand the format's presence, though management says it is being "cautious" about the experiment. M&S has three Simply Food stores inside railroad stations, and says it plans to open 150 Simply Food stores in the UK by 2006, compared to the some 30 currently operating.
    KC's View:
    Sounds like a plan to us…we remain convinced that the synergies between the grocery channel and the c-store channel are greater than ever. This initiative can been seen within the context of a broader trend that seems to be evolving.

    Published on: June 11, 2003

    The June 2003 issue of Rodale's Men's Health is a special nutrition issue, featuring as its cover story "125 Best Foods for Men."

    Retailers looking to attract male customers could do worse than to use these 125 foods - virtually every one of them a branded item carried in almost every one of the nation's grocery stores - as a marketing tool. They’re broken down into categories - Best Pantry Foods, Best Snacks, Best Condiments, Best Work Foods, Best Drinks, Best Freezer Foods, and Best Muscle Foods.
    KC's View:
    We'll keep saying it until someone pays attention - men are a great untapped customer base for most supermarkets.

    Published on: June 11, 2003

    The Associated Press reports that the Appleton, Wisconsin, Board of Education has unanimously voted to stop vending candy and sweets on school grounds, beginning this fall. The board said it was making the move to help improve students' health and combat obesity.

    "We have no question in our mind this is a step in the right direction," said Superintendent Tom Scullen "Do we have an obligation to provide the safest, healthiest environment for our kids? Yes we do."

    The policy allows the sale of soda and candy after school for student organization and booster club fund-raisers, but not before or during the school day.

    The board also encourages Aramark, the district's food service provider, to follow a guideline that any food sold during the school day should derive no more than 30 percent of its calories from fat.
    KC's View:
    This certainly isn't a foolproof policy, and kids will be able to bring whatever they want from home.

    But we think it makes sense. Schools have a responsibility to instruct, and not just in the classroom. As long as there are classes that teach kids about nutritional and health issues, this seems like it would be part of a comprehensive curriculum.

    Published on: June 11, 2003

    The International Herald Tribune reports this morning that while the US Centers for Disease Control in Atlanta "estimates that food-related illnesses kill 5,000 Americans each year and that 76 million Americans a year get some form of food poisoning," the lack of a single controlling authority in Europe makes the assemblage of similar numbers there virtually impossible.

    Still, concerns about food safety are serious enough that Romano Prodi, the president of the European Commission, to have made it a priority.

    "Prodi decided that restoring the confidence of Europeans in their food would be the best way of restoring their faith in European institutions, badly dented by a scandal that had forced the resignation of the previous commission," the IHT reports.

    "It is not just a question of ensuring consumers enjoy the highest level of food safety," he told the paper. "It is also a question of seeing the institutions treat people with proper respect."

    According to the IHT, "the commission has achieved more progress in this area than in any other. It has enacted dozens of new laws and set up a Food Safety Authority…although it lacks the teeth of the Food and Drug Administration in the United States."

    Other notes from the report:

    • "Food safety has become a key element not only for public health but also for the efficient functioning of markets. It is also at the heart of quarrels with the United States over genetically modified foods, and hormones or antibiotics in meat."

    • .
    • "…the commission is working on stricter labeling, giving consumers in the 15 member and 10 candidate countries of the EU common nutritional information and facts about additives as well as enabling food inspectors to trace foodstuffs back to their source when a problem arises.
      "At the very least, the picture on the label should describe what's in the package," says one expert. "But deceptive labeling is rife in the industry. Products straight from the factory are routinely touted as 'natural,' 'farm fresh' and 'homemade.' The British Food Standards Agency is complaining about so-called chicken breasts that contain up to 40 percent added water and pork products."

    • "Europeans often admire the wide-ranging powers of the Food and Drug Administration and think that food in America is safer, but 'that is not true,'" according to one expert, who says that while the United States has never reported a case of mad cow disease, 'They might find it if they looked.'

      .The commission has long listed North America as a region likely to harbor the disease - a view confirmed by the recent discovery of mad cow in Canada.

    KC's View:
    Fascinating piece, not least because it seems to point up the simultaneous grudging admiration and antipathy that at least some Europeans have for the US these days.

    A heightened awareness of food safety issues in Europe is a good thing, and the development of a single, responsible and activist food safety agency can only strengthen the EU's resolve and ability to react to crises. The problem is, what happens when the EU reaches different conclusions than the US? Will they be points to be negotiated, or issues that will become divisive?

    Published on: June 11, 2003

    Cable News Network reports that after almost three works of investigation by Canadian health officials and the slaughter and testing of almost 1,500 cattle, no new cases of mad cow disease, also known as bovine spongiform encephalopathy (BSE), have been discovered.

    "So far, other than the original cow, all test results have come back negative for [BSE]," said Dr. Brian Evans, chief veterinary officer with the Canadian Food Inspection Agency. "We can remain confident that the systems in place in this country have worked to detect the presence of BSE and to prevent its spread."

    However, because the infection can take between six and eight years to show up in cattle, there seems to be a prevailing belief among experts that new cases of mad cow disease eventually will show up in Canada.

    The infectious agent takes at least six to eight years to cause symptoms in cows, meaning that the infected cow was likely spreading the disease during that time. "There are very few countries in the world where there is only one case," said Dr. Ulrich Kihm, director of Safe Food Solutions. "Normally there are more. One has to look properly."

    US officials have not said when they will re-open the border to Canadian cattle.
    KC's View:
    We suspect that the border will be opened pretty soon, owing to political pressures that have nothing to do with food safety. That's not to say that Canadian beef isn’t safe, however…

    But let's pose a question. You’re in a supermarket meat department looking at two identical steaks. One says "Made in USA" and the other says "Made in Canada." The expiration dates suggest that the Canadian product is one day fresher.

    Which one do you choose?

    Published on: June 11, 2003

    Safeway Inc. announced yesterday that it will cut 940 administrative jobs to reduce its costs, defining the move as one was to deal with falling sales and profits in the face of heightened competition from the likes of Wal-Mart.

    About half the job cuts will come from its California and Arizona corporate offices.

    "Because of a prolonged economic downturn and a difficult operating environment, we need to lower our costs of doing business," Safeway Chairman, President and CEO Steve Burd said in a statement.
    KC's View:
    We hope that for Safeway's sake, these administrative cuts don’t create a domino effect that will be seen in the stores and experienced by customers.

    Because that won’t help anything.

    Published on: June 11, 2003

    Separate Moves In Video, Clothing Show Company's Flexibility
    Wal-Mart Stores Inc. yesterday made two announcements that signaled the company's ability to think beyond its traditional formats, creating new businesses where it sees opportunity.

  • Here in the US, Wal-Mart announced that it will expand the DVD rental service that it began testing seven months ago as a direct challenge to Netflix, which until then had the market all to itself. The business model is fairly simple: customers pay a monthly subscription fee, rent the DVDs online, and the company sends them from six distribution centers, reaching 90 percent of the country within two days. There are no late fees, and customers simply return the DVDs when they are done.

    Blockbuster also started up a similar business at around the same time Wal-Mart did.

    Netflix spokeswoman Lynn Brinton told The Associated Press that Wal-Mart and Blockbuster will end up in a battle for the No. 2 spot. Netflix, based in Los Gatos, Calif., has 1 million members.

    "We're not sure what Wal-Mart has, but we're sure it's a fraction of that. Until Wal-Mart hits 100,000 they won't be a threat," Brinton said.

    Wal-Mart won’t reveal its rental numbers.

    During the test, Wal-Mart's service cost $18.86 per month; with the current expansion, Wal-Mart will charge $15.54 for unlimited monthly rentals with a maximum of two out at a time; three movies at a time will cost $18.76, and four movies will cost $21.94.

    By way of comparison, Netflix charges $39.95 a month for up to eight movies out at a time, $29.95 for up to 5 movies out at a time, $19.95 for three movies at a time, and $13.95 for two movies at a time (with a limit of four movies a month).

  • In the UK, Wal-Mart's Asda Group announced that it will open two stand-alone George clothing stores this fall, a major shift in strategy for the company, which traditionally has only sold the highly successful George line from its traditional superstores.'

    According to analysts, the move reflects Asda's desire to expand its share of the UK clothing market beyond its current 2.5 percent.

    Dow Jones reports that t he two stores will be branded 'George' and will open in Croydon, south of London, and Leeds, in Yorkshire. The clothing sold in the two units will be priced the same as in Asda stores.

    Asda says that it will take about a year of testing before it decides whether or not to roll the concept out further.

    According to a statement from the company, the stand-alone fashion stores reflect the "latest example of Asda's commitment to develop flexible formats that offer the right ranges at the right prices."
  • KC's View:
    The key word there is "flexible."

    We don’t think it is a coincidence that these two announcements were made on the same day. As we wrote yesterday on MNB, Wal-Mart faces some considerable challenges as it tries to maintain its recent rate of growth, just in terms of its own size and the tendency of anything so large to become inflexible, monolithic, and intractable.

    The DVD and clothing store announcements suggest that the company is willing to do whatever it takes not just to make sure its image is of being a "quick on its feet" company, but that the reality is connected to that image.

    Published on: June 11, 2003

    The US Food and Drug Administration (FDA) announced that it will require manufacturers to expand the information included on all food labels, including details such as trans fats contained in the product.

    The FDA is making the move to combat the growing obesity problem in the US. "Right now, companies do a good job of competing on the basis of taste and price and whether a food springs ready to eat out of a box," FDA Commissioner Mark McClellan said in a speech. "But they don't spend as much time competing on science-based information about the health consequences of their product."

    McClellan said a commission will present recommendations this month on improving food labels.

    According to a report in The Washington Post, McClellan also said consumers should also know if the food has omega-3 fatty acids, which studies suggest help prevent coronary heart disease.
    KC's View:
    Good. There may be some whining about this from some quarters, but ultimately this is right for the consumer, and therefore right for industry.