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    Published on: June 12, 2003

    Lots of email yesterday, on a wide range of issues…

    One MNB user wrote in about the Wal-Mart/Asda decision to open freestanding 'George" clothing stores in the UK:

    Some time ago a vice president of merchandising of a large supermarket chain i worked for told me : You can't be everything to everyone. And you know what? You can't even if you are Wal-Mart.

    It is good to try and be flexible though.

    Ultimately, we think, the "George" stores will be successful if they have the right merchandise at the right price at the right locations. If it has those three things, it won’t matter a bit what company owns the store.

    We had an email yesterday from a parent who bemoaned the way he believed his stepdaughter had been treated by Wal-Mart when returning from maternity leave. He didn’t find hugely sympathetic ears among the MNB community, as one user wrote:

    To reply to the person with the step-daughter returning from maternity leave, Federal law only states that a comparable position be offered an employee returning from leave (medical, personal, armed forces reserve activation, etc.). An employer cannot leave a position open for weeks or months. Many folks in the armed forces reserve are finding this out when they're being placed on active duty.

    Wal-Mart is just doing what many other employers do. It is a rare employer who will hold a position open for more than a couple of weeks.

    This position was reiterated by a number of other letter writers, but we think that perhaps our original correspondent wasn't so much talking about a breach of law as a breach of faith. Because of Wal-Mart's role in our society, we think he just expected more…and his stepdaughter got the same old treatment that she could have gotten anywhere.

    That's not illegal. We're not even sure it is wrong.

    If nothing else, however, it does suggest how Wal-Mart's rivals can compete effectively for employees - by offering something more than the "same old treatment."

    Regarding yesterday's piece about increased food safety vigilance in the EU, one MNB user wrote:

    Sure wish that the numbers referred to in the article could be collected BEFORE a new government entity is put into place. A comparison between the US and Europe would show whether government entities are as effective as they are perceived (by some) to be.

    I'd also be interested to see a survey done comparing the average consumer's knowledge of food safety in Europe and here in the US. Is it possible that the level of basic food safety knowledge is higher where the responsibility for it rests on the market and the consumer?

    Government oversight does contribute to standardization of methods and language as well as response to crisis, which is good. But I would hope for Europe's sake that they don't rush this - that they build only the kind of government resource that they need. By simply copying our agencies they may be in danger of only importing our bureaucracy.

    On the subject of the FDA deciding that trans fats ought to be included on food labels, MNB user Denise Remark wrote:

    Now all we have to do is provide education education education for consumers. How about a slogan:

    3 - 6 - 9 -- Omega fats are fine!

    And another MNB user wrote:

    I work with labeling in my job and I think adding trans fat to the label is fine, but don't expect the American public to "downsize". If the American consumer really cared about labels, this wouldn't even be needed. People eat for taste and convenience - I don't see that changing much.

    On the subject of marketing to men, one MNB user wrote:

    Most men I know don't take the time to read what to buy, moreover actually go out and make a list of what to buy and make food for themselves at home. The convenience of going out to eat or stopping by the grocery store when they run out of things is one thing but advertising "best foods" in my opinion isn't going to reach the majority of men.

    Maybe. But we're not sure that's as true as it used to be.

    We were at a dinner recently, sitting with our Marketing Guy, Jim Roxbury, and three women from the industry…and it was we men who liked to cook far more than the women did. Some of those old stereotypes may be breaking down…

    We have three kids…and two of them (the 14 year old boy and the nine year old girl) seem to have about the same appreciation for cooking. Brian makes a helluva quesadilla, and as we're writing this, Allison is in the kitchen whipping up a batch of scrambled eggs with a dash of Emeril's Essence.

    On the subject of Wal-Mart expanding its DVD rental business, one MNB wrote:

    Wal-Mart getting into the online rental DVD business is really interesting to me from a branding standpoint. As I see it, Netflix stands for "online DVD rental", Blockbuster stands for "rent movies" (if they're lucky it doesn't stand for "rent videos") and Wal-Mart stands for "cheap stuff and lots of it".

    I'm guessing Netflix will stay at #1 (unless they make a branding mistake) and the number two race will be very, very interesting.

    Australia is considering a fat tax, which led one MNB user to ask:

    If we tax booze, cigarettes and fatty food in order to reduce the amount of them in our society, what do we expect income tax to do?

    Take the rest of the money, we think…

    MNB user Brad Zemcik added:

    It is sad to see this proposal. When will people take responsibility for their own actions? In a world where information abounds if people chose to ignore it, it is their own fault. Unfortunately the word accountability is disappearing from the lexicon of this "modern" society.

    We wrote yesterday about a supermarket banned from selling the new Harry Potter novel because it broke the embargo on the last one; this prompted an email from an MNB user:

    By the way, I think the timing of the release of the new Harry Potter book is brilliant. Most schools get out this week and next (at least those in the NW). Parents are planning activities for their children that are healthy, active and also those that support reading over the summer. What great timing to let the kids be away from reading and homework for a week or two then THE CHILDREN will be pushing their parents to PLEASE get more time to read! BRILLIANT!

    The cultural power of the Potter novels are such that The Scotsman yesterday reported that a UK bookie is taking wagers on which character will die in the new "Harry Potter and The Order of the Phoenix."

    Hagrid, the Hogwarts groundsman is the favorite to perish at 7-2 odds, followed by Sirius Black at 4/1 and Professors McGonagall and Dumbledore at 5/1.

    Regarding Safeway's decision to lay off people at headquarters level, one MNB user wrote:

    When you squeeze a lemon - what do you get? Lemon Juice. - no surprise.

    When you squeeze an MBA/Finance Guy what do you get? A spreadsheet with lower expenses. - no surprise.

    Will it improve the Customer experience at the stores? - no.

    Does the MBA/Finance Guy care? no.

    The Safeway lemon has been squeezed for the last 10 years - my guess is it's DRY.
    KC's View:

    Published on: June 12, 2003

    • Rewe of Germany has announced that it will acquire Bon Appetit, Switzerland's third-largest food retailer, a deal that will give Rewe a presence in 13 European markets.

    • Kasumi, a Japanese supermarket operator, reportedly is negotiating a possible alliance with Aeon, Japan's second-largest retailer, which would have Aeon buying a 15 percent stake in the grocery company. The arrangement is designed to give both companies a better chance of competing with Wal-Mart, which owns part of Seiyu, and Tesco, which is entering the market though an acquisition.

    • Carrefour is acquiring the 45 percent of Carrefour Colombia, which operates nine hypermarkets in that country, that it does not own. The price has not been disclosed.

      Carrefour Colombia plans to add three new hypermarkets to its fleet there this year.

    KC's View:

    Published on: June 12, 2003

    The San Francisco Chronicle reports that Pinot Noir, traditionally a difficult grape to grow and turn into wine, and therefore one of California's pricier varietals, suddenly is facing what it terms "one of the most serious oversupply situations of any California variety."

    "That's bad news for wineries and growers, who may be forced to reduce their prices and pull up some Pinot vines," the paper reports. "But it's a great opportunity for Pinotphiles to buy more affordable wine. And it may even introduce a broader swath of people to Pinot, which has a passionate cult following but has never become widely popular, largely because of its cost. It's tough to find a good bottle of Pinot for under $15, and the best ones can cost $50 or more."

    Now, however, prices are expected to fall as the supply becomes almost oceanic in nature…though nobody seems to expect that one will be able to buy a Pinot Noir for the same $8-10 that one can now spend to get a good bottle of Merlot.
    KC's View:
    We've just grown to enjoy Pinot Noir lately, and find that one of the nicest things about it is that it goes with so many different foods. We'll be watching the stores for deals…

    Published on: June 12, 2003

    The Toledo Blade reports that Spartan Stores Inc. has sold two Food Town supermarkets in Michigan to a Detroit area businessman who plans to operate them as independent grocery stores. The stores are scheduled to be closed and reopened next month.
    KC's View:

    Published on: June 12, 2003

    The New York Daily News reports that New York City Assemblyman Felix Ortiz (D-Brooklyn) has proposed that the city help to battle obesity by imposing a one percent "fat tax" on junk food, video games and "television commercials that tout fatty treats."

    In its inimitable fashion, the Daily News writes that "Ortiz said he's determined to introduce the anti-lard levy by Friday because too many New York children are too chubby for their own good. He noted that one of every five students is a fatty." At a recent hearing, Ortiz made his point by introducing three youngsters under 10 with 40-inch waists.

    The paper notes that there seems to be little if any support for the proposal among either the populace or other legislators. "New York's most pressing fat problem is the fat in the state budget," said Matt Maguire, a spokesman for the state Business Council.
    KC's View:
    The Daily News does not note that Ortiz's proposal doesn't exactly come in a vacuum - a so-called "fat tax" has been discussed in places as far away as Australia, and there seems to be a slow but growing momentum towards the concept as a way of helping to deal with the obesity issue.

    That doesn't mean we support it. But we wouldn't be surprised to see one of these bills passed one of these days.

    Published on: June 12, 2003

    Loblaw, which has operated its Real Canadian Wholesale Club format is western Canada for almost 10 years, has opened its first such unit in Ontario.

    The company says that the decision to test the format in eastern Canada is not related to Wal-Mart's decision to open Sam's Club stores there later this year.
    KC's View:
    With all due respect to the folks at Loblaw, we think they may protest too much…

    Published on: June 12, 2003

    The Los Angeles Times reports that despite all the publicity and notoriety given these days to the issue of American obesity, there remains much debate within the medical community about its causes and effects.

    U.S. Surgeon General Richard Carmona told an obesity conference this week that obesity is the fastest-growing cause of disease and death in the country, with two out of every three Americans overweight or obese — a 50 percent increase over the last decade — and obesity-linked health costs totaling $117 billion in 2000.

    But there's another theory - that so-called "yo-yo dieting," inactivity and diet drugs actually could be the main causes of diseases usually associated with obesity, including diabetes, heart disease and cancer. Glenn Gaesser, an associate professor at the University of Virginia, told the same conference that exercise and healthy eating habits had been conclusively shown to improve health even without weight loss.

    "The jury is still out on the cause of obesity, with consumer advocates arguing that aggressive food industry advertising and portion "super-sizing" at fast-food restaurants are to blame," the LAT writes. "Others highlight the roles of genes and sedentary lifestyles."
    KC's View:
    All of which will serve to confuse the consumer even more.

    It's tough being a consumer in the current environment. And we've certainly felt that pain over the last couple of weeks as we've been on the Atkins Diet; it is so completely counter-intuitive to eat bacon but not bananas when trying to lose weight, and yet it seems to work.

    We're just counting on the Lipitor chaser to keep our cholesterol in check…

    Published on: June 12, 2003

    The Christian Science Monitor reports that bacon is undergoing a renaissance, in part driven by Atkins-style low-carb, high fat diets that encourage its consumption.

    There's a bacon-of-the-month club with more than 1,000 subscribers, the paper reports, and sales of refrigerated bacon grew 21 percent between 1999 and 2001.

    In addition to the imprimatur that the Atkins diet gave to bacon as a nutritional element, it is reported that chefs are using it more and more in other recipes, using it as a flavor enhancer in everything from pasta to apple pie, and taking advantage of the distinct aroma that cooked bacon emanates.

    There's even a book: "Everything Tastes Better With Bacon," written by Sara Perry, a food columnist for The Oregonian.
    KC's View:

    Published on: June 12, 2003

    Crain's Chicago Business reports that McDonald's Corp. will launch a new global advertising campaign this fall using the slogan, "I'm loving it."

    The ads, created by a small German agency, are the first global campaign McDonald's has ever attempted, are designed as "hip" and "fun," and will include modern musical talent in the execution.

    McDonald’s, which spends $400 million-plus on U.S. advertising alone, reportedly doesn’t plan to boost its ad budget.
    KC's View:
    We suppose that "I'd be loving it except that I ate so much of it that I can't see my shoes" was deemed inappropriate…

    Published on: June 12, 2003

    Published reports in Canada suggest that Canadians are undeterred by the recent mad cow disease scare there, and are continuing to consume beef at an increasing rate as the summer barbecue season approaches.

    In fact, according to one report, demand is so high that there could be a shortage - which means that prices actually could go up for Canadian beef. Not many animals are being shipped for slaughter these days because of bans on exporting the product to numerous countries, including the US; exports account for 60 percent of Canadian beef sales.

    The Canadian Council of Grocery Distributors reports there's been no downturn in the demand for Canadian beef.
    KC's View:
    A plucky bunch, those Canadians.

    Published on: June 12, 2003

    While its stock price was off a little bit on Wednesday, down 34 cents and closing at $19.25, Kmart's debut on the NASDAQ Tuesday was perceived as a success, with its stock price increasing 11 percent in a single day.

    Kmart had been listed on the Over-The-Counter exchange until Monday's close of business, having been delisted by the New York Stock Exchange last December.

    The company has just emerged from bankruptcy, having closed hundreds of stores and laid off tens of thousands of employees.
    KC's View:
    "There's a sucker born every minute."

    Published on: June 12, 2003

    Global news and commentary from
    Asda has confirmed plans that it is to open two pilot standalone George clothing stores in September 2003 as it attempts to extend its already impressive performance in the UK‚s clothing market. The George clothing brand has been one of the key factors behind Asda‚s rampant success in the UK grocery sector and the two pilot stores will be monitored for a year to gauge the potential scope for a more extensive rollout.

    The two stores will be located at a high street site in the Yorkshire city of Leeds and in a shopping centre in the south London suburb of Croydon and will trade under the George banner. The ranges will be priced identically to those in Asda outlets and the stores are being lauded by the company as the "latest example of Asda's commitment to develop flexible formats that offer the right ranges at the right prices." Each store will employ around 70 staff and will trade from around 930 square metres. The outlets will sell a full assortment of George-branded merchandise including ladieswear, menswear, teen ranges, childrenswear, lingerie and footwear.

    This is a move that‚s been on the cards for a while, with speculation over the possible launch of standalone George stores taking place for at least the last three years. There can be no doubting the strength of the George brand, as it has proven to be a backbone of Asda‚s industry-leading same-store sales growth and has seen the company become UK market leader in childrenswear and the second-largest overall fashion brand in volume terms. The fact that it has grown from zero to GBP1 billion in sales in just 13 years speaks volumes for the appeal of the ranges and its strong value positioning. This development indicates that Asda is continually searching out new avenues for growth and is not taking the result of the ongoing battle to acquire Safeway Plc as a foregone conclusion.

    What of the prospects for the new chain? We feel reasonably optimistic that Asda could make a decent go of this new venture, building on the appeal of the George brand and using its extremely keen EDLP pricing to carve out a key point of difference in the crowded UK clothing sector. Our only reservations would be that Asda is not well versed in high street retailing (with its leaning towards out-of-town operations) and lacks experience in operating smaller specialist stores. Which is where the benefit of being part of the Wal-Mart family comes in.

    Among Wal-Mart‚s other wide variety of global activities is its portfolio of expanding retail chains in Mexico. Chief among these are the usual suspects of supercentres, warehouse clubs and hypermarkets, but the company also operates the Suburbia specialist clothing chain, a concept that sells a broad range of affordable family clothing with a strong reliance on own-brands. Wal-Mart has an impressive track record of flying its personnel around the world in order to transfer knowledge and best practice, so it should come as no surprise if Mexican accents are heard in Leeds or Croydon in 2003/04. It should also be unsurprising if there are more than two George stores trading by the end of 2004.
    KC's View:

    Published on: June 12, 2003 has posted an interesting piece addressing the curious dichotomy that Wal-Mart's enormous marketing presence and economic power presents.

    "Given the degree to which our collective health relies more on the insatiable American consumer than on the declining American manufacturer, does it make sense to consider Wal-Mart as today's best economic proxy?," Slate asks. "Should there be a Wal-Mart Index?"

    On the one hand, there are economists who believe that each Monday, when Wal-Mart posts chain issues weekly sales figures from its 2,870 stores and 520 Sam's Club warehouses, one can get a pretty good sense of what is going on in the economy.

    But there is another school of thought, one suggesting that because Wal-Mart is a discount retailer, it actually can do better in a down economy and present a warped view of the nation's economic strength. (Nobody actually goes so far as to suggest that when Wal-Mart's sales are off, it means that the economy is good and people can afford to shop elsewhere.)

    "Wal-Mart is not just Disney's biggest customer but also Procter & Gamble's and Kraft's and Revlon's and Gillette's and Campbell Soup's and RJR's and on down the list of America's famous branded manufacturers," Slate reports. "It means, further, that the nation's biggest seller of DVDs is also its biggest seller of groceries, toys, guns, diamonds, CDs, apparel, dog food, detergent, jewelry, sporting goods, videogames, socks, bedding, and toothpaste - not to mention its biggest film developer, optician, private truck-fleet operator, energy consumer, and real estate developer."

    There are other considerations, of course: "Of course, there's reason to be cautious about placing too much credence in the Wal-Mart weekly sales figures, which are delivered in a deadpan by an anonymous investor relations official. For instance, Wal-Mart doesn't sell automobiles, which can account for 10 percent to 20 percent of overall retail sales. And while Wal-Mart entered its 50th state, Vermont, in 1995, the company is nowhere near as geographically distributed as, say, McDonald's. Since it built out in concentric circles from Arkansas, the chain is disproportionately concentrated in areas of comparatively low population. Like the Republican Party, it is weak on the affluent urban coasts and dominant in the comparatively poorer and rural interior."
    KC's View:
    It is interesting to see these thoughts laid out, especially because so many of us who spend time paying attention to Wal-Mart have felt for a long time that its sales and profits are a pretty good barometer for how the country is faring.

    These are, of course, just statistics. There are other issues that need to be considered that aren't revealed by spreadsheets and weekly sales figures. Issues like, what is the increasing dominance of Wal-Mart doing to entrepreneurial enterprise in this country? To small and medium sized businesses? To the nation's ability not to be monolithic, but diverse and varied in its retail offerings?

    We're not suggesting here that Wal-Mart is having a negative impact on all these things, though one could certainly make a pretty good argument that way. But you could also make the case that Wal-Mart's dominance forces its competitors to be smarter, better, faster, and more creative than they would be without Wal-Mart.

    Of all these, we are most concerned about Wal-Mart's monolithic nature, and the potential impact it will have not just on business, but on the broader culture. It is too early to tell where this particular train is headed, but not all the signs are positive.

    Published on: June 12, 2003

    Farmer Jack, the 105-store division of The Great Atlantic & Pacific Tea Company (A&P) that lost millions of dollars last year, will shut down its stores for an entire day next week and then reopen them as an Everyday Low Price operation.

    The Detroit Free Press reports that "workers are expected to have new uniforms, weekly price-cutting specials will be abandoned and customers will no longer need their Farmer Jack Bonus Savings Club cards to save money. Instead, Farmer Jack will offer 30-day specials. Shoppers can still use their cards for special promotions and contests."

    Despite rumors to the contrary, Farmer Jack will not be sold, according to company executives.

    Farmer Jack's origins date back to 1927. A&P bought the company in 1989.

    In other A&P news, the company reportedly is close to finalizing a deal to sell its Eight O'Clock coffee brand to Gryphon Investors, a private-equity firm, for roughly $150 million.
    KC's View:
    The makeover carries risks, of course. Farmer Jack will have to generate in volume what it loses in margins, which will make it difficult for the company to turn around its financial situation. It isn’t a short-term proposition, but could take months or years to achieve.

    The company also has the internal pressure of being part of A&P, which itself lost a total of $193 million last year. (Farmer Jack's losses were part of that, but A&P does not break the numbers out.)

    The other big risk is the fact that a low price strategy not only will put Farmer Jack into greater head-to-head competition with Wal-Mart and Meijer, but make it easier for customers to compare prices. Unless Farmer Jack actually is able to have the lowest price in the market - which we doubt - this could be perceived as a desperation-based marketing ploy without teeth.

    And, of course, there is the ultimate question: Does emphasizing price in a battle against Wal-Mart make more sense than creating a truly differentiated shopping experience?