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    Published on: June 30, 2003

    We had a story last week about Netflix, and compared its approach to making recommendations to users based on past DVD rentals to an approach that we said more retailers ought to take (especially when it came to creating a market for lesser used, niche products that consumers might not even know about). This prompted several emails.

    MNB user Tom Brown wrote:

    Your closing paragraph struck a responsive chord. Obviously, it would be great to creatively sell new products to individual people based on past usage of a similar item. But there is something more basic out there. There are easily a dozen items that we use that our Stop and Shop no longer sells. The store is a large store generally with redundant brands in most categories. With the customer identification made possible by the loyalty cards, there would clearly be a way to find the users before discontinuing an item. But I suppose that it is too tempting not to take the new product money and discontinue established items to make the space. And there is a difference between discontinuing redundant items and unique items that is seemingly missed by retailers.

    This is one of the issues that we believe NetGrocer's "endless aisle" technology is uniquely designed to address, though the problem is that retailers often institute such an initiative without doing the kind of promotional push for it that the service warrants. If we had a retail store that could provide customers with virtually any grocery product they want regardless of whether it is on our shelves, we'd be making a big deal about it…especially if we were facing off against tough competition.

    We wonder how many people are doing that.

    Another MNB user, quite rightly, asked the following question:

    Isn't this the Trader Joe's model (without all the club-card consumer research)?

    To a great extent, yes. It carries only the products that it can sell, tests and promotes new products all the time, and specializes in surprising and delighting the consumer. Not a bad way to run a business, really…

    Not everyone agrees with us, though. One MNB user wrote:

    Isn't there quite a bit of shopping difference out there when you are buying groceries, on which we live, and movies, which we mainly seek for enjoyment?

    It is to me.

    While admitting there are grocery items I buy from which I get, mainly, enjoyment, i.e., snack foods for example, but when it comes down to buying to sustain me and my DW, it's down to brass tacks; buying what we like to eat and live on.

    Now, maybe this netflix method is a way for a new item to get on my shopping list, or hers, more than likely, as I'm a stick in the mud about adding new and, usually, strange looking food item to my plate, she's always open for something new and different.


    Hey, there are two different kinds of people in the world - people who eat to live, and those who live to eat. (Anyone reading MNB knows where we fit into this continuum…)

    At some level, many (not all) supermarkets may have to concede some of the "food as sustenance" shoppers to Wal-Mart, because competing at that level may be impossible. Which means, conversely, that many (not all) supermarkets should target everyone else by focusing on people who will be energized by a fresh approach to food products in all categories. And that doesn't mean, by the way, just targeting traditional female shoppers, but finding new and original ways to run promotions and provide resources that will appeal to men, senior citizens, kids, teenagers, whatever…

    This is a dynamic business, and you have to be dynamic to succeed in it these days.

    Now, to be honest, we have the advantage when writing all these things of not actually being as retailer…a point that MNB user Marv Imus made:

    You have been a strong proponent for years, as have I, on the ability to “mine” customer data for target marketing. But your examples of current retailers do not have the volume issue our industry has. Let me be more specific … in one week’s time our ONE store has 45,000 items, we have 15,000 active customers, we sell 150,000 units, and 7 years of historical data on each customer, which over that period of time is over 25,000 customers, stored on a desktop PC. You can see the issue we have … 2,000 customers per day times 25 items avg per basket times 365 days per year is over 18 million records. And that’s per STORE ! No other industry has that kind of data. Today’s systems are better than even a year ago but still we can not get to the item level per consumer in a timely enough manner. That’s why you usually see marketing to the category level ( baby clubs ) or inside a category ( dog food ) just like your NetFlix ! They are NOT giving you detail suggestions but genre “similarities” … the other issue we have is in our data the consumer is NOT loyal ( we market her NOT to be ! ) Take the pasta sauce for example … we have 20 different “kinds” which runs to over 100 different sku’s ... each week we promote a different brand at prices levels that consumers can not pass up. So in the data a consumer in one year’s time has records of 10 different kinds and 20 different flavors. Which one is she loyal too ? This is in NO means a disagreement with your philosophical agreement about marketing to a consumer's preference … I agree COMPLETELY ! But we are no where NEAR there yet, and I do not expect anything much better in the next couple of years. That’s also why you see more programs in the Independent retail than in chains … we have less data so can manage it better. BUT we can not upgrade with every new system that is the hottest out there, either. We must wait a couple of years to get our ROI on that system. “We” ARE working toward this goal each and every day by building the databases of information to feed that wiz-bang program 5 – 10 years from now.




    Regarding our story about addictive food, and the criticism that Dr. Barnard got for his radical views (as we discussed above in our essay), we got several emails:

    So, let me get this straight: a scientist who chooses to belong to organizations dedicated to helping people live longer, healthier lives is now a political hack?

    Perhaps Dr. Barnard's allegiances should have been mentioned in your original summary, but I strongly disagree that his case is the same as a physician in the "employ" of the American Meat Institute. Where, exactly, is the big financial payoff to Dr. Barnard for "getting everybody under the sun to stop eating meat?" Is "big veggie" (you know, those big evil broccoli conglomerates Eric Schlosser must be investigating right now) somehow behind him, financing his studies?

    Besides, I think Mr. Hervey is "protesting too much." According to you, Dr. Barnard's study cast a much wider net, looking at meat, cheese, chocolate, sugar -- hardly the image of a doc with a fixated grudge. Whether or not one agrees with him, this sounds like a person who fits our old image of what a doctor is supposed to be: interested in keeping us healthy.


    We rest our case about the problem with relegating such opinions to the fringe.

    And another MNB user wrote:

    I was at a natural products trade show a few years ago & attended a presentation featuring Dr. Barnard and another doctor whose name I have forgotten. They were discussing dietary protocol for cardiovascular patients. Dr. Barnard's approach included eliminating all meat and having the patient consume whole grains, vegetables, and fruits.

    But the other doctor countered that after several decades of poor eating habits, the patient would probably be better off limiting certain favorite foods and increasing healthier alternatives, including using proper meds & dietary supplements, all under medical supervision. He suggested that forcing the patient to follow such a radical dietary routine, as Dr. Barnard was espousing, would cause the patient to become angry & frustrated and backslide into old habits. Dr. Barnard lashed out at him, saying that if the patient didn't follow such a strict routine, he/she would not see improvement. The other doctor said that the stress of such a radical change might hamper any improvement the diet provided! It was like watching a tennis match, each of them lobbing statements to counter the other!

    The health-food crowd in the meeting room rallied around Dr. Barnard - he's made a positive name for himself with them. I was negatively impressed with him as a rabble-rouser & zealot. The natural products industry has created/increased awareness for foods processed with fewer questionable ingredients, better nutrition, cruelty-free personal care items, etc. Unfortunately, it has also given voice to people whose personal agendas take precedence over common sense, good nutrition, and good medicine.


    We had a thought while reading this letter:

    Who is to say that Dr. Barnard's approach is any more radical than, say, Dr. Atkins?

    Hmmmmmm?




    Responding to a story last week about moves that both Albertsons and Winn-Dixie were making on the private label front, MNB user Ellen White wrote:

    How is it that Albertson’s thinks the customer will want a premium product…I guess my take on them is that they are trying to compete with Wal-Mart on so many fronts, it’s confusing to the customer to throw high priced competing product in the stores. Also, I hope this means they will abandon pricing their private label orange juice higher than Tropicana - I never got that.

    Winn Dixie might get the margin it wants, but how can you drive sales enough to offset their lower prices? Top line growth is simply # units x price…they will have to sell a lot more units.

    I continue to have concerns that all of the conventional competitors will cut service instead of beefing it up and that’s a problem in my book. I understand that the competitive environment is horrible, but Sam Walton even said “they need to avoid coming at us head-on, and do their own thing better than we do ours….it doesn’t make any sense to try to under-price Wal-Mart on something like toothpaste.” I’ll bet if you ask Albertson’s and Winn Dixie what “their own thing” is, they can’t tell you.


    Another MNB user wrote:

    Although I haven't bought the brand, it's been in the Albertson's near our house. It is priced higher that some frozen foods, though may not be more expensive per oz as I didn't look closely as we typically don't purchase/consume frozen prepared meals. However regarding your comment about upscale, the packaging is very clean (and white) with good food photography, which is more in alignment with more upscale brands....Coulda fooled me...




    We made a crack the other day about misplaced priorities of school board, and how they often view education as a "cost" as opposed to an investment, prompting the following email from an MNB user:

    I have no children and I agree with you on this subject. Children are our investment in the future. They are our future leaders, inventors, and caretakers of our society. Teachers are supposed to teach!! Not empty trash cans and sweep floors like some have to do in Oklahoma or even buy supplies out of their meager salary. (By the way I am not a teacher nor do I have a spouse that is a teacher.) How are we going to attract qualified people if we don't pay them a decent salary or supply them with the necessary tools to teach? If we continue to cut budgets and activities then the only way we can help make up that shortfall if the good folks don't want to raise taxes and get the taxpayers upset is to take corporate donations.

    Parenthetically, we went to our 14-year-old's Babe Ruth game yesterday in Ridgefield, Ct., and saw that not only did the scoreboard have a Pepsi logo on it (which we thought was just fine), but each player's uniform had an enormous "PEPSI" written across the back where normally their own name would be.

    Not sure what it cost Pepsi to get that placement. Nor what the greater cost was of being willing to offer Pepsi a group of 14 year olds as human billboards.




    Responding to our continued support for Country of Origin Labeling (COOL) legislation, MNB user Robert Hermanns wrote:

    I disagree with you on COOL, it is a real mess that will cost consumers in the end. There may be a compromise that works for consumers and the industry, but in its present form it will be a disaster to the supply chain that someone will have to pay for.

    The question, we suppose, is whether consumers are willing to pay for it - and if they want it in the first place.

    If they are, and if they do, should the industry be resisting?

    However, if there is a compromise that is both efficient and effective, we would support it completely.

    One consumer perspective on this was reflected in the following email:

    When the food-basket today is made up of several items from the global village, it would be very foolish not to know about what precautions/measures/regulations where in place in the exporting country to assure the highest standards of food quality & safety.

    COOL means to provide proof of trace-back & forth…the consumer will play the price, no one else, the pay back is we will not become ill for the sake of PROFIT. Think long & hard about this one.





    We had a piece last week about how a couple of Ahold USA chains, including Giant down in Washington, DC, are hiring consultants to help them define their customers better and then market to them.

    One MNB user responded:

    Having lived in the Washington area in the 80's. I find it eye-opening that Giant has to pay someone to identify their customer. They sure had it right when I was there. Clean stores, with a lot of services designed to get the 2 income families that spent way too much time sitting in traffic in and out. Their customers didn't worry about clipping coupons or the price of hamburger. They never had an out-of stock (and as a vendor, I endured their wrath when our trucks were late or we shorted an item to them.) Have the principles of grocery retailing changed that much and/or has the Balt/Wash Giant consumer changed? (I'll tell them that and I won't charge them for it…)




    Finally, at the risk of seeming immodest, we have a couple of other emails we'd like to share:

    You are great for putting all the ranting of people like myself into your daily. Some of it is great for the morale. Some of it is closer to humor
    and some makes one want to weep. (No comment on where I must fit into that picture please.) I'd love to see some of what does not get past the review
    board.

    I did a little comparison on Krispy Kreme VS Shipley's glazed donut
    and I vote for Shipley. I've yet to have the key lime variety so I now have
    a mission for my next Donut splurge.

    On a side note, after hearing about "Two Buck Chuck" and getting some research on sales trends of PL wines we have placed a similar product in our stores. The price is closer to 5.99 on a daily basis but the quality is better than the price suggest. Sales are picking up each week and we have
    ad inquiries from a few restaurants who are considering the PL wine as a "House Brand" for the Bohemian crowds on Saturday PM. Granted, none of these restaurants are going to be serving royalty this week. It is valuable lesson
    to learn how quality products can be purchased and sold if you willing to forgo the national advertising and take on most of the advertising in your market aimed at your customer. (promoting a product that is only in your store.) Never stop learning…

    Enough of my rambling. Thank you for the great daily news and I'm glad to
    see your sponsorship growing.

    Keep up the good and informative commentary.


    Thanks. These kinds of emails make our day.

    And another MNB user wrote:

    I think this is probably the best email I receive. Thanks for your opinions and comments.

    When I started in this business, almost twenty years ago, it was fun. Now it is survival. The industry has taken a basically simple business and complicated it to the point were they can't understand how the competition is beating them at the business they established. I hear all of the catch phrases and industry programs, but they don't mean a damn thing unless the principle behind the program is genuine and real. It's about keeping your customers happy, selling
    groceries for a fair price and not managing your category into sameness. When I go to stores today I can't hardly tell the difference between competitors.


    There's a slogan there:

    "SAMENESS IS DEATH."

    We'll have the t-shirts printed up straight away.
    KC's View:

    Published on: June 30, 2003

    In case you missed it, Katherine Hepburn died yesterday at age 96.

    If there ever was a classier, smarter and more distinctive example of an American film actress, we can't imagine who it might have been.

    Hepburn's death, coming on the same weekend that Hollywood releases its current vision of American womanhood - "Charlie's Angels: Full Throttle," one of the most profoundly stupid movies ever made - illustrates how times have changed.

    And not for the better.
    KC's View:

    Published on: June 30, 2003

    On Friday, we reported on Supervalu testing a new concept that combines its discount grocery Save-A-Lot format with the Deals$ - Nothing Over a Dollar chain that it acquired last year. We said that Supervalu currently had 47 of them operating in the St. Louis area, with plans to have a total of 75 in different parts of the country by the end of the year.

    A story over the weekend in the St. Louis Post-Dispatch noted that Supervalu actually operates 47 of them around the country, with just "several of them" in the St. Louis area.

    We regret the error.
    KC's View:

    Published on: June 30, 2003

    The Detroit Free Press notes this morning that the Automated Teller Machine is 30 years old this month, with the first patent on the technology issued in 1973.

    Facts worth knowing…

    • ATM usage grew 64 percent between 1994 and 2002.
    • Half of ATM users would like to buy stamps from the machine, 48 percent would like to cash checks there, and a third would like to be able to buy tickets to sports and entertainment events.
    • The first working ATM was installed at a Chemical Bank in New York City.
    KC's View:

    Published on: June 30, 2003

    Reuters reports that Wal-Mart plans to focus on the apparel business as its next great conquest, bringing to it the same relentless focus and aggression that it has used to conquer the grocery business.

    Symbolic of this attitude, according to the report, is a poster near Wal-Mart CEO Lee Scott's office that reads, "Who is taking our business? Kohl's."

    And remarkable about Wal-Mart's identification of Kohl's as a threat is the fact that Kohl's annual revenues are less than Wal-Mart pays in US sales taxes each year.

    Wal-Mart's strategy is to create a stockpile of name-brand, low-cost clothing items with which it can lure shoppers from Kohl's and other specialty clothing retailers. It also is opening two stand-alone "George" stores in the UK, from which it plans to sell its popular fashion brand, and there have been rumors about it buying another UK clothing retailer.
    KC's View:
    This will have a big impact on people and companies in the rag trade, all of which will have to begin finding new and differentiated ways to compete with the Bentonville Behemoth.

    Welcome to a very big club…

    Published on: June 30, 2003

    Reuters reports that Stampede Meat Inc. of Chicago has recalled 739,000 pounds of frozen beef that may be contaminated with bacteria.

    The move came after five cases if E. coli infection were linked to the meat.

    The US Department of Agriculture (USDA) Food Safety and Inspection Service said the beef was sold mostly in the form of vacuum packaged steaks, in both the United States and in Canada.
    KC's View:

    Published on: June 30, 2003

    The US Department of Agriculture (USDA) reportedly has informed the Wine Institute that wine bottle labels that use the word "organic" do not have to carry an ingredient listing - because wine labels in general do not carry such listings.

    The Wine Institute reportedly requested a ruling on this issue because it was not explicitly addressed in the Organic Foods Production Act of 1990.
    KC's View:

    Published on: June 30, 2003

    The New York Times reports this morning that as France hosts its largest annual wine fair in Bordeaux this week, "the usual contingent of American wine merchants were mostly absent, confirming to many at the fair that American ill will over France's opposition to the war in Iraq bruised more than egos."

    France's wine exports to the US totaled close to $1 billion in 2002, roughly 16 percent of all French wine exports, but the drop in volume this year is expected to be in double digits. Overall French exports to the US are off 21 percent for the first four months of 2003.

    The NYT reports, apparently with tongue firmly in cheek, that "France is trying to repair the damage with a maladroit public relations campaign whose tagline is, 'Let's Fall In Love Again,' featuring a video in which the aging comedian and filmmaker Woody Allen talks about French kissing his young wife." Fourth of July celebrations are planned for a number of places in Paris, though there seems to be little hope that these effort will repair the damage in the short-term.
    KC's View:
    We were out sailing the other night, and someone brought along a couple of bottles of French rose that he'd carried back from a French business trip.

    And, while at CIES recently, they were serving French champagne at many of the parties.

    Here's what we learned from both experiences.

    We don’t ordinarily like rose because it is too sweet, but the French rose was excellent.

    And we're not a huge fan of champagne…but we discovered that we like really, really good French champagne.

    Politics is politics. Food and wine are what make life worth living.

    Our philosophy is to try to keep them separate, though we recognize that this is not a universal trend these days…

    Published on: June 30, 2003

    Reuters reports that, believing that baby boomer customers are looking for healthier alternatives to burger-and-fries fast food joints, casual dining restaurants such as Applebee's and Chili's are adding curbside delivery, improved take-out packaging, and even altered menus that can appeal to this highly desirable customer base.

    Speed, while important, is not considered to be a driving factor as these customers make fast food choices. Rather, the conventional wisdom is that they are looking for better-tasting, higher-quality options…and the casual restaurants are expected to start launching highly visible ad campaigns touting these improved services.
    KC's View:
    Which means that fast food restaurants will be forced to improve their menus, and that supermarkets and c-stores will have to follow suit. Ultimately, all of these venues will have to acknowledge that they all are in the same business - that of feeding people - and that consumer doesn't think about format, just about the food that he wants to eat.

    Published on: June 30, 2003

    There was an interesting story in The New York Times yesterday about the subject of organic certification, and "the exhaustive inspection and voluminous review of paperwork" needed to get it.

    A Whole Foods store manager says that all this work is worth of it, because, "This speaks volumes for the commitment we have made to organic foods. Retailers are going to benefit tremendously because of the assurances we are giving our customers."

    Organic certification is designed to assure consumers that products labeled as organic indeed are free of conventional pesticides or fertilizers, antibiotics or growth hormones.
    KC's View:
    There has been much discussion on MNB lately of how much information is appropriate or necessary to give consumers; it has been prompted by a number of stories about issues such as County of Origin Labeling (COOL) legislation and trans fat labeling.

    It just struck us that this store manager makes a critical point that, while it is about a specific issue, can be applied to a number of subjects. Providing information is not something to be afraid of, or to be avoided because it is complicated and/or expensive. Rather, it is something to be embraced because it recognizes the intelligence of the consumer and speaks to the commitment that the retailer has to carrying the right products and providing the comprehensive information about them.

    We recognize that not everyone agrees with us on this one. But we keep thinking that an unwillingness to provide certain kinds of information to the consumer could be interpreted by consumers as a reluctance to be upfront with them. And that sort of interpretation cannot be good for the retailer.

    Published on: June 30, 2003

    by Kevin Coupe
    There were a couple of stories last Friday that, having had the luxury of the weekend to think about them, we believe deserve some additional comment.

    One of them actually was in the Your Views section, in which there were a number of comments about an earlier story on addictive foods, all of them referring to Dr. Neal Barnard, who had been quoted in the original Washington Times piece.

    MNB user James Hervey of the National Association of Convenience Stores (NACS), wrote that "Your article and commentary left the impression that Dr. Barnard was an unbiased man-of-science. In fact, nothing could be further from the truth. Neal Barnard is a political hack with a political agenda, which includes getting everybody under the sun to stop eating meat." And James went on to detail his associations, most of which, he said, want "to eliminate the consumption of meat, among other politically charged and highly controversial stances."

    Our first reaction to this, and other similar emails, was that "we can't keep track of all the political hacks, and that sometimes at 5:30 a.m. it's hard to separate the legitimate scientists from the ones with an agenda."

    But on second thought, we're not sure that was a fair comment.

    One of the realities of 2003 is that unlike years past, when people like Dr. Barnard could be marginalized on the lunatic fringe as being a hack and radical, these kinds of characterizations may not work. Dr. Barnard and other people no longer can be relegated to the fringe because they operate within the mainstream, using the Internet to communicate their views to a wide range of people. They can influence opinion…and, quite frankly, they have every right to. And it probably isn't wise for anyone to underestimate their power and potential.

    We should note, by the way, that one of Dr. Barnard's affiliations is with People for the Ethical Treatment of Animals (PETA), an organization with which we have had numerous disagreements and that sometimes, we believe, is completely nuts (to use the clinical term). So this observation isn’t designed to approve of Dr. Barnard or any of the organizations with which he works, but just to acknowledge that it is important not to take them too lightly.

    The other story that we felt we gave short shrift to was the piece about the competition between Dunkin' Donuts and Krispy Kreme. We should have noted that, based on the fact that Dunkin' Donuts is currently in 100 Stop & Shop stores and a number of Home Depots, it seems like any retailer looking to create a way in which to attract shoppers ought to be calling Dunkin' Donut headquarters.

    And no, it is not a sponsor. But it sure seems like it is a company seeking strategic alliances.
    KC's View:

    Published on: June 30, 2003

    The Kroger Co. announced it has purchased 13 Food Town stores in the Toledo, Ohio, area from Spartan Stores.

    Financial terms were not disclosed.

    The stores are now part of Kroger's Great Lakes division, which currently operates 22 stores in the Toledo area and a total of 231 stores in Ohio, Michigan, and northern West Virginia.

    Three of the units already have been re-opened under the Kroger banner, while the other ten have been closed for inventory review. Nine of these are expected to be opened by the end of July.
    KC's View:

    Published on: June 30, 2003

    The Sacramento Bee reports that Raley's management denies the rumor that the Northern California-based, 134-store chain is for sale.

    "It's a definite no. Raley's is not for sale," said spokeswoman Nicole Townsend. "This is something that we've heard, too, over the years, but we're a family-owned company and intend to stay that way."

    However, the Bee reports that it has received numerous reports that Raley's is for sale, that management wants to sell the company as a whole, and even that the sale already has taken place.

    Raley's generates about $3.2 billion in annual sales, but because it is a private company, it is not required to reveal as much about its operations as publicly held companies.
    KC's View:
    Part of the problem with this rumor at the moment is that some of the companies considered likely buyers in the past - like A&P or Ahold - no longer are likely to be in acquisition mode because of their own financial problems.

    But we have to say that we've encountered this rumor several times recently ourselves. While we are prepared to take management at its word, it would be less than candid to pretend that this is speculation without a lot of currency at the moment.

    Published on: June 30, 2003

    Reuters reports this morning that Dutch retailer Ahold managed to meet its June 30 deadline for filing audited results of its Stop & Shop unit over to its bankers, though it has not yet revealed those results to investors.

    Ahold's "forensic accounting probes" into the remainder of its US operation will be filed within days, according to the company.

    The company has to have all of its results filed with its bankers by mid-August in order to be able to access its credit line. It has said it will publish the results of the internal audit in September.

    Ahold has endured a rash of resignations, both in the US and Europe, in the wake of revelations that it had overstated profits by more than $880 million during a two-year period. It share price has dropped by almost two-thirds during the past year, and it has debt in excess of $12 billion (US).
    KC's View:
    It's hard not to feel that there is a shoe hanging out there, just waiting to drop, in which there will be more bad news from Ahold. Closure does not seem to be on the immediate horizon…and closure on these issues is what this company desperately needs.

    Published on: June 30, 2003

    C&S, Nation's Third Largest Wholesaler, To Buy Business; Also Will Begin Immediately Providing Fleming With Groceries

    Fleming Companies has signed a letter of intent to sell its grocery wholesale business to C&S Wholesale Grocers, the privately held company that is the nation's third largest grocery wholesaler. The terms of the sale were not disclosed, and it is contingent on "the execution of a definitive asset purchase agreement," according to a statement released by the companies.

    In a separate arrangement, C&S agreed to promptly begin supplying Fleming with selected vendor products for distribution to Fleming retail customers.

    "These actions represent major steps in Fleming's Chapter 11 process," said Fleming's Interim President and Chief Executive Officer Pete Willmott. "We believe the best way to maximize the value of the business for our constituents is to sell Fleming's grocery wholesale business to a strong buyer who can provide our customers with the service and reliability they need. This arrangement with C&S…is designed to allow performance to be restored and enhanced in our grocery wholesale divisions, to the benefit of our customers and associates. The supply arrangement with C&S, which is effective immediately, will provide additional product to enhance service to Fleming customers."

    C&S Executive Vice President Mark Gross said, "The purchase of Fleming's wholesale grocery operations would allow us to expand our business into parts of the country where we do not presently operate. We are excited about working with Fleming and its chain and independent supermarket customers in a mutually beneficial transition for all parties."

    Fleming currently is operating under bankruptcy protection, having filed for bankruptcy back on April 1. It expects to file a motion with the courts to set in motion the procedures that will set in motion an auction of the grocery wholesaling business that would be completed within the next six weeks. The possibility remains that another bidder could step in, or that an auction of the parts could create a sale price greater than an auction of the whole thing as a single entity.

    This move does not affect Fleming's Core-Mark convenience wholesaling business, which operates as a separate entity.

    C&S Wholesale Grocers has annual sales in excess of $11 billion, and has been ranked by Forbes as the nation's 11th largest private company. The company says that it "provides wholesale food distribution to grocery chains, as well as independent stores throughout the Northeastern and Midwestern United States, delivering to over 2,200 locations from its distribution centers in Vermont, Massachusetts, Connecticut, New York, New Jersey, Maryland, Ohio and Pennsylvania."
    KC's View:
    Obviously, this is an enormous story for the food industry, and it raises a number of questions:

    • Will another entity step in and try to trump C&S's bid and set off a bidding war for Fleming's grocery wholesale business? There is a very strong possibility that the feeding frenzy that occurred in the UK after William Morrison put in a bid for Safeway Plc (which wasn't in bankruptcy, and therefore pricier) could get replicated here.


    • Will C&S remain a privately held company now that it is more than doubling its size?


    • How long will it be before Fleming sells off its Core-Mark c-store distribution business? And will Warren Buffet step up to buy it, now that he's already acquired the McLane business from Wal-Mart?


    • And, despite the fact that it appears that Fleming will vanish from the face of the earth, will there be legal actions taken against the former senior executives who guided it in the months and years that led to its demise? (The betting among a number of former and current company executives is that there will…though it is a little hard to tell whether these are informed judgments or just wishful thinking…)



    In a draft copy of "talking points" that was obtained by MNB, it was stressed to employees that C&S is "known for being a cost-efficient distributor with a stable, growing business." The company said that "We believe selling the wholesale business to such a strong buyer gives us the best chance for restoring service levels and serving the largest number of customers. This will be seen as good news by many of our customers. Obviously, this can also be good news for associates."