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    Published on: August 4, 2003

    We got a number of emails regarding last Friday's story about the Consumer reports ranking of the nation's top supermarket chains, based on more than 25,000 responses to a poll questioning consumers about their food shopping experiences during 2001 and 2002.

    The top ten were: Raley's, Wegmans, Publix, Harris Teeter, Hannaford, H-E-B, Hy-Vee, Meijer, Stater Bros., and Vons.

    You can read the full story at:

    http://www.morningnewsbeat.com/archives/2003/08/01.html#MNB1




    We had commented that because different divisions of the same companies often had diverse rankings, it demonstrated that centralization often does not actually deliver a consistent shopping experience. (We used Safeway as an example.)

    MNB user Derek Newell responded:

    Although I've never been in a Dominick's, I'm guessing the shopping experience is probably fairly consistent between them and Safeway. It's the expectation of the customers that is the real differentiation. Hence, your own comment later: "That said, it has to be pointed out that while these rankings are interesting, an inherent flaw in the reasoning is the fact that almost nobody is able to compare all of the chains and make an objective comparison. They are all different, and are competing in widely varying markets."

    We think that's the main problem with centralization as a strategy - it doesn't take into account the differences between markets and customers.


    MNB user Glenn Cantor wrote:

    It is interesting to observe that the large, national, and public chains -
    all with strong cost cutting objectives - don't rate well with consumers. Perhaps the most thought-provoking observation is that most of the best chains, in the opinion of shoppers, are private companies that don't have to answer to equities markets.


    Agreed.




    Last Friday, we reported about how in California's Contra Costa County, Wal-Mart has collected enough petition signatures to force a public referendum on a county ordinance that would restrict retailers with stores in excess of 90,000 square feet from devoting more than five percent of their floor space to non-taxable items such as groceries.

    The countywide referendum could take place as early as this November.

    We noted that while Wal-Mart says that it has no current plans to build such a store in the county, management said it has to fight the ordinance on principle. Local officials and citizens, on the other hand, say they are fighting for principle of being in charge of their destiny, not Wal-Mart.

    One MNB user wrote:

    You chose to miss the point.

    On the surface and superficially it's about local control and "us" versus the evil plague of the corporate profiteers and exploiters of our neighborhoods (sociologists versus capitalism and freedom). How can a intelligent analyst chose to disregard the issues of free enterprise and markets free of governmental interference?

    The union and governmental activist are so brazen that they dispel the lie of "local land use control" as the pretense to impose market and merchandise controls and interference. On that basis, our local governmental bureaucrats, and elected officials will make it as their place to tell Sears they must limit the area of hardlines in their department stores and focus only on apparel and home furnishings. "Out with the appliances, auto services and tools!!" That won't happpen because Sears is not a threat to a powerful special interest with campaign contributions and political clout demanding protection of a union wage scale in grocery stores (inflated above the market scale).

    Beyond the true conflict of a union lobbying government to construct special interest protection of its dues base and pay scale (which is in conflict with consumer choices and interest), on the profound scale it is about a group of trustees of government authority asserting a mission to impose its choices upon the consumer, and decides for the market what it needs and will get.

    Beware of elitists, who believe they know better and should decide for your family the needs and wants that they know are worthy, or, not compelling.

    Next year they could be telling Barnes & Noble which categories of books that should be limited in their assortment. Special interest has influenced government to take priority over consumer choice - plain and simple. What is next?


    We may be accused of being a little naïve on this issue, but we think that it may be somewhat unfair to suggest that this is just elitist local officials and labor unions trying to limit Wal-Mart's expansion. Certainly the unions are playing a role, but local officials usually are local residents with a strong point of view about the shape and substance of their communities…and it would seem to us that within the boundaries of the law and ethical behavior, they have both the right and responsibility to control commercial growth in their towns.

    We live in a small Connecticut town, and if Wal-Mart had decided to put a store here (as opposed to just up the road apiece in another town), we would have felt obliged to oppose it - not because Wal-Mart is the evil empire (which it is not) and not because we are elitist (which we probably are), but because it simply would have put too much stress on an already overburdened infrastructure and created traffic issues that we are not able to deal with. We would have suggested that the best way to deal with a proposed Wal-Mart would have been to put in place zoning regulations that would keep out all such big-box stores.

    We would have opposed such stores not because we are the unwitting tool of labor unions, nor because we believe in government controlling what people can sell…but because we have opinions about what is right for a place where we have lived for 20 years and where our children are growing up.

    This is not to say that Wal-Mart is wrong and its opposition in Contra Costa County is right. Far from it. It is, however, to suggest that people have a right to make their opinions heard, and to do so without being labeled as union dupes and elitists.
    KC's View:

    Published on: August 4, 2003


    • Publix Super Markets posted second quarter net income of $161.5 million, up better than 14 percent compared to the same period a year ago.

      Total sales were up 7.5 percent, to $4.1 billion, while same-store sales increased 1.4 percent during the second quarter.

    KC's View:

    Published on: August 4, 2003

    The Associated Press reports this morning on how New England dairy farmers are finding ways to deal with the fact that a national milk glut has deflated prices, leaving them with "mounting debt and diminishing revenues."

    Selling milk to distributors sometimes earn as little as 11 cents per pound -- less than it costs to produce it.

    But it turns out that cheese is a lot more profitable. So one farmer, for example, now is selling artisanal Gouda online and in specialty stores for $9 per pound.

    "If we had continued milking cows we would be out of business by now," one farmer tells the AP. "The cheese is definitely what has kept us going."
    KC's View:

    Published on: August 4, 2003


    • Connecticut-based Bozzuto's Inc. reportedly is taking advantage of the troubles being suffered by two other wholesalers to expand its customer base. The Independent Retailers Group (IRG), a mid-Atlantic retailer group formerly served by Fleming, will be joining Bozzuto's under the IGA banner. And The Neighborhood Group in upstate New York, formerly served by Penn Traffic, also reportedly is moving over to Bozzuto's.



    • The Penn Traffic Co. announced that the U.S. Bankruptcy Court for the Southern District of New York in White Plains has approved $270 million of permanent debtor-in-possession (DIP) financing for the company, which it said would enable it to "conduct business as usual during the reorganization process."


    • The Food Marketing Institute (FMI) applauded the introduction today of the Organized Retail Theft Act of 2003, legislation which it said would "combat what has become one of the most serious retail security challenges - organized retail theft." This form of crime costs food retailers "up to $15 billion a year and all retailers $34 billion," according to FMI.



    • The Mercury News in Northern California reports that a practicing Muslin in the city of Fremont is suing a Food Maxx store there because its "country style ribs" were not clearly identified as pork. The man, Faraj Tabari, had never consumed pork in accordance with his religious beliefs, but mistakenly bought and consumed the pork ribs last June.

      Food Maxx said that it was a labeling mistake, and that usually "pork" and "beef" are clearly labeled on their meat products.

      The issue highlights labeling issues that go beyond simple accuracy. In communities with diverse religious and ethnic populations, there can be major implications when products are not accurately labeled - even if it is a simple mistake.

      "It's a very big deal,'' Hamid Mavani, spiritual leader at Oakland's Islamic Cultural Center of Northern California, told the Mercury News. "If it was mislabeled, it's a big issue from the Muslim perspective. It is as if you were to buy a soft drink and it turned out to be alcohol or wine. It should not be taken lightly."

    KC's View:

    Published on: August 4, 2003

    The University of Michigan reports that its consumer sentiment index rose to 90.9 in July, up from the 90.3 reading in its preliminary report at midmonth and 89.7 in June.

    These numbers were in contrast with the Conference Board index released last week, which showed an unexpected decline to 76.6 last month from 83.5 in June.

    The University's index for consumer expectations reportedly fell to 83.7 fro 86.4 in the June survey.
    KC's View:
    Seems like a good day to be quoting George Bernard Shaw, who said:

    "If all economists were laid end to end, they would not reach a conclusion."

    No kidding.

    Published on: August 4, 2003

    The Washington Post had a great story over the weekend about Dennis Buettner, a NASA employee who loves beer and who used to joke with friend and co-workers that he was the captain of the US Beer Drinking Team.

    As a gag, he decided to establish such a team, creating a logo, membership cards and a website: www.usbdt.com. Suddenly, without any effort at all, he found that 450 people he didn’t even know had gone on the site and signed up to be members of a team that in reality didn’t exist.

    So, he sold them t-shirts and sweatshirts (at $19 and $30 apiece). In the 18 months since he started the site, he's sold almost 1,000 such garments, and more than 20,000 have signed up for membership on the team.

    There are team members as far away as England, Germany, and even Australia. And Buettner dreams of chapters in every country on the planet, of setting up a Beer Lover's Hall of Fame, and international summits where beer lovers could get together.

    Buettner tells the Post, "It's about the brotherhood of beer, which is a step above the brotherhood of man -- or maybe a step below it. The competition is finding the best beer on the best day with your best buds."
    KC's View:
    i>Some look at things that are, and ask why. I dream of things that never were and ask why not?

    (Though a beer drinker's team may not have been what George Bernard Shaw had in mind…)

    The interesting thing is that the site and the team is not focused on drunkenness, but just on the social interaction that can happen over a tall and frosty. It's all about community…people's yearning for it, and the ability to provide it without much effort at all.

    It's a good lesson for retailers. They settle for customers and databases, when they could be creating communities…which would be a lot more powerful and enduring.

    Published on: August 4, 2003

    The Milwaukee Journal-Sentinel reports that Fresh Brands, which operates Piggly Wiggly supermarkets in Wisconsin and northern Illinois as well as Dick's Supermarkets, has emerged as a likely buyer of 23 Kohl's Food Stores in the Milwaukee area.

    If such an acquisition is made, it seems likely that it will happen soon, since Kohl's is scheduled to start closing down in mid-August, and buying shuttered units is a lot less attractive than buying stores that actually are operating. In addition, it seems probable that Fresh Brands would sell of some of the units to reduce its debt from the acquisition.

    The Great Atlantic & Pacific Tea Co. is the corporate parent of Kohl's Food Stores, and has pledged to sell or close the units by the end of the month.
    KC's View:

    Published on: August 4, 2003

    Decanter.com reports that Tesco, the UK's biggest supermarket chain, is predicting that within five years, most wine sold in the UK will come with metal screw tops, not corks.

    "We are aiming to have half our range sealed with screw caps by 2005," company spokeswoman Helen McGinn told the website. "We are moving more and more towards the use of metal screw caps, especially on our premium wines."

    At present, close to 10 percent of Tesco's wine SKUs are sold with screw tops. According to Decanter.com, "the supermarket has been a major player in encouraging the Old World to use metal closures on exports to the UK."

    This trend sets up an intriguing conflict. On the one hand, The Portuguese Cork Association (APCOR) recently unveiled a Cork Mark symbol to clearly identify products made from real cork, and maintains that research shows that consumers prefer wine closed using the real thing.

    On the other hand, as reported not that long ago over on www.supermarketguru.com, there is a shortage of real cork, concerns about the cost of the real thing, plus worries about "cork taint" that can ruin wine.

    Wineries have four choices for sealing a bottle of wine: Natural, one-piece cork; Cork composites, or twin-top, which is a cork with a body of granulated cork, with a disc of cork at either end; The twist-off screw cap; and synthetic or plastic cork.
    KC's View:
    It may be a typically uninformed comment, but somehow wine just doesn't seem the same when you open the bottle by unscrewing a metal cap. It isn’t just a matter of freshness; there is a romance and poetry about the unique sound that a cork makes when it is removed from a wine bottle.

    Seems to us that if screw tops are to become prevalent in this country, there is going to have to be a lot of consumer education done.

    Published on: August 4, 2003

    The Associated Press reports this morning about a number of Kansas retailers that are actually taking advantage of the fact that Wal-Mart has come to town.

    Their basic strategies:

    • They appreciate the fact that Wal-Mart creates traffic, and try to create environments that will attract core customers. At a local hardware store, men tend to drop off their wives at Wal-Mart, then go across the street to a store they really want to patronize.


    • If Wal-Mart starts selling something that they have, they react by closing it out, and moving on to something that Wal-Mart doesn't carry.


    • They emphasize customer service, and put a premium on special order items.


    • A local pharmacist visits customers at home to make sure they take their medications correctly, and he delivers or stays open late to take care of a customer. "Wal-Mart made me a better businessman. You look at ways to compete," he says.

    • The hardware store even has its own greeter: Gus, a German shepherd-husky mix, who lies on the floor watching customers come and go.

    KC's View:
    Finding points of differentiation isn't just a matter of competing with Wal-Mart, though that's always the big focus. It also is the key to competing in general.

    Published on: August 4, 2003

    USA Today reports on how a number of manufacturers are looking to convenience breakfast foods as a major source of new volume, with offerings such as Quaker's new Breakfast Squares product leading the way.

    However, the report also cautions that nutritionists say that often the convenience versions of familiar breakfast foods aren’t necessarily delivering the same values as the original versions.

    In the case of Breakfast Squares, for example, they have 220 calories and four grams of saturated fat vs. a bowl of Quaker Instant Oatmeal's 160 calories and zero grams saturated fat.
    KC's View:
    Worth noting, especially in an environment where obesity and nutrition issues seem to be in almost every headline.

    Coincidentally, we've been nibbling on Breakfast Bars almost every morning for the last couple of weeks…we get up at about 4 a.m., and found that combined with several cups of coffee, they were a nice way to jump-start our day while writing MNB. But we didn’t even check about the greater amounts of calories and saturated fat…and now that we have this information, we may look for another option.

    This doesn't mean it isn’t a good product. It just means that many of us are being more conscious of these issues, and that manufacturers need to be attentive to this shift.

    Published on: August 4, 2003

    PlanetRetail.net reports this morning that Ahold is expected to announce that its second quarter sales are off by about 10 percent compared to a year ago, specifically reflecting declines at both its US Foodservice division and in its Albert Heijn flagship chain in the Netherlands.

    With financial reporting due this week, Ahold is expected to announce its strategic intentions next month, unveiling a reorganization plan that it believes will put it on firmer competitive ground as well as reduce its staggering $12 billion (US) debt load.
    KC's View:

    Published on: August 4, 2003

    According to an internal memo circulated at Fleming Cos. late last week and obtained by MNB, the sale of Fleming's whole grocery business to C&S Wholesale Grocers continues to move forward, with one small glitch. The memo reads, in part:

      "It was originally anticipated that C&S would be prepared to identify their staff transition team needs by today. C&S has notified us they have not yet finalized their part of the transition team plan. We are continuing to work through the transition list with C&S and will to share this information with associates as soon as it is available. We thank you for your patience as we work through this process with C&S.

      "On Monday, the company will present the C&S asset purchase agreement to the Bankruptcy Court for approval. We will provide an update upon the completion of the hearing.

      "As we work through the restructuring and court process, we will continue to share developments as they occur. Associates who have questions or want to clarify rumors they may be hearing are encouraged to use the Open Door Policy to speak with their supervisor or any other member of the company's management."

    As previously reported, Fleming and C&S Wholesale Grocers, Inc. have signed a definitive asset purchase agreement to sell Fleming’s wholesale grocery business to C&S for about $400 million.

    Fleming's Core-Mark c-store distribution business is not affected by this sale.
    KC's View:
    We suspect that for a lot of people, the reassurance that there is an "open door" policy at Fleming is small comfort at this stage of their careers. For many of them, the policy may mean "don't let open door hit you in the rear end on the way out…"

    Published on: August 4, 2003

    Dow Jones reports that Loblaw Cos. will open its first Real Canadian Superstores in the province of Ontario during the fourth quarter this year, with plans to open as many as a half dozen of the units there in the near future.

    Until now, Loblaw has only used the format in western Canada. However, Wal-Mart's expansion plans in Canada, as well as an expectation that eventually it will bring its supercenter format to the country, has energized Loblaw to make a pre-emptive move.

    The Real Canadian Superstores generally are about 140,000 sq. ft. and have a combination of food and nonfood. By agreement with the unions, they will be staffed by a combination of union and non-union personnel, which Loblaw believes will make it more competitive with the assiduously non-union Wal-Mart. And, in Ontario, Loblaw is expected to modify the offering somewhat, keeping the look of traditional Loblaw stores and including departments not offered in western Canada units.
    KC's View:
    Smart move. We like aggressive offense, and think it makes a whole lot more sense that just playing defense.

    Published on: August 4, 2003

    Sunday's edition of The New York Times featured an interesting piece entitled, "If You Pitch It, They Will Eat," detailing how food companies target children with promotions and advertising that affect their behavior. Some would call it smart marketing designed to take advantage of the fact that children between the ages of four and 12 spend about $30 billion on their own wants and needs each year, while their parents spend $600 million to feed their kids.

    But others - many of them nutritionists - "call it a blitzkrieg that perverts children's eating habits and sets them on a path to obesity," the NYT reports.

    It isn’t just advertising. McDonald's, for example, "besides operating 13,602 restaurants in the United States…has plastered its golden arches on Barbie dolls, video games, book jackets and even theme parks." And other companies are using every possible product tie-in available to make products attractive to children, the NYT reports. "There are SpongeBob SquarePants Popsicles, Oreo Cookie preschool counting books and Keebler's Scooby Doo Cookies. There is even a Play-Doh Lunchables play set."

    "The problem of obesity is so staggering, so out of control, that we have to do something," Walter Willett, a professor of nutrition at the Harvard School of Public Health, tells the NYT. "The vast majority of what they sell is junk…how often do you see fruits and vegetables marketed?"

    The response by food companies until recently has been to say that the real cause of childhood obesity is sedentary lifestyles, not diet. But while this remains very much the party line in the food industry, companies like Kraft and McDonald's are making strides to reduce fat and portion size in the products they sell.

    There is a need to set specific standards on what is marketed to children, Professor Willett tells the NYT. "We don't sell children guns, alcohol or drugs, but we do allow them to be exploited by food companies."

    You can read the entire piece at:
    http://www.nytimes.com/2003/08/03/business/yourmoney/03KIDS.html
    KC's View:
    As we were reading this piece, it occurred to us that it is ironic that while packaged food manufacturers and fast food restaurants spend an enormous amount of time and money marketing to kinds and trying to influence their behavior, we can't remember the last time we saw a major supermarket chain do the same thing in a comprehensive, intelligent manner.

    If this ability to influence children's eating habits could be adopted by supermarket chains and then given a spin that sought to get them to make healthier and more informed choices, it could be an enormous step in the right direction.

    This would seem to be a case where chains could do well by doing good.