Published on: September 10, 2003We got a number of emails reacting to our criticism of the McCafe concept in yesterday's MNB. Kevin Graff, a member of the MNB community, wrote:
Your review was based on your experience 3 years ago. Seems a little unfair. They may not be any better today, but I'm certain they deserve a current and fair evaluation. Just a thought.
Good thought, and a fair point.
It's just that we can still taste that damned coffee…
MNB user Dave Tuchler added:
It has always puzzled me how McDonald's seems to miss opportunities they
might have through coffee.
With a zillion locations, many with drive-thrus, it seems that with a better-tasting coffee (and a good sip lid) they could steal a lot of volume from other vendors, and probably draw a lot of customers to boost their breakfast sales.
As it is, I prefer the more robust taste of Starbucks (or comparable) coffee over McDonald's bitter/inconsistent offering -- even though I pay a premium. And because their sip tops are fairly useless to travelers, I'll go out of my way for an alternative when I'm on the road.
I actually wrote Oak Brook a few years ago asking why they can't just offer the sort of sip top that Starbucks and Costco have, and got a form letter response about it 'being in test market' or something like that. Still can't figure that one out...
As for the coffee itself, I don't think that I would advocate their upgrading all coffee, but offering a better quality alternative for a premium couldn't be that hard. Seems to be a pretty active arena for Dunkin' Donuts, Krispy Kreme, etc.
Regarding the asset swap by Supervalu and C&S, which we reported on yesterday, one MNB user wrote:
Three or more independent wholesalers in the same region isn't going to last. Chain presser is going to whittle this down to one or two at the most. The independent is probably better off having one major wholesaler to develop efficiencies in the supply line. Independents are famous for using small specialty suppliers and will continue to regardless of who their major supplier is.
The threat to independents isn't other independents, it's the chains. There is ample opportunity to differentiate yourself from chains and other independents buying from the same independent wholesaler if that wholesaler knows its business.
I know little of the C & S operation. If they are the right fit for independents they will grow; if not, the money spent…will be a poor investment.
Mergers and buy-outs will happen, some will work, but most will be a bust. Let's worry less about the number of suppliers and more about the flow of creative juices. After all, that's what you do best.
We continue to get email on the subject of cost-cutting and efficiency drives by retailers. One MNB user wrote:
I think that cost cutting is important but only a small part of the challenge. Nobody is ever going to match operating margins with Wal-Mart. It’s a fool’s errand. The best they can do is create value with what they’ve got, and pay attention to their customers and employees while watching their margins—not hacking at their organization to try to see what happens next.
“No sacred cows” type of cost-cutting is the first sign of a death-spiral. It presumes a cost-approach instead of a business approach. It also telegraphs (rightly or wrongly) a message that your business operation is currently out of control. By nature, mainstream grocery has tiny margins (in comparison with “Premium” grocery—and any other business for that matter). No amount of cost-cutting will ever substitute for customer-focus and expansion of share-of-wallet. There is just not enough there to “cut your way to profitability” absent dramatic revenue growth.
An interesting thing happened the other day; I went into an Albertson’s on my way home immediately after having visited a Safeway in the same town (same super-store layout). I was disappointed not just because the floor plan is confusing, and not just because the items I enjoy seeing are not on the shelves, and not just because the staff seems to shrug their shoulders and say “that’s all they send us, sorry…” It was all of those things combined, plus the fact that none of the “regular” employees I know (this store is very close to my home) seemed to know who the heck Larry Johnston was, or what he was trying to do. I brought up his name when the topic came up of a recently closed Albertson’s super-store in our area. Employees from that store were being sifted into the local stores. Seems that after a complete remodel to compete with a Safeway across the street, they stayed open for all of six months, then closed for good.
It is rumored that a Whole Foods will be moving in. My wife, for one, is thrilled. We now have Whole Foods in two semi-convenient locations, three Draeger’s, two Molly Stone’s, two Piazza’s and several Andronico’s. This is in the San Francisco Bay Area market in the Peninsula area, near Palo Alto.
It demonstrates the challenges ahead for Albertson’s. Their selection is already a far second to Safeway, and neither are anywhere close to the others that I mentioned, in the “premium” category.
Safeway continues to dominate due to convenience, abundance of selection, quality of produce and meats, and a lot of staff that operate more as roving “sales people” – always asking if we have found all we need, and always open to running back to see if some item is there. If something is lacking or desired, they personally take up the issue and get back to us if we give out our phone number. Case in point: organic “Rocky” brand chickens. We received a call when they came in. That’s a four-dollar ++ per pound chicken item. Keeping premier customers in the store with such attention is what protects Safeway from the four super-premium stores in the area. We still go to those other stores, but not for staples, and we frequently spill over and pick up premium items at Safeway. So they’re doing a lot right. Poor Albertson’s seems like a ship without a rudder. The people seem to want to do the right thing but are not given the tools, or the empowerment to do so. And please, let them know who is running their company. It’s kind of embarrassing for them. Apparently Larry still has layers left to dig through.
Interesting commentary. We would be remiss, however, if we didn’t point out that many people we speak to have exactly the opposite evaluation of Safeway and Albertsons - that Safeway is the one struggling, and that Albertsons is in better shape.
The truth probably lies in the middle somewhere - it depends on the market, and even the individual store.
Which is a great object lesson, when you think about it. That no matter what cuts you make, or efficiency drives you promote, or advertising campaigns you commence - it all comes down to the experience you have in the store. And in this area, the food industry can be judged guilty in many cases of being too lazy and complacent, and of settling for "me, too" stores when they should be striving for "only me" stores.
We got a number of reactions yesterday to the email from Gristedes CEO John Catsimatidis that lambasted (we think that is a fair word) Fleming's management and culture. It's fair to say that a number of people were outraged - a number didn’t want their emails used, but expressed vehement disagreement with his sentiments (and that's putting it mildly).
We have to be honest here. Before posting Catsimatidis' email, we thought long and hard about "Roshomon," the 1951 Akira Kurosawa film about the subjectivity of truth. And we talked to a number of former Fleming people about his recollections, just to understand them in context.
A debacle like Fleming - and debacle may be too mild a word - quite naturally will inflame passions on all sides.
Not everyone disagreed with Catsimatidis' sentiments. One MNB user wrote:
I loved the note from John Catsimatidis about Fleming & Pantry Pride. In my tenure at Fleming I was involved in working with Pantry Pride in it's Fleming incarnation as Hyde Park Markets and it, like every other Fleming owned retail operation, was run into the ground by Fleming senior executives who possessed ego far out of proportions to their ability and who were congenitally deaf & dumb to any input other than that provided by their coterie of junior coat holders, boot lickers and fawningly obsequious yes men on the corporate staff. Honesty, objective facts and critical thinking were rare and unwelcome visitors at the Fleming corporate office, especially in the isolated fourth floor aerie where the wise owls of the wholesale industry resided in their vast, thickly carpeted, wood paneled and fireplace equipped offices.
You have to remember that Fleming grew from its Topeka origins by buying competition as they grew from coast to coast. Unfortunately Fleming ran out of wholesalers to buy and the bigger chains and Wal-Mart moved into Fleming's rural markets. Fleming turned to "buying" retail business with foolish high risk loans, lease subsidies, and ridiculous over commitments to retailers which inevitably ended up with Fleming in court and losing big time or holding the keys and bills to lots of dark stores.
Fleming was never a competitor or an innovator. Fleming never saw technology as a tool for strategic and competitive advantage, instead years of Fleming CEO's viewed IT solely as an expense to be relentlessly minimized like copier paper or janitorial services.
The corporate retail strategy was raise retails and cut labor hours, period. None of the series of wonder boys who ran corporate retail could tell an end cap form a pallet jack. And they all spelled merchandising R E B A T E.
The wholesale strategy was never, ever to reduce cost of goods to customers instead it was to maximize internal margin. The corporate manager who, for example, presented a program where Fleming would obtain Chocolate Frosted Sugar Coated Twinkie cereal at 40% discount and pass only 2% to the retailer was praised, even though retailers could obtain the same product from smaller competitive wholesalers at, say, a 5% discount.
When sales in the category predictably tanked the blame was placed on dullards at the divisions for poor execution. Retail customers quickly and angrily realized that Fleming's "national volume buying power" only guaranteed low prices for Fleming and not its retailers.
Its hard to tell who was more responsible for Fleming's demise, its decades long series of overmatched and overpaid executives whose haughty attitudes would make Marie Antoinette look like Mother Theresa or the completely inert Fleming Board of Directors whose lack of measurable action could probably qualify them as being legally dead in several states but they both were on watch as a Fleming culture that was not capable of competitive reaction or innovation and focused on internal margin flourished and ultimately destroyed the company. And it all started years before Mark Hansen and his obscenely oxymoronically named "Servant Leaders" arrived to stick their snouts in the Fleming trough.
You mentioned in your column: "And you have to wonder if some of the former senior executives at Fleming are shaking their heads, wondering how they missed so badly."
The former senior executives would devoutly prefer that everyone blame the debacle on the vendors, the unions, Kmart, fluctuations in Euro or sunspots , anything other than where the blame solely and personally belongs - with the former senior executives themselves. And the only thing they shake their heads about is that they are no longer on the Fleming gravy train.
Like we said…passions get aroused.
- KC's View: