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    Published on: September 26, 2003

    …will return next Monday.

    Have a great weekend.
    KC's View:

    Published on: September 26, 2003

    • Smart & Final Inc. announced that Etienne Snollaerts has joined the company as president and chief operating officer.

      Snollaerts comes to Smart & Final from Groupe Casino, the $26 billion food retailer that owns 60 percent of Smart & Final; he also has been a member of Smart & Final's board of directors since 1998.

      At Smart & Final, Snollaerts will have responsibility for all of the company's store operations and supply chain. He will report directly to Ross Roeder, the company's chairman and chief executive officer.

    KC's View:

    Published on: September 26, 2003

    • Rite Aid Corp. posted a second quarter net loss of $10.6 million, compared with a year-ago net loss of $105.3 million. Quarterly sales rose 5.1 percent to $4.05 billion from $3.86 billion., with same-store sales up 5.9 percent.

    KC's View:

    Published on: September 26, 2003

    • Starbucks, which has more than 7,000 locations around the world, has announced plans to open its first store in Paris, France, early next year.

    • United Airlines said Tuesday that it plans to expand its "buy on board" meal program to more than 200 daily flights in and out of Denver and Chicago for 90 days starting Oct. 31. The move follows a test that the company said went well.

    • In the UK, Sainsbury has opened a new "foodie" store in London that offers a number of fresh foods in a farmer's market-style environment.

    • Canada Safeway employees who are members of the United Food and Commercial Workers (UFCW) union have overwhelming approved a new contract offered to them by the company.

    KC's View:

    Published on: September 26, 2003

    Wal-Mart Stores said that it will open two environmentally friendly stores in the US next year - including a 120-foot-tall electricity-generating windmill, solar panels and a recycled water system, all geared to reducing the raw materials used in building stores and increase the use of renewable materials.
    KC's View:

    Published on: September 26, 2003

    A new survey of British public opinion reveals that 54 percent never want to see genetically modified crops grown in the UK, with another 18 percent saying they would find the crops acceptable only if there was no risk of cross-contamination. About 13 percent want to see more research done into the subject.

    A mere 2 percent of people polled said GM crops were acceptable "in any circumstances" and eight percent were willing to eat GM food.
    KC's View:
    And no amount of pressure from the US or the World Trade Organization (WTO) is likely to change that.

    Published on: September 26, 2003

    Saying that they had "systematically and secretly" inflated the prices of medicines purchased by the state's Medicaid program by more than $50 million over several years, Massachusetts Attorney General Thomas Reilly has filed a lawsuit against 13 generic drug companies.

    "Today's suit should serve as a wake-up call to those drug manufacturers who manipulate the system to inflate their profits at the expense of the Massachusetts Medicaid Program and taxpayers," Reilly said in a statement.

    This is just the latest shot taken at the US pharmaceutical industry over the past week weeks, as Illinois, Iowa and the city of Springfield, Mass., have begun looking to Canada for cheaper medicines that can help them cut health care costs.

    The US Food and Drug Administration (FDA) objects to the practice of importing medicines from Canada, saying these prescriptions are illegal and unsafe.
    KC's View:

    Published on: September 26, 2003

    The Associated Press reports that the US Congress is being petitioned by state and local officials to allow them to begin collecting sales taxes on items acquired via e-commerce.

    The problem isn't that states don't require people to pay taxes on Internet purchases - in fact, 45 of them do. But almost nobody enforces those laws, and the US Supreme Court has ruled that states can't force a business to collect sales taxes unless it has a store or other physical presence in the state.

    Hence the creation of the Streamlined Sales Tax Project, signed onto by 20 states, designed to create legislation that will provide a mechanism that will force online retailers to collect the taxes.

    The push for sales taxes to be collected on Internet purchases comes from state and local governments that are under a great deal of financial pressure and need to find new revenues to pay for existing services, as well as from brick-and-mortar retailers that believe e-commerce has had an unfair advantage because of the lack of sales taxes.
    KC's View:
    The funny thing about this push is that proponents are suggesting that it involves no new taxes, only taxes already due but unpaid.

    Which may be technically true, but remains a crock.

    As far as consumers are concerned, the Internet has been tax-free. If the Streamlined Sales Tax Project has its way, now they will. That sounds like new taxes to us.

    We must admit, though, that we've changed our mind on this one. We used to think that the Internet ought to remain sales tax-free, but have come to believe that the significant revenue problems being suffered by states and localities need to be alleviated.

    Published on: September 26, 2003

    USA Today reports that as retailers look to build sales, one of the newest means being employed is to create product lines and marketing efforts that focus on children. Companies such as Coach, Ralph Lauren, Burberry, and even Tiffany are creating items that will appeal to children and earn their interest and loyalty from an early age.
    KC's View:
    This seems like such an obvious ploy, and yet here you seem to have luxury retailers - not day-to-day retailers like supermarkets - that are focusing on kids.

    We think this is such a natural for supermarkets - creating programs and promotions that can bring kids (and their parents) into the store. Often.

    Sometimes, supermarket retailers aim at the big picture without paying attention to smaller subsets - like children or men - that could add real vitality to the bottom line.

    Published on: September 26, 2003

    The Tucson Citizen reports that a Pima County Superior Court judge has tossed out a Wal-Mart lawsuit against the city looking to overturn a 1999 law that requires an extensive review process for stores larger than 100,000 square feet and limit the grocery area to 10 percent of the building.

    Wal-Mart had challenged the law, trying to force a referendum and then filing a lawsuit - and both efforts failed. The judge actually threw out the lawsuit because he said Wal-Mart couldn’t prove that it had been harmed by the law, since it hadn't even applied to go through a review.

    Home Depot, on the other hand, complied with the law, got approval, and then built a store.

    "We are disappointed that the shopping choices of the residents of Tucson have been limited," said Wal-Mart spokesman Pete Kanelos, "and that they are not afforded the same opportunity citizens of other communities have regarding shopping choices." Kanelos noted that Wal-Mart took the litigation route because "we are opposed to any type of legislation or ordinance that restricts consumer choice. And that's simply what this does."

    Kanelos added, "We are reviewing all of our options in our effort to allow Tucson citizens to shop in the store of their choice without restrictions."
    KC's View:
    Gee, y'think maybe the best option would be to actually comply with the law?

    It doesn’t sound all that difficult or onerous to us.

    Published on: September 26, 2003

    Sometimes, conventional wisdom actually turns out to be correct.

    UK Trade and Industry Secretary Patricia Hewitt announced this morning that she has decided to accept the Competition Commission's recommendation that William Morrison Supermarkets be the only one of four major food retailing chains allowed to bid to acquire Safeway Plc, the nation's fourth largest food retailer.

    If fifth-ranked Morrison is successful in its quest to buy Safeway, it will have to divest 53 of Safeway's 479 stores - but will in theory create a much stronger entity with which to compete with Tesco, Wal-Mart's Asda Group, and Sainsbury.

    The Competition Commission's recommendation came after a five-month investigation, and had been shrouded in secrecy until this morning's announcement.

    The decision by the government is seen as a rejection of Wal-Mart's significant efforts to persuade officials that allowing it to buy most of Safeway's stores - and therefore creating an entity that was as powerful as top-ranked Tesco - would lower prices and improve competition. The government clearly felt that having four strong competitors in the UK is better than two - a position supported by consumer groups.

    Both Tesco and Sainsbury also had indicated an interest in bidding for Safeway, but that was seen more as a defensive posture against Asda rather than as having any real conviction that they would be allowed to bid.

    Tesco, Wal-Mart, and Sainsbury will be allowed to bid for the stores that Morrison will have to divest, subject to certain conditions.

    The remaining wild card in all this is retail entrepreneur Philip Green, who has indicated an interest in Safeway and who was exempted from the competition inquiry because he has no interests in the grocery sector. Green, however, has been waiting to see what the government would do before playing his hand.

    There also remains a possibility, according to a report in the BBC, that Safeway's current management could try to bid for the company.

    Morrison originally launched the feeding frenzy over Safeway with a $4.8 billion (US) offer, but its next bid for the company is expected to be somewhat lower - in part because Safeway's value has dropped in the past few months. It was reported yesterday that both Sainsbury and Safeway have seen their market share s fall during the past quarter - Sainsbury down to 16.1 percent from 17.2 percent a year ago, and Safeway down to 9.2 percent from 9.7 percent.

    Tesco, Wal-Mart's Asda Group and William Morrison all saw small increases - to 27.1 percent, 16.9 percent, and 6.1 percent, respectively.
    KC's View:
    Do the math. If it succeeds and all else remains even (which it won't), Morrison will suddenly find itself with 15.3 percent of the grocery market, nipping at the heels of both Sainsbury's 16.1 percent and Wal-Mart's 16.9 percent.

    This will not please the Bentonville Behemoth, which will displeased that the Brits decided the resist its southern charms. Since persuasion didn’t work, we suspect that it will now resort to its time-honored steamroller technique, laying waste to the marketplace with a barrage of lowered prices designed to box everyone else into a corner - a technique that Tesco will have to match.

    This will make it exceedingly tough on both Morrison and Sainsbury - though we have to admit we have a feeling that Sainsbury is in for the roughest time.

    This battle isn’t even close to being over yet.