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    Published on: October 8, 2003

    In the first game of the best-of-seven National League Championship Series, the Florida Marlins defeated the Chicago Cubs 9-8 in 11 innings.
    KC's View:

    Published on: October 8, 2003

    We continue to get email on the evolving tendency of Wal-Mart Supercenters to house other retail businesses, including beauty salons, optometrist offices, tax preparation offices, McDonald's franchises, and now even Krispy Kreme doughnut shops.

    MNB user Paul Schlossberg wrote:

    We recall visiting an Auchan "superstore" in Tours, France. There was a mini-mall inside the main entry, before you reached the Auchan store itself. We found a variety of small shops in the forecourt area. These stores were able to draw from the traffic coming to (or leaving) the Auchan store - and we noticed that some of the stores/services seemed to be doing good business.

    We recall a similar situation at a very appealing Vendex supermarket in a suburb of Rotterdam - although there were fewer stores at this location.

    Both of these stores were visited when I was working extensively in Europe in 1998. Looking back to 1998 shows that this is not exactly a new idea. Integrating the other retail brands into the store is a good idea. It brings other brands and/or services to the shoppers at the location. This is how to create sales - call it new consumption if you wish - or call it stealing share from other retail outlets.


    Point taken.



    We wrote yesterday about a piece in this week's Advertising Age about the "challenges faced by retailers of all sizes as they square off against Wal-Mart, the discount colossus that has become the national market leader for everything from health supplies and beauty aids to women's clothing and groceries." Ad Age cited the case of Oklahoma City's Budget Food Market, which is surrounded by 10 Wal-Mart Super Centers, six Wal-Mart discount stores, seven Wal-Mart Neighborhood Markets, and four Sam's Clubs. How does it compete? By doing what Wal-Mart doesn’t do, and by being what Wal-Mart isn't, including selling fresh cactus, daily baked tortilla and other low-priced and frozen Mexican specialties, as well as cashing checks and selling money orders.

    One MNB user responded:

    The KEY to capitalism is where can a company garner the greatest number of profit dollars? Wal-Mart is winning hands down against anyone else. How much profit is in fresh daily baked tortillas or cashing checks vs. the work involved?

    Your letter suggests there is no room for anyone but Wal-Mart. We cannot accept that scenario.

    We're always writing that the key to survival is being where the customer wants you, how the customer wants you, when the customer wants you, and at a price the customer thinks is appropriate. One MNB user observed:

    How long do you think it will be before the corporate giants finally understand that? I know this is something that you have been saying for a long time, and it certainly makes sense. Why can't they see it? Or will it take the demise of many to finally get them to see the light? As my mother would say, "It's as plain as the nose on your face". Why don't they get it?

    Oh, they get it. They just can't do it, or don't choose to, because they are so focused on lowest common denominator marketing.




    We had a story yesterday about coming grocery wars in Medford, Oregon, and the fact that local retailers actually are embracing new competition from Wal-Mart, saying that it demonstrates the opportunities available in the market and its broadening appeal to consumers. They seem to feel that Wal-Mart will serve as a kind of magnet for shoppers, and that they will be able to take advantage of the increased traffic.

    MNB user Mitch Pallotta responded:

    It's interesting that one of the local retailers who "embrace" Wal-Mart's Superstore arrival is Harry and David Country Store. Harry and David (part of Bear Creek Corporation) sold Wal-Mart the property that they plan on building on....

    Very interesting......


    Also regarding general competition from Wal-Mart, one MNB user wrote:

    The retail business has a low barrier to entry and if Wal-Mart gets too greedy after wiping out substantial competition there will be upstarts to keep it honest, so long as these upstarts can coerce the suppliers to comply with the federal Robinson-Patman Act and give them comparable pricing and service. At the time my father closed his independent drugstore the promotional retail prices at the discount stores were often lower than his wholesale cost. Difficult to compete under that scenario.

    Another MNB user filed this report:

    I shopped a Wal-Mart in Orange County, Ca. this weekend. Jammed with customers all complaining about the narrow aisles in this 100k sq ft monster.

    All were enjoying the low prices . Reminded me of Gemco in the 70’s without the food. OOS (out of stocks) were high. Store looked over shopped. Did not stop the perceived snobby Orange County crowd.





    We mentioned in yesterday's sports report that the Indianapolis Colts defeat of the Tampa Bay Buccaneers Monday night was being described as one of the greatest football comeback wins of all time. Needless to say, not everyone agreed:

    As impressive a victory as it was, the honor of the greatest comeback in a professional football game still belongs to the Buffalo Bills. Led by backup QB Frank Reich, filling in for an injured Jim Kelly, the Bills fell behind 35-3 in the 3rd quarter of the 1992 AFC Wild Card game. Taking the game to OT, the Bills win on a Steve Christie field goal, 41-38.

    Notes: current Bills Coach Gregg Williams was on the Houston sideline in 1992 as a coordinator.

    Frank Reich also holds the record for the greatest comeback in NCAA history, leading the Maryland Terrapins past the Miami Hurricanes 42-40 after trailing 31-0.

    Truly an inspiration for any retailer going up against seemingly unbeatable competition...


    Agreed.
    KC's View:

    Published on: October 8, 2003


    • Supervalu Inc. posted second quarter net sales of $4.6 billion, compared to $4.3 billion during the same period last year, and net earnings of $62.2 million compared to $58.8 million last year.



    • Costco posted annual results for the fiscal year ended August 31, 2003, with net sales of $41.7 billion, an increase of 10 percent. Same store sales were up five percent.

      Net income for the year was up three percent.



    • PepsiCo Inc. reported that third-quarter net income rose to $1.08 billion, from $953 million a year earlier. Sales increased 8.4 percent to $6.83 billion.


    • Drug chain CVS reported that September total sales increased 8.8 percent to $2.49 billion compared with last year’s $2.29 billion. Same-store sales for the month were up 6.6 percent.

      Third quarter total sales at CVS were up 8.5 percent to $6.38 billion, while same-store sales increased 6.4 percent. Pharmacy same-store sales for the quarter rose 8.5 percent, and front-end same-store sales were up 1.9 percent.



    • Drug chain Rite Aid posted September sales that were up 5.2 percent to $1.24 billion, as same-store sales increased 6 percent.

      Pharmacy same-store sales rose 6.5 percent. Front-end same-store sales increased five percent.



    • 99 Cents Only Stores reported that total sales for the third-quarter reached $211.5 million, up nearly 23 percent from the $172.3 million in total sales for the same period last year. Same-store sales for the quarter rose 4.95 percent.

    KC's View:

    Published on: October 8, 2003


    • C-store distributor Core-Mark International Inc. announced yesterday that it will add three eastern distribution centers to its network of warehouses. The facilities formerly were owned by Fleming Cos.

      The centers are located in Minneapolis, Atlanta, and Leitchfield, Kentucky.

      Core-Mark used to be owned by Fleming, but operated independently. While it is the sole remaining piece of Fleming to be operational, the company announced last week that it is entertaining offers.



    • Kraft Foods has agreed to sell coffee certified by the Rainforest Alliance as environmentally and socially sustainable. The decision was reached after Kraft formed a partnership with the conservation organization, agreeing to pay more attention to social, economic, and environmental issues in coffee production.

      Kraft committed to increase purchases of certified coffee, pay more to farmers that employ sustainable farm management practices and deepen its involvement with coffee-producing communities.



    • Japanese c-store retailer FamilyMart announced that it plans to open 200 convenience stores in the US by February 2007, most of them on a franchise basis. The product mix carried by the stores, according to PlanetRetail.net, will include Japanese-style food products such as sushi boxed lunches.



    • Carrefour SA reportedly is scheduled to announce that it has signed a franchise deal with Norway's biggest grocery chain, NorgesGruppen, that will bring the Carrefour name to Scandinavia.

    KC's View:

    Published on: October 8, 2003

    C-store chain 7-Eleven, Inc. announced that it is introducing new coffees, creamers, cocoa, cappuccino, toppings, flavor syrups, steamed milk mix and sweeteners - all of which permit consumers to create "more than 1,300 different hot beverage combinations" for the same price as a plain old cup of coffee.

    "Our goal was to recreate a coffeehouse experience and selection with two key distinctions," said Kris Nelson, 7-Eleven, Inc. category manager for coffee.

    According to the company, the new 7-Eleven hot beverage bar will feature: five or more varieties of coffee (Exclusive Blend, Dark Mountain Roast, 100 Percent Colombian, Decaf, Flavored), four Italian-style flavored syrups (Vanilla, Caramel, Hazelnut, Irish Creme), five toppings (Cinnamon, Nutmeg, Vanilla, Chocolate, Mini- marshmallows), Steamed Milk Mix, Hot Chocolate made with Hershey's Cocoa, Flavored Cappuccino, Half and Half and flavored creamers (French Vanilla, Hazelnut, Irish Creme), sugar and artificial sweeteners, and seven varieties of teabags (Black, Earl Grey, Green, French Vanilla, Orange Spice, I Love Lemon, Mint Medley) to be brewed fresh with hot water. The new expanded coffee program is available in participating U.S. and Canadian stores.
    KC's View:
    Oy.

    This much confusion we just don't need.

    While 7-Eleven certainly can take some pride in the fact that it is trying to take advantage of the Starbucks-created coffee craze, somehow the notion of 1,300 combinations may be more than most people can handle. It’s just too many choices…and may serve to intimidate people rather than inspire them.

    Then again, we could be wrong.

    Published on: October 8, 2003

    The New York Daily News reports that McDonald's restaurants in the Big Apple will launch a nutrition education program in early 2004, dubbed "Real Life Choices."

    The goal of the program is to offer consumers suggestions on how to make the chain's foods more healthy - skipping the bun, or using barbecue sauce instead of mayonnaise.

    Nutritionists quoted by the paper suggest that the fast feeder is taking the wrong approach, and should be creating more healthful menu options and suggesting the consumption of fruits and vegetables, as opposed to just urging people to eat less of certain foods.

    This is just the latest move by McDonald's to respond to nutrition and obesity concerns. Also this week, the company announced that it is reformulating Chicken McNuggets to make them less fatty.
    KC's View:
    Of course, if New Yorkers actually ate a big apple instead of a Big Mac, maybe the nutrition concerns would be less pressing…

    Published on: October 8, 2003

    Published reports say that Schnuck Markets, Dierbergs Markets, and Supervalu's Shop 'n Save chain all have locked out 10,000 employees who are members of United Food and Commercial Workers (UFCW) Local 655, staffing the stores with store managers, office workers, vendors, friends and family members while replacement workers are being trained. The stores are operating on a reduced schedule from 10 a.m. to 7 p.m.

    The lockout was implemented after the union voted to strike after a contract agreement could not be reached. Originally, the union planned only to strike Shop 'n Save, but the chains reportedly had agreed to the lockout in advance.

    The UFCW has filed charges against the chains with the National Labor Relations Board (NLRB), saying that they planned to pay temporary workers "unfairly higher wages."
    KC's View:

    Published on: October 8, 2003

    IGA announced that it has hired Thomas Zatina, a former executive with both Bozzuto's and Fleming, to be the organization's vice president of Red Oval Family relations, working with a coalition of national and international
    manufacturers, suppliers, and service providers.

    The appointment is effective immediately.

    Zatina will be responsible for facilitating successful and productive relationships with existing Red Oval Family members, as well as recruitment of new members.

    While Zatina will spend the majority of his time on his IGA responsibilities, he remains the president of Zatina & Associates, a consulting group providing advisory services to senior management across channels and industries, with a focus on improving understanding, execution and results.
    KC's View:
    We think the world of Tom Zatina. Not only is he a terrifically talented executive, but he seems to have an exquisite sense of timing - he left Fleming before the whole world went south for that company.

    If IGA is smart, it'll also use Zatina to perhaps do a little diplomatic work at Bozzuto's, where he once was COO. The folks there are still smarting over their treatment at the hands of IGA, which recently decided to make C&S Wholesale Grocers a member of the organization, taking over the spot that used to be occupied by Fleming. Not only is C&S a direct competitor to Bozzuto's, but IGA reportedly never even gave the company a heads-up about the move.

    Zatina never would have made that mistake.

    Published on: October 8, 2003

    The Atlanta Journal-Constitution reports that Coca-Cola will bring to a conclusion at least some of its legal troubles by agreeing to pay its former auditor, Matthew Whitley, $540,000, including $300,000 in legal fees.

    While the money being paid to the whistleblower who exposed a number of financial and marketing issues to the media - garnering Coca-Cola bad publicity and damaging its relationship with Burger King - would seem to be a victory for Whitley, the fact is that he was looking for more than $44 million in damages.

    The $540,000 Whitley gets from Coke includes $100,000, plus $140,000 in severance benefits related to his layoff.

    Whitley had contended he was fired in retaliation for speaking out about problems in Coke's fountain unit, though he has changed his tune now that a settlement has been reached. "Over the past several weeks, I have reflected on my relationship with Coca-Cola, a company I still respect and love," Whitley said. "It's become increasingly clear to me that the company has taken seriously the issues I raised. That's all I ever wanted."

    An inquiry by the Securities and Exchange Commission remains ongoing.
    KC's View:

    Published on: October 8, 2003

    The Minneapolis Star Tribune reports on the confusion often felt by people subscribing to one of the many diets that are popular today, only to find out that some of the foods that they are eating contain the new nutritional boogeyman: trans fats, which are believed to cause as much damage to the heart as saturated fat.

    "Brands with trans fat in at least some of their products include Lean Cuisine, Healthy Choice, Slim Fast, and Weight Watchers Smart Ones -- foods that are marketed as nutritionally balanced," the paper reports.

    The good news for confused dieters is that the US Food and Drug Administration (FDA) has passed a regulation requiring that trans fats be listed on food labels. The bad news is that the regulation doesn't take effect until 2006.

    "Some companies have begun putting trans fat levels on their labels," the paper reports, "but for the most part only people who know what to look for can tell whether trans fats are in products."

    Trans fat is created by infusing hydrogen into vegetable oil, and the problem is that creating an alternative with the same taste and texture is not an easy task.
    KC's View:
    It is stories like this one that point out the critical need for consumer education and information. There is so much competing and conflicting information out there, consumers need an advocate to help them sort through it all.

    It seems to us that a retailer that has achieved a high level of credibility and competence can serve as that advocate…but it is a process that takes time. You can't just turn credibility on like a light bulb.