retail news in context, analysis with attitude

MNB Archive Search

Please Note: Some MNB articles contain special formatting characters, and may cause your search to produce fewer results than expected.

    Published on: January 22, 2004

    We had a story yesterday about a company called "Dream Dinners" that sells people a month's worth of meals that can be frozen and cooked later; what makes "Dream Dinners" intriguing is that patrons go to franchise locations and make their own meals - customizing them for their own tastes by subtracting certain ingredients and adding others. All the ingredients and pans are supplied by the company, as is the instruction.

    The company says that in addition to providing healthy, good-tasting meals, it saves patrons both money and time - the food costs less than it would at supermarkets, and less grocery shopping is required.

    MNB user Paul Schlossberg sent us a link for another company involved in the meal solutions business, "Seattle Sutton," which provides people with "freshly prepared meals - not frozen or dried - for an entire week (7 breakfasts, 7 lunches, 7 dinners, 21 total)." And he offered some provocative thoughts about what all this means:

    This looks to me like an evolving "disintermediation" movement. This is a financial term used when funds are withdrawn from one bank and invested elsewhere at a higher return. Banks once held almost all of people's savings - but banks did not evolve (50 years ago) and other financial services arose to compete for and capture a significant share of savings (at higher rates).

    Applying "disintermediation" in this case - consider that a new competitor with lower costs (and possibly a better and more appealing product) "steals" customers from an established channel (supermarkets). These new entrants are not facing slotting fees and have simplified shopping for their customers. One company even involves shoppers by letting them cook their own meals - if they don't want to buy finished meals.

    Most supermarkets have not evolved effectively in meal solutions selling efforts. There are a few successful exceptions. MNB has presented good insights about some who do it well.

    Where and how will this idea of selling finished meals show up next? Is it possible that convenience stores will play a role in this disintermediation process for the American meal? After all, the 130,000 c-stores far outnumber supermarkets and are well-placed for fast in-and-out shopping as commuters head home at the end of the workday.

    Two different companies, so far, have popped up as new alternatives to where we can buy dinner. You've got to wonder if there are others doing the same thing on a local or regional basis around the country. How do these meals taste? Are the heating directions clear and simple to follow?

    Just what supermarkets needed - more competition. How about losing shoppers and their meal purchases (as ingredients or as finished meals) from supermarket aisles? From the price points being offered, this doesn't look like a scenario for a price war. That takes away one strategy from supermarkets in responding to this competitive threat.

    The c-store thought makes us wonder about the announced strategies of two different companies: Wal-Mart, which plans to open more than 160 c-store/gas stations in the parking lots of its supercenters this year, and Ahold, which is divesting its c-stores because they are a non-core business.

    Seems to us that you could suggest that one of these companies knows that the core business is finding new ways to reach out to the consumer, and that the other is so busy trying to cut costs and save money that what should be the core competency - solving customer problems centered on food - has been lost.

    Sure, it is more complicated than that. Life's sort of like that. But there's clearly something going on here worth paying attention to.

    Regarding Ahold's decision to move its US headquarters from Virginia to Boston, one MNB user wrote:

    That is a big deal. That move involves more than just the few dozen employees who will be severed as a result. (Is Ahold going to replace them with people locally in Boston, by the way, or what?) I personally went though this with Fleming here in Dallas. I worked for a "big 3" Food broker managing lines nationally for the Fleming team. When Fleming went belly up, the broker had no choice but to let all of us go. I'm not bitter about that, I'd have made the same decision.

    My point is that, as in Dallas, many companies have Ahold teams that just became expendable. Now I realize it's not exactly the same because as far as we know, Ahold will still be around but I don't see every manufacturer and broker moving all those people from VA to MA. You and I know that won't happen. Several people will be let go, some may be replaced in Boston but in many cases, the folks already in Boston will just pick up the slack.

    Consolidation is a beautiful thing, eh?

    Repercussions that, we must admit, we hadn't even thought of.

    No wonder they call this a jobless recovery.

    Another MNB user wrote:

    Basically, Ahold is waking up to the fact that the operating companies obtained zero synergy as being part of Ahold.

    As an aside, although 200 jobs were lost at Tops during the Shared Services transition to Carlisle, more than 200 jobs were added in Carlisle. Does that sound like synergy?

    Another member of the MNB community had a different explanation for the Ahold move:

    Ahold moves out of Washington.....because Wegmans is moving in! (Dulles store opening soon!)


    In response to our story about Fair Trade bananas being sold at Wild Oats, one member of the MNB community wrote:

    Although I am all for fair wages and work conditions, these "initiatives" can often be "feel good" initiatives. "Fair Trade", "Organic", "Shade Grown" do not always equate with quality. Nor are they always better tasting. It is, however, a step in the right direction. Quality and good value remains most important to the consumer.

    And another MNB user chimed in:

    In response to your story "Yes, We Have Fair Trade Bananas", and in light of the ongoing labor issues, perhaps TransFair USA should turn their sights inward upon our own retailers to ensure they too are paying living-wages.

    Now there's a concept…

    Our story about the AFL-CIO calling for nationwide picketing of Safeway stores elicited the following email:

    Seems like the union is picking on the wrong company. Safeway has always been union. Why don't they pick on the non-union stores and bring them up to union pay scale? They would not be having a problem if there were not so many non union stores at a lower cost.

    We made a similar point yesterday, and MNB user Ted File observed:

    Kevin, again you hit the nail on the head. I can think of nothing worse for Dominick's to have right now than pickets out in front of their stores.

    Sure, many consumers will cross and a few others will sympathize but then remind the pickets that we are not California and why discredit Dominick's for something over which they have no control. Randall Onstead is getting his feet on the ground and the personality of the stores are changing. That's the good sign. Let's all hope that the situation in Cal gets closed soon....too many have already suffered.

    Regarding the divisive situation that exists between management and labor in California, we wrote yesterday that "the chains' managements can't be solely blamed for this; the unions have helped to engineer a labor culture that doesn't make a 'stakeholder' culture possible."

    To which one MNB user responded:

    "Stakeholder".......common everyday usage word at Wal-Mart.

    Stakeholder culture runs throughout the Wal-Mart chain of associates. It is preached and practiced there unlike at many other companies who only give lip service to the practice of employees being totally involved in their company's policies and practices at store level and their thoughts being part of the consideration in instituting new ideas.

    Unlike what you read about going on at Wal-Mart in newspapers and magazines.

    Good point. Which is probably one of the reasons Wal-Mart is so successful.

    That said, the questions being raised about the company's labor policies suggest that NOT EVERYONE feels like a stakeholder. How bad the situation is remains to be seen. And proven.

    Just being called a "stakeholder," however, doesn't mean that a person actually feels like a "stakeholder."

    And, regarding the growth of big box stores in the US, MNB user Todd Hale wrote:

    No doubt that big box stores are on an aggressive growth pattern as Wal-Mart Supercenter expansion continues and other retailers look to "supersize" too. However, the fastest growing retail segment in terms of store count is the Dollar Store channel. The top five Dollar Store chains added over 4,400 stores between December 2000 and December 2003. Within the Food, Drug, Mass, Convenience, Dollar Store, Hardware/Home Improvement universe, the Dollar channel has two of the top three retailers (based on store count) and they also hold the number eleven position. Expansion continues as Family Dollar looks to add about 500 net new stores in 2004 and Dollar General plans to add 675 stores. In addition to offering low prices and "treasure hunt assortment", these retailers are carrying an increasing amount of national brands to improve their image and drive larger shopping baskets. Additionally, many of these stores are located in Wal-Mart heartland offer consumers a more convenient shopping trip than what is available at their the local Wal-Mart Supercenter or Grocery retailer.

    Walgreens' aggressive store expansion also shows that "bigger isn't always better" as they are well positioned to take advantage of the aging population boom - many aging consumer will likely find the trips from the super store parking lots almost as daunting as walking up and down the store aisles.

    Point taken. Thanks.

    Finally, we had an interview yesterday previewing an upcoming session at FMI's MarkeTechnics conference, "How To Keep Your CEO Out Of Jail." This prompted one MNB user to write:

    FMI would get a much bigger turnout for a "How to put your (former) CEO in Jail" seminar.

    The number of former Fleming associates and shareholders alone who had lives, careers and savings destroyed by the plunder and blunder gang of talent-free executives who ran Fleming would fill the Moscone Center. I'm sure folks from Ahold & Kmart could also bring an SRO crowd too.


    There's a lot of bitterness out there, and it isn’t going away anytime soon. This level of anger and mistrust is something that the industry has to deal with, because it soils the image of the business, and can't help but affect consumer perceptions in the long run.
    KC's View:

    Published on: January 22, 2004

    • Obviously, there are a lot of James Bond fans in the MNB community…because we got deluged with emails yesterday morning about our "Willard Whyte" reference. Whyte, of course, was the reclusive billionaire who is kidnapped by Ernst Stavros Blofeld and eventually rescued by James Bond in "Diamonds Are Forever."

    • One of the most interesting things about the Internet is how jokes circulate so fast and for so long…especially the same joke. We learn this virtually every day, as we receive the same email from dozens of MNB users - a picture of the Mars landscape, with a Wal-Mart in the distance. We can understand why you all find this funny, and why you knew that we'd find it funny.

      Mostly, it's because Martians work cheap, don't know about health benefits, can survive with food and water breaks, and don't mind being locked in the store for those long, cold Martian nights.

    KC's View:

    Published on: January 22, 2004

    • Starbucks reported that its first quarter profit was up 41 percent to $110.8 million, compared $78.4 million during the same period a year ago. Net revenues rose 27.7 percent in the quarter to $1.3 billion; the company said the improvement could be attributed to a string holiday season and the continued success of its stored-value card.

      The coffee retailer said that it plans to add 1,300 stores to its global chain of 7,567 cafes this year, with expected sales growth of 20 percent and earnings growth of 20 to 25 percent.

    KC's View:

    Published on: January 22, 2004

    • Published reports say that John Fingleton, chairman of the Competition Authority in Ireland, has charged that the nation's law against selling products below cost is anti-consumer. The charge came in the wake of a conviction by the Irish courts of both Tesco and Dunnes for selling baby foods below cost. The two chains were fined the equivalent of more than $2,000 apiece.

    • Carrefour has announced that it will roll out electronic shelf labels in its hypermarkets at a cost of roughly $12.7 million (US) this year.

    • In the UK, an alliance of consumer and farmer groups is calling for a new competition code to protect both shoppers and small suppliers.

    KC's View:

    Published on: January 22, 2004

    Global notes & commentary from…

    In December 2003, Japan's largest convenience store operator, Seven-Eleven Japan, announced it had agreed a joint venture with ExxonMobil, whereby 7-Eleven stores would be sited on petrol forecourt sites. While ExxonMobil will operate the petrol side of the business, the shop will carry the 7-Eleven fascia, with Seven-Eleven Japan also responsible for issues such as prices and product range in the shops. Trial stores will be launched in early 2004 and a full roll-out could commence soon after if the initial tests prove successful.

    This is just the latest example of grocery retailers linking up with petrol companies in order to gain a presence on forecourts. The tie-up makes good sense for both parties as they are able to take advantage of the expertise and brand of their partner in their respective sectors. In this instance, the combined stores will be equipped with ExxonMobil's advanced technology such as Speedpass (Pay-at-the pump) and expertise at selling fuel, while Seven-Eleven Japan brings a unique product range as well as invaluable experience in the Japanese convenience store sector.

    Although the presence of grocery retailers on petrol forecourts is relatively common in North America and Western Europe, the sector is still in its infancy in Japan. Japan's second largest convenience store operator launched a tie-up with Nippon Oil Corp in April 2003. Meanwhile, am/pm Japan Co Ltd, a mid-sized convenience store operator, launched its first Delice-town combined convenience store, restaurant and self-service petrol station in 1999. Though the company currently operates only two outlets, am/pm Japan intends to expand the Delice-town concept over the next few years. Another mid-sized convenience store operator, Three F Co Ltd, has also been operating two pilot stores combined with Idemitsu self-service petrol stations.

    One reason why Japan's grocers have so far failed to gain a strong presence on petrol forecourts is because until 1998 Japan's petrol distribution sector was fully regulated and rigorously licensed so that self-service petrol stations were prohibited. However, following deregulation of the sector in 1998, the number of self-service stations has grown and so has the competition between operators. Faced by increasing competition and declining margins, many oil companies therefore view a link-up with convenience store operators as an important way of differentiating themselves from rivals.

    Meanwhile, in a saturated market, Japan's major convenience store players are on the lookout for new, often unconventional locations in order to open stores. The likes of Lawson and FamilyMart have already opened stores in hotels, office buildings, hospitals, banks, factories and universities, so opening a store at a self-service petrol station has become increasingly attractive.

    Until the trials have been completed, the implications of the tie-up will be unclear. The fact that the number of customers at a petrol station is much lower than the level needed by a c-store to break even, and with car parking spaces limited, success is by no means guaranteed. It certainly seems likely that the venture will be concentrated in large cities where there is adequate customer traffic.
    KC's View:

    Published on: January 22, 2004

    Krispy Kreme has opened the first of 20 planned stores in Mexico, in Interlomas, a suburb of Mexico City.

    The company is in the middle of a significant global expansion initiative. It currently operates more than 345 stores in the US, Canada, Mexico, Australia and the United Kingdom, but only opened outside North America for the first time last June.
    KC's View:

    Published on: January 22, 2004

    USA Today reports that RTI International and the Centers for Disease Control and Prevention have come up with a cost of obesity-related health care cost: $75 billion.

    Those who are actually obese (30 pounds or more overweight) pay less than half of those costs, or about $36 billion. The other $39 billion is paid by the nation's taxpayers at the rate of about $175 per taxpayer, in the form of Medicare and Medicaid programs for those who are overweight.
    KC's View:

    Published on: January 22, 2004

    The Boston Globe reports that Wal-Mart has settled a class action lawsuit in Massachusetts that charged it with violating the state's item pricing regulations.

    The company will pay $5.6 million to bring itself into compliance with the regulations, $1 million to various charities, and $750,000 for attorney's fees accumulated by the consumers who filed the suit.
    KC's View:

    Published on: January 22, 2004

    Spartan Stores announced yesterday that it will consolidate its retail stores from five banners to two, believing that the move will allow it to achieve greater efficiency in its marketing efforts and improve sales and profitability.

    The company will change the name of its six Ashcraft's Markets, three Great Day Food Centers, and eight Prevo's Family Markets to either the Family Fare Supermarkets or Glen's Markets banners. Spartan already operates 13 Family Fare stores and 23 Glen's Markets, and says that these are its best-known banners.

    According to a statement released by the company, "This marketing effort will allow Spartan to develop a more consistent and effective consumer message, and result in higher product, service, value and quality standards across its entire retail grocery store base. Operational efficiencies will be realized primarily through more streamlined and focused retail marketing and advertising functions."
    KC's View:
    This may be a bit of a risk, changing the names of stores in a highly competitive marketplace. Even if they are less well known, they still have years of brand equity behind them.

    But efficiencies have to be found wherever and whenever they may be available. Let's hope for Spartan's sake that the balance works out in its favor.

    Published on: January 22, 2004

    Connecticut-based wholesaler Bozzuto’s announced a reorganization of its sales force into three geographic regions: west east, and south. The move comes in responses to rapid growth the company has been experiencing of late, in part because of the regional swap between Supervalu and C&S Wholesalers that took place last year.

    Ray Jacques, the company's former sales director for Independent Sales, was named Sales Director of the newly established West Sales Region, which includes western Connecticut, western Massachusetts, Long Island, and the rest of New York State.

    Steve Traun, the company’s former director of New Business Development within New England, was named Sales Director of the newly established East Sales Region, which will include eastern Connecticut and eastern Massachusetts, along with Rhode Island, Vermont, New Hampshire and Maine.

    Richard Herrmann, the company's manager of New Business Development, was named Sales Director of the newly established South Sales Region, which includes New Jersey, Pennsylvania, Maryland, Delaware and the Washington DC area.

    Jacques, Traun and Herrmann will all report directly to Dan Brock, Bozzuto’s Vice President of Sales.

    In other changes, Jeff Antil, previously Retail Sales Counselor at Bozzuto’s, has been promoted to Manager, New Business Development.
    KC's View:

    Published on: January 22, 2004

    Sainsbury, the UK retailer that recently lost its second-place ranking to Wal-Mart's Asda Group, reportedly plans to spend the equivalent of $90 million (US) on an image makeover that will stress value in addition to quality.

    The Sunday Express reports that the campaign is expected to kick off in the spring, when current CEO Sir Peter Davis moves up to become chairman and is replaced by Justin King. While Sainsbury isn’t confirming the report, spokesman for the chain did tell the paper that management was looking at "the way we communicate our brand to customers, and how that reflects a combination of value and quality."
    KC's View:
    Not to suggest that value isn't important, but it seems to us that this sort of shift plays right into Wal-Mart's hands. By de-emphasizing quality and putting new weight on "value," this kind of image makeover simply concedes that Wal-Mart is setting the rules of the game.

    Is it possible that Sainsbury would be better served by a campaign that sought to better communicate to consumers why quality is more important than value?

    Just a thought…

    Published on: January 22, 2004

    A dairy in Oregon has had a "hold order" placed on it, restricting the movement of cattle on or off the property, as the US Department of Agriculture (USDA) continues to investigate the Canadian herd of cattle from which one cow was identified as having bovine spongiform encephalopathy (BSE), or mad cow disease.

    USDA believes that one of the animals at the Oregon dairy is part of a group of 17 cows that came from the Canadian herd.

    Until now, all the cows affected by the probe have been in Washington State.
    KC's View:
    It becomes clearer and clearer why the USDA didn’t want the fact that an "extraordinary emergency" had been declared to become common knowledge.

    Might scare the cows.

    Published on: January 22, 2004

    A column in The Los Angeles Times by the excellent Michael Hiltzik assesses the California supermarket strike, which has entered its fourth month with no sign of resolution.

    "At this stage," Hiltzik writes, "it's impossible to tell when this tussle might end, or how much the workers might have to concede in a settlement. (It's reasonable to assume that they'll have to give in on something.) But it's not too early to judge what the course of the dispute says about the condition of the American labor movement today: It's pitiful.

    "The UFCW's regional locals, to start with, vastly underestimated their opponents in this fight. When talks opened in August, union leaders told me, they were blindsided by the depth of the cuts demanded by the supermarket chains in health care and other provisions." Furthermore, the unions have remained surprised at the solidarity shown by the chains, even in the face of more than $1 billion in lost sales.

    "That means they've underestimated Safeway Chairman Steven A. Burd, who is spearheading the assault," Hiltzik writes.

    In addition, he notes, the union has not effectively communicated that the fight isn’t "about asking the workers to pay a little out of their own pockets for health care," and that "it's really about an attempt to sharply reduce the level of health benefits overall, especially for new hires."

    At this point, Hiltzik writes, it seems likely that the unions will have to concede more than management…and that whatever resolution to the strife is reached, it will come at a higher price to organized labor than to management.
    KC's View:
    Reading a piece like this only heightens our frustration at the inability of the two sides to come to any kind of equitable agreement.

    And things aren't getting any better. If anything, labor is getting more aggressive.

    The Associated Press reports that a rally of about one thousand protestors outside Vons headquarters resulted in the arrest of close to a dozen labor and religious leaders.

    "We are escalating protests throughout California," said Art Pulaski, head of the California Labor Federation. "We will continue until the grocery chains provide affordable health care to workers."

    But management wasn't budging. "These kinds of rallies do nothing to address the issues that have been the sticking points throughout this strike," said Vons spokeswoman Sandra Calderon.

    However, it isn’t only the unions feeling the pressure. The California Public Employees' Retirement System (Calpers) gas said that it plans to ratchet up pressure on the chains to settle the dispute, complaining that the strike is costing them money. Calpers owns $77 million worth of Safeway stock.

    Published on: January 22, 2004

    The Atlanta Journal-Constitution reports that next month, the US Food and Drug Administration is expected to define what "low carbohydrate" means for the first time, giving manufacturers and retailers a yardstick by which they can measure their products and then advertise carb-related attributes to a carb-obsessed nation.

    The problem, however, is that this is a lot tougher land to navigate than one might expect - especially because there a lot of different kinds of carbs to consider. After all, there are net carbs, effective carbs, and fit carbs. Depending on how the carbs compare to an item's fiber and sugar alcohols, the appropriateness of certain products for people on low-carb diets can be dramatically affected.

    At the same time, manufacturers such as PepsiCo and Unilever are lining up to cash in on the low-carb trend, and no doubt hoping that whatever regulations the FDA puts into place will help to clarify and solidify their competitive positions.

    Confusing an already complicated issue, of course, was the revelation by Atkins Nutritionals - the company founded by the late Dr. Robert Atkins to develop and peddle low-carbohydrate products consistent with the dietary regimen he established - that it is adjusting downward recommendations about the amount of red meat and saturated fat to be consumed while on the diet.

    Traditionally, people on Atkins have believed that they could eat as much meat and saturated fat as they wanted, a feeling that was encouraged by the company's consumer publications. But now, the company is being more stringent about letting people know that only 20 percent of a dieter's calories should come from saturated fat.

    The new revisions suggest that a great emphasis should be placed on fish and oils, and actually puts the Atkins Diet more in line with its competition, such as the South Beach Diet.

    And there's another concern, says the paper. "Nutritionists worry that dieters will look at carb counts and ignore calories, which can add up."
    KC's View:
    Here's the real goal. You spend so much time considering all these various issues that you get a colossal headache and never want to eat again. You lose weight. You credit Atkins. They get rich. Everybody's happy.

    If that doesn't happen, then they count on the fact that all this detail drives you to drink…which makes you fat, which forces you to go on the damned diet.

    And once again, everybody's happy.

    Actually, anything the FDA might do will be welcome, as long as it clarifies the situation.

    After all, we're living in an environment where a "LowCarbiz Summit" is taking place this week, allowing retailers and manufacturers to share strategies that cater to this new reality.

    In western New York, Wegmans Food Markets has begun using an aisle-by-aisle guide to help consumers find low-carbohydrate foods in its stores, as well as using displays for low-carb foods. In a column posted on the company’s website, Mary Ellen Burris, vice president of consumer affairs, notes that “Our leaflet is not a ‘how-to’ but rather a ‘where-to-find’ guide."

    And, FYI, there's a new bi-monthly magazine on newsstands this week, Low Carb Living, designed to help the some 35 million Americans who are said to be flirting with or actually on a low car diet. There should be a lot of call for it, because the way things are right now, not everybody is happy.