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    Published on: February 9, 2004

    The Arizona Republic reports that Eddie Basha, owner of the grocery chain that bears his name, has described Wal-Mart and its growing power in stark terms.

    "I call it the economic holocaust," Basha told the paper. "It's no different than what the Nazis did in World War II. It's a blitzkrieg. They are doing economically what the Nazis did militaristically."

    Basha also said that he didn’t mean that Wal-Mart was run by Nazis, but that it is a "cultural predator" with tactics that ?are wiping out small businesses and hurting workers."

    While Wal-Mart did not comment to the paper about Basha's accusations, the paper notes that the company "has strongly denied claims that its low-cost, low-prices strategy has harmed the economy or been a detriment to employees."

    Basha's comments came as Wal-Mart plans to expand its presence in Arizona. It is Arizona's largest non-government employer, with close to 24,000 employees, 21 discount stores, 22 Supercenters, two Neighborhood Markets, and 10 Sam's Clubs.

    Basha said one of his stores expects to lose 10 percent to 20 percent of sales when a Wal-Mart Neighborhood Market opens nearby.

    Ironically, the paper notes, while Basha decries Wal-Mart's treatment of employees - "in the scheme of things, they exploit and take advantage of their people…that's not my idea of citizenship" - his company is a non-union shop that has been criticized for its resistance to third party labor representation.
    KC's View:
    Tough words. Tougher sentiments.

    And while we feel for Basha and are sympathetic to his concerns, we're honestly not sure that framing the enemy in these terms is helpful.

    On the other hand, maybe those are the kinds of stark terms that need to be used.

    But here's what is not addressed in the article:

    What does Basha want? A government response? (Not likely.) A consumer response? (The ball is in his count on that one.)

    Published on: February 9, 2004

    The Los Angeles Times reports this morning that because of the four-month-old Southern California supermarket strike - affecting 70,000 employees at the region's three major chains - an influx of Anglo-American shoppers is going to historically ethnic stores.

    While the shift in sales to smaller companies is building their bottom lines (allowing some to retire much of their debt, which puts them in a better long-term competitive position), it also presents the ethnic supermarkets with a challenge - to get a little more mainstream.

    In some cases, that means remodeling stories and adjusting product selection. In others, it means changing the background music played in-store, or the uniforms worn by checkers.

    And the challenge is by no means over. While the big three chains - Kroger's Ralphs, Safeway's Vons, and Albertsons - have lost more a billion dollars combined since the strike began, at some point the strike will end, and the ethnic stores will then be forced to try and retain those customers.
    KC's View:
    And, of course, the smaller ethnic stores will have to deal with an influx of Wal-Mart Supercenters.

    One hopes, if only for sake of diversity, that this opportunity will allow for more stores to be more competitive. Which will be good for consumers.

    Published on: February 9, 2004

    A page one story in Sunday's Washington Post looked at the increasing connection between Wal-Mart and its Asian suppliers, focusing specifically on what the paper terms the "ultimate joint venture" between the company and China, "their symbiosis influencing the terms of labor and consumption the world over."

    Noting that Wal-Mart is the biggest retailer in the world (with sales of $245 billion) and China is the world's most populous country (with 1.3 billion people), "more than 80 percent of the 6,000 factories in Wal-Mart's worldwide database of suppliers are in China. Wal-Mart estimates it spent $15 billion on Chinese-made products last year, accounting for nearly one-eighth of all Chinese exports to the United States." If Wal-Mart were a separate country, the Post notes, "It would rank as China's fifth-largest export market, ahead of Germany and Britain."

    Ironically, China's Community Party "has become perhaps the world's greatest facilitator of capitalist production, beckoning multinational giants with tax-free zones and harsh punishment for anyone with designs on organizing a labor movement."

    It is the working conditions in China that make it possible for Wal-Mart to obtain products at low cost and sell them at low prices. Reporting from Shenzhen, China, the Post writes, "Most of the 2,100 workers here are poor migrants from the countryside who have come to this industrial hub in southern China for jobs that pay about $120 a month. A sign on the wall reminds them of their expendability in a nation with hundreds of millions of surplus workers: 'If you don't work hard today, tomorrow you'll have to try hard to look for a job.'"

    While Wal-Mart says that it is rigorous about maintaining labor standards in countries like China, labor activists there say that the government often is willing "to overlook labor violations to appease businesses that can be milked for taxes, fees and bribes. The activists argue that as Wal-Mart pits suppliers against one another and squeezes them for the lowest price, the workers suffer."
    KC's View:
    Not being en economist, we're not sure what the answer is to this question. (Though we are pretty sure that a dozen economists probably would give us a dozen different answers, and that the one thing the answers would not have in common is simplicity.)

    But what we think needs to at least addressed is whether the availability of low-cost goods imported from China is worth the cost of all those manufacturing jobs that have been exported outside the US. We're not saying that this is just a Wal-Mart-related issue, nor that the Bentonville Behemoth is solely responsible for the trend.

    But the Nation of Wal-Mart and its foreign policy need to at least be part of the debate. And we're not sure that "always low prices" is, by itself, a justification.

    Published on: February 9, 2004

    Published reports say that the United Food and Commercial Workers Union (UFCW) is threatening to strike Ahold's Stop & Shop supermarkets in Connecticut and western Massachusetts.

    The UFCW contract, which covers 5,000 workers in the meat, deli, and fish departments, expires on February 14.

    Brian A. Petronella, president of UFCW Local 371, has said that Stop & Shop is guilty of "outrageous givebacks that would destroy health care benefits, pension benefits and wage scales."
    KC's View:
    Gee, except for the snow and frigid temperatures, maybe New England is going to start resembling Southern California.

    Published on: February 9, 2004

    In this month's Facts, figures & The Future, from the Food Marketing Institute (FMI), ACNielsen, and Phil Lempert, an extensive look at the burgeoning low-carb explosion:

    • In evaluating the low carbohydrate phenomenon, Lempert writes that "we are seeing a market adjustment; where food companies are reducing the amount of carbs (especially those hidden carbs) with the hope of capitalizing on the trend and increasing their brand's share. Bottom line is that the change will be good for America's waistline no matter what the motivation."


    • Proof that low-carb may be more than a fad can be seen in the fact that "interest in low carb foods, unlike in previous health-related shifts (such as no-fat or low-fat), is showing up in many product categories while simultaneously we are seeing a shift in buying behaviors with numerous inherently high carbohydrate foods showing sales declines," F3 reports.


    • In addition, F3 reports that "Watching carbohydrate consumption is not the only food concern among American consumers. When asked about obesity, trans fatty acids and saturated fat, most people are aware of and concerned about the health risks surrounding each issue. However, awareness of trans fatty acids is significantly below that of the other two which may well come as a surprise to the manufacturers as they change their labels to include that information.


    And, in other news from F3:

    • News that "store growth within the Dollar Store channel is unsurpassed by any other retail channel and retailers within the Dollar Store channel are moving from their rural and small town American roots into both urban and suburban America."


    • A new SupermarketGuru.com Consumer Panel Survey reveals that while alternative channels have captured many food dollars, consumers continue to spread their dollars across multiple food retailers. When surveyed as to which of the food stores they frequent is their favorite store, the panel rated the Independent Regional Chain Supermarket as its number once choice, followed by the National Chain Supermarket, and then, in third place, Supercenters.

      "While the National Chain Supermarket outranks the Independent Grocer in both location availability and frequency - shoppers indicate they want more personal attention, and traditionally the Independent Grocer channel has outperformed the National Chains in these areas.



    To get your own copy of this month's Facts, Figures & The Future, go to:

    http://www.factsfiguresfuture.com
    KC's View:

    Published on: February 9, 2004

    The federal Centers for Disease Control and Prevention (CDC) has released a new report saying that the reason that US citizens are fatter than ever is because they eat more than they ever have.

    Women, in particular, are consuming on average 335 more calories per day than they did in 1971, from 1,542 calories per day to 1,877. Men are eating 168 more calories per day than they did in 1971, from 2,450 to 2,618. The federal government currently recommends the daily consumption of about 1,600 calories by active women and 2,200 by active men.

    Small wonder that since 1971, the obesity rate in the US has more than doubled from 14.5 percent of US adults to 30.9 percent in 2000.

    And according to the CDC, the calories are coming from carb-laden products such as breads, pastas, sweets, and sugared soft drinks.

    One bit of health-related good news: Americans seem to be exercising more, even as the obesity rate is increasing.

    Only a quarter of US adults surveyed said they did not exercise during their free time in 2002, down from 30 percent 15 years before.
    KC's View:
    The unwillingness - or perhaps inability - of the US supermarket industry to embrace the obesity issue as one where it can have a dramatic impact on the health of consumers, shrinking waistlines while building the bottom line, was driven home to us over the weekend when we got an email from one of our favorite stores.

    "Send your favorite student or a loved one away from home a gift that shows you care," the email said. "This Care Package is chock full with great tastes & treats of home!" And what was it the $39.99 care package?

    Chocolate chip cookies, butter toasted peanuts, cookie thins, a tub of penny candy, caramel corn, a box of microwave popcorn, squeez-it peanut putter, macaroni & cheese mix, pretzels, a box of hot chocolate, beef jerky and vitamin water.

    Maybe they should have thrown in a prescription for Lipitor and a blood pressure gauge.

    This marketing pitch ignored completely the well-known tendency for freshman college students to gain as much as 15 pounds the first year of college, since for the first time they often don't have parents setting parameters and monitoring their eating habits.

    Wouldn’t it make more sense to come up with a care package that stressed healthier foods and a healthier lifestyle? Instead, we keep moving down the same old path in the same old direction.

    Published on: February 9, 2004

    The Buffalo News reports that, faced with the bankruptcy and shutdown of irradiation process supplier SureBeam, companies like Wegmans and Tops Markets have stopped selling irradiated ground beef, but are actively looking for another supplier.

    Wegmans notified customers that it wasn't selling irradiated ground beef via its website and in-store signage; it also used data from its frequent shopper program to notify customers who had bought the product. According to the paper, Tops said that demand for irradiated ground beef had been limited and that the shutdown wouldn’t have much of an impact.
    KC's View:
    The SureBeam bankruptcy came as something of a surprise, since for a while it seemed like every other day one chain or another was announcing that it would be using the SureBeam process - a concentrated beam of electrical energy - to irradiate beef. It would seem, at least from the outside, if that someone comes along and buys SureBeam's assets, it would have a built in customer base.

    We also couldn’t help but notice the difference in tone between the Wegmans and Tops approaches to the subject. For Tops, it seems to be just another product line that ran out…if a replacement can be found, fine. If not, c'est la vie.

    But Wegmans, as we recall, made a big deal when it brought in irradiated beef, informing customers about the decision, educating them about the implications, and offering cooking and preparation suggestions. It isn’t a surprise that the company would take a similar approach to talking to its shoppers about why a product line has been discontinued and what the company is doing about it.

    Published on: February 9, 2004

    Reuters reports that a US Department of Agriculture (USDA) advisory committee plans to advise the Bush administration by the end of the month what steps it needs to take to prevent mad cow disease outbreaks in the US.

    The committee was appointed after the first case of the brain-wasting infection was found on US soil just before Christmas.

    Among the options being considered are those recommended by an international panel of experts that already has gone on the record as saying it believed that there is a high probability that more mad cow cases exist in the US and have been undetected. The panel also has recommended that the federal government ban all farm animal remains from cattle food as a precaution, ban cattle brains and spinal material in animal feed and pet food, increase testing of older cattle, do random tests of healthy cattle, and ban the use of mechanically separated meat in human food.
    KC's View:

    Published on: February 9, 2004

    Nature.com reports that genetically modified (GM) ingredients have been found in a number of products in the UK labeled as either "organic" or "GM-free." The revelation, made in a study scheduled to be published in April by researchers at the University of Glamorgan in Pontypridd, Wales, reportedly "confirms previous tests by national food standards agencies."

    The discovery of transgenic soya in these organic or health food products has generated some alarm in GM-conscious Britain, and organizations that certify food to be organic or GM-free are reviewing their procedures.

    Nature.com says the problem is only going to get worse. "Almost all the soya from the United States and Argentina, two of the world's major producers, is transgenic. The world's third largest soya producer - Brazil - legalised GM varieties of the crop last September. In many countries, GM-free crops are often mixed with transgenic varieties after harvesting. And batches of soya seed sold as non-GM can contain 1-2% from transgenic varieties."
    KC's View:

    Published on: February 9, 2004

    The US Food and Drug Administration (FDA) announced Friday that its ban on dietary supplements containing ephedra, will take effect April 12.

    The planned ban was first announced last December. USDA said that ephedra has been established to be a stimulant that raises blood pressure and puts stresses on the circulatory system and can cause serious heart problems, strokes and deaths.
    KC's View:
    Why the delay?

    Published on: February 9, 2004

    The US Department of Labor reported that the nation's unemployment rate dropped to 5.6 percent in January as companies added 112,000 new jobs in January.

    This news stood in contrast to the report last week from outplacement firm Challenger, Gray & Christmas that the announcement of job cuts by US corporations were up 26 percent in January from the previous month, the highest since October.

    However, January 2004 layoffs were 11 percent lower than January 2003's 132,222 and 53 percent lower than January 2002's 248,475.

    The issue of unemployment and job creation is certain to be a major issue in the coming presidential campaign. The Associated Press notes that it is one on which President Bush could be vulnerable, since "the economy has lost more than 2 million jobs since he took office, giving him the worst job creation record of any president since Herbert Hoover."
    KC's View:

    Published on: February 9, 2004


    • Scott W. Klein has been named president & CEO of Information Resources, Inc (IRI). Klein, the former president of the Consumer Industries & Retail business for Electronic Data Systems Corporation, will be focused on "transforming IRI’s business by focusing on strengthening its core business of market content and analytic services, while extending services through business performance management solutions."


    • Campbell Soup named Procter & Gamble veteran David White to be the company's senior vice president, global supply chain, reporting to CEO Douglas R. Conant and overseeing the management of Campbell's global supply chain, including engineering, manufacturing, procurement, logistics, and customer service.

      The appointment takes effect March 10.


    • Published reports say that the head of Apple Japan, Eiko Harada, is leaving that company to become the head of McDonald's Japanese division, which has been reeling from a mad cow disease scare that dramatically undercut beef consumption there.

    KC's View:

    Published on: February 9, 2004


    • Internet Retailer reports that Safeway.com has redesigned its web site to showcase cross-selling opportunities, promotions and recipes, and, eventually, "contextual ads" that can drive sales. These efforts have resulted in Safeway.com increasing its average basket size to $130 last year, up 18% from $114 in 2002,

    KC's View:

    Published on: February 9, 2004

    Pondering the loss of sales in Southern California during the protracted strike, we asked last week what else is being lost. To which one MNB user responded:

    I live in Southern California, and we have simply adjusted our shopping habits to avoid the big three; my family now shops at Stater Brothers and Costco primarily, crossing pickets only to buy small quantities of commodity items when absolutely necessary.

    I can't help but feel that these changes may be permanent, not just for my family, but for all shoppers in our region, because we have become accustomed to this new pattern. Kroger, Safeway and Vons are refusing to cry "uncle" to avoid embarrassment, but I feel that their bottom lines here been irreparably damaged in a misguided attempt to pick the lowest hanging fruit to trim costs.


    We also got the following email from an MNB user:

    I was having lunch in a great, outside restaurant in La Jolla on Wednesday, when a Vons' truck passed by. Covering the complete side of the truck was a sign with large pictures of 6 or so smiling employees. The slogan read: "Giving our Best."

    Interesting!





    We got several emails about Ahold's decision to move decision-making for Giant of Landover to Stop & Shop headquarters in Massachusetts. One member of the MNB community wrote:

    As a former Ahold associate, it was apparent that Giant Landover's resistance to change upon purchase by Ahold put them in the situation they are today. Giant Landover may complain about Ahold but they also had record earnings in years subsequent to Ahold's purchase. It is unfortunate for the associates at Giant Landover that it came down to this.

    MNB user Michael A. Casciano wrote:

    This is the first step toward the final “end game”, which includes Stop and Shop being the US headquarters for all of the operating companies in the US, the ultimate closing of Carlisle, and the sale of Bi-Lo and Bruno’s.

    And another MNB user wrote:

    I'll bet Izzy Cohen is spinning in his grave. Giant Foods always and unbelievable customer service and I remember as a vendor rushing LTL shipments of one item or another so that they wouldn't have a retail OOS. My son worked for them while in school and was tapped to work on New Year's Day. He got a letter from Izzy thanking him for giving up his holiday (even though he was certainly well-paid that day) so that "the rest of the Giant associates could have the day off." All the innovations they brought to the industry!! Don't get me wrong, they were a fierce customer, demanding, and at some times arrogant. But their stores were stocked and clean.

    On the broader subject, MNB user Glen Terbeek wrote:

    When it comes to the question "Should a retailer be centralized or decentralized?", the answer is a definite YES! The demand side decisions and authority (including merchandising, marketing, customer relationship management, and employee development) needs to be decentralized down to the shoppers' marketplace to win; while the supply side decisions and authority (including buying, or rebuying, logistics, accounting and other non customer, marketplace related functions) should be centralized.

    The best of two worlds; a decentralized, shopper and employee relevant organization supported by a cost effective centralized infrastructure! Hard to beat!

    It's a great opportunity for Ahold and other retailers to change organization and measurements around the two related business processes mentioned above, rather than continue to exasperate (streamline) the "out of date, unilateral" product supply chain thinking.





    We wrote last week about the agreement between Home Depot and the American Association for Retired Persons that will have the AARP recruiting senior citizens to work at the home improvement store; as distressed as we are by the notion of getting an AARP membership card in the near future, we're even more depressed by the idea that there might be a Home Depot application in the same envelope.

    MNB user Richard Lowe wrote:

    Can you imagine being 55 years old or more and having to take a $7.00/hr job? I would rather shoot myself first! And what may I ask is (Home Depot CEO Robert) Nardelli making per hour? Where is the conscience of these CEO's and upper management? How about trying to provide a fair wage for all employees?

    In all fairness, we probably should note that for a lot of people, working at Home Depot (or Wal-Mart. Or wherever) not only is the best option, but a necessity - and they welcome it. You can debate working conditions and salary/benefits issues all you want, it still beats working the mines or plowing fields.

    Not that working conditions and salary/benefits issues shouldn't debated. They should, and vigorously.

    And another MNB user wrote:

    You've got it all wrong! As a recently knighted member of the AARP, I'm finding this is one of the most powerful groups in America today. With their growing numbers (sorry), they can sway elections, muscle unions, and just about get their way on anything. If HD plays it right, and markets the fact that they employ seniors with extensive experience who can advise customers on their jobs, they will have achieved a coup in the home improvement center business.

    Also understand that most home improvement chains will probably transform in the coming years to as be as much of a place where you can find someone to hire to build or service your home improvement needs, rather than DIY. And who is the target customer for all this, seniors. An invitation to join the AARP, which somehow mysteriously arrives in your mailbox just before your fiftieth birthday, is an invitation to join what is becoming a pretty elite set. Don't miss out.


    The best thing that you can say about one's fiftieth birthday is that it beats the hell out of the alternative.




    And, our favorite email of the still-young week, from MNB user Mike SanClemente:

    On Feb. 1 the Patriots continued their winning streak, having won every week since I began subscribing to MorningNewsBeat! I don't believe there is any coincidence at all…

    Kevin, this is one of the most creative ways I've ever seen to breed reader loyalty!


    Hope this doesn't hurt our considerable Carolinas circulation…
    KC's View: