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    Published on: April 7, 2004

    Voters in the Los Angeles suburb of Inglewood voted roughly 60-40 to defeat a ballot initiative that would have allowed Wal-Mart to build a supercenter in the shadow of Los Angeles International Airport.

    Inglewood reportedly represented a new strategy for Wal-Mart, which essentially sought to sideline local officials and allow the development without the usual traffic studies, environmental reviews, and public hearings.

    Labor and community groups opposed the effort, charging that Wal-Mart would "depress wages, drive out existing businesses, create traffic problems, and actually reduce the total number of jobs in the surrounding area."

    According to early numbers, roughly 25 percent of the suburb's 40,000 registered voters apparently cast ballots - even though Wal-Mart collected more than 10,000 signatures to force the vote.

    The vote in Inglewood underlined some of the troubles that Wal-Mart is facing on the west coast.

    As the votes were being counted, The Los Angeles Times reported that California Lt. Gov. Cruz Bustamante and other Democrats "are pressuring the world's largest retailer through proposed legislation to improve health benefits for its employees — or pay a steep price."

    According to the LAT, "one bill would require 'big-box' stores to reimburse government for the cost of providing public healthcare to workers. Another would require the stores to pay for expensive studies on whether they harm local economies by crushing competition and offering inadequate benefits to workers."

    Of course, it isn’t all bad news for Wal-Mart. The Japanese media reports that Seiyu, which is more than 37 percent owned by Wal-Mart, has opened its first western-style supermarket there - part of Seiyu's effort to adapt a Wal-Mart-style approach to retailing.
    KC's View:
    Tough day for Wal-Mart. But it ain't over…because the Nation of Wal-Mart hasn’t grown to its current proportions by accepting defeat.

    It will argue that not enough people voted, or that the union has too much sway over public policy issues, or that it is serving poor people and that only rich people vote. Or it'll make some other argument that will allow it to keep the Inglewood store proposal alive.

    The problem is that Wal-Mart spent a reported $1 million to try and get its way in Inglewood, and not couldn’t the company get it done, but its defeat will no doubt serve to embolden opposition elsewhere.

    Count on one thing. Wal-Mart won't play defense. It'll launch a retailing offensive in California that'll make your head spin.

    Published on: April 7, 2004

    The Los Angeles Times reports that a meeting took place earlier this week between disgruntled investors in Safeway Inc. and a majority of the company's stockholders - representing about 55 percent of the company's outstanding shares - as the disenchanted shareholders look to force a change in company management.

    The goal of the meeting was to generate support for a move to unseat company chairman Steve Burd and two directors seen as too beholden to management to be truly independent. Much of the impetus for the move comes from public pension funds that are connected to organized labor, which has had a fractious relationship with Burd and Safeway that led to a four-month strike of the company in Southern California.

    New York State Comptroller Alan Hevesi, one of the meeting's leaders, told the LAT that additional shareholders will be contacted in the coming weeks, as anti-Burd forces hope to marshal their support in time for Safeway's May 4 annual meeting.

    While the owners of only seven million Safeway shares — less than two percent of the company's stock — have indicated they would withhold their votes from Burd and the other directors, the meeting this week seems to suggest that anti-Burd forces are gathering some momentum.

    Safeway made a brief statement assuring that "efforts to maximize shareholder value are well underway."
    KC's View:
    We're trying to be fair here, and we realized as perusing these reports that it certainly could be argued that the anti-Burd forces are concerned about short-term results, while Burd is positioning the company for long-term advantage. And since we normally side with those who take a more long-term approach, you'd think that we'd be on Burd's side in this case.

    But we can't go there.

    The fact is that with few exceptions, knowledgeable people we talk to in the industry firmly believe that Safeway is a company moving in the wrong direction. (These same people say that Kroger is moving in the right direction, and they're simply not sure about Albertsons.)

    This isn’t to suggest that Safeway is clueless. In fact, we know some people at Safeway who say that the company in involved with various initiatives that will serve it well…but the company refuses to talk about what those might be.

    The sum result of the past few years - the problems at Dominick's, Genuardi's and Texas, and all the labor issues that the company faces - is that Safeway seems to be a troubled company. It is hard to see Burd surviving long-term. He may make it through the May 2004 meeting…but if things don't reverse themselves soon, it is hard to see the upside of this thing.

    Published on: April 7, 2004

    Tesco's CEO, Sir Terry Leahy, has agreed to change the terms of his employment contract with the company from two years to one year, a move that comes in response to shareholder concerns about public companies in the UK.
    KC's View:
    We are reminded that the Los Angeles Dodgers used to have a series of one-year contracts with managers Walter Alston and Tommy Lasorda.

    Alston managed the Dodgers to winning seasons in 19 of 23 seasons from 1954 to 1976. Lasorda, who replaced him, managed the Dodgers for 19 full seasons, leading them to two World Series titles, four pennants, and seven NL West division titles.

    This may be the first time that Leahy ever has been compared to Alston and Lasorda…but here is how they are similar.

    They all get it. Those two baseball managers understood how to play the game, how to manage and motivate players, and how to develop a winning philosophy. And Leahy seems to understand the same thing about retailing.

    He can manage our team anytime.

    Published on: April 7, 2004

    The Detroit News reports on the new mindset at Kmart, where managers "aren't eager to spend a dime extra unless they'll get it back in higher sales, increased shopper traffic and a rising share price," a approach that alone serves to "differentiate them from their predecessors, who seldom saw a perk they wouldn't willingly exploit."

    At the helm is the company's new chairman and controlling shareholder, Eddie Lampert, who "doesn't spend anything he doesn't have to" and won't "shrink from potentially nasty fights if he thinks confrontation is in the best interest of Kmart Holdings Corp." Which explains, according to the paper, why Kmart is suing almost 500 local governments for a total of $8.6 million in what it believes are property taxes improperly assessed while it was in bankruptcy.
    KC's View:
    We still think that suing communities on which you depend for a relatively small amount of money is a dopey thing to do. If we lived in a town being hurt by such a suit, and we knew that having to refund property taxes would have an impact on public school funding (which it will in many cases), not only would we refuse to shop at Kmart, but we might get on a picket line to protest the retailer's moves.

    This is what happens when non-retailers run retailing entities. They just don't get the nature of the relationship that should - and must - exist between shopper and shopkeeper.

    Published on: April 7, 2004

    One of a series of articles previewing the annual Food Marketing Institute (FMI) show, scheduled for May 2-4 in Chicago.

    This year at the Food Marketing Institute (FMI) Show, on Monday, May 3 from 8:15 to 11 a.m., a "super session" will focus on a new Coca-Cola Research Council study designed to transcend traditional demographic views of consumers, to look at "state of mind occasions for shopping," occasions that can be both overlapping and divergent. These "need states" include:

    The results of the Coca Cola Retailing Research Council’s most recent study on consumer shopping patterns and how these trends impact sales and profits will be revealed. Key findings will enable retailers to see their customers, not only through the lens of gender, age, ethnicity and other traditional categories, but with an expanded vision that describes your customers based upon their fundamental wants and needs. This new vision will give food retailers alternative insights on how to “recognize your customers” and personalize your marketing and merchandising message as a solution for growth.

    • The "Keeper," who is responsible for caring for the family.
    • The "Banker," who must shop within a budget.
    • The "Quartermaster," responsible for efficient replenishment.
    • The "Hunter," always is search of a bargain.
    • The "Desperate" shopper, looking for food out of some urgent need.
    • The "Courier," who needs "grab and go" food.
    • The "Reluctant" shopper, just trying to get through the day.
    • The "Seeker," looking for discovery.
    • The "Hungry" Shopper, seeking immediate gratification and consumption.

    It is critical, according to Kevin Davis, president/chairman/CEO of Bristol Farms and one of the session presenters, for a retailer to choose his or her spots…to accept the notion that you can't be everything to everyone. It can be done through format selection, or it can be done through canny product selection that is focused rather than exhaustive.

    We turned to Bill Bishop of Willard Bishop Consulting, who is the coordinator of the Coca-Col Research Council, for a preview.

    MNB: The Coke Research Council came up with a series of nine “need states” that differentiate the consumer. Is there any kind of single, overriding need that you see as connecting all consumers, or is that “old thinking”?

    Bill Bishop: Specific needs vary by need state, and that’s the challenge for retailers—particularly supermarket. For example, no one likes lines, but getting in and out quickly is more important to Small-Basket Grab & Go need state shoppers than to the Smart Budget Shopping need state shopper. The new and different thing about this study is that we now know what’s more and what’s less important by need state.

    MNB: Based on the research, is there a sense of how many need states a retailer can meet at a single time?

    Bill Bishop: We found that the number of need states a retailer must serve well is directly related to their strategy.

    Most supermarkets are generalists in their communities, so by definition, they have to do a good job of serving all the need states, which can be hard but not impossible.

    If the retailer has selected a more focused strategy such as serving upscale customers or being a price-impact operator, they can afford to focus on a smaller number of need states, i.e., those that are important to customers typically shopping in their stores.

    That said, regardless of the retailer’s strategy, they need to focus their communications on branding their ability to serve one of the need states, i.e., they need to establish what they’re known for in the market. In other words, if you can’t be all things to all people, how many things can you be to how many people, and still be effective? Can you offer some examples?

    MNB: Does it follow that a retailer that wants to be all things to all people is doomed because it will end up being nothing to anyone?

    Bill Bishop: No, assuming they can execute a strategy where they 1) Deliver well against all need states, and 2) Can brand themselves and be known for uniquely serving one of the need states.”

    MNB: So let us follow up by asking if it makes sense in the current environment to try and be all things to all people...or whether it makes more sense to identify one or two need states and go after those relentlessly?

    Bill Bishop: It makes sense, but most supermarkets would have to totally reinvent themselves to do it which, of course, would be hard. Also, the market for just a couple of need states might not be enough to support a store.

    MNB: The Coke Research Council has made some significant analytical progress since the early results were revealed in January at FMI Midwinter. Can you give us a taste of some of the revelations you’ll be making at FMI in May?

    Bill Bishop: Some of the new learnings include:

    • Supermarkets are very strong generalists in the market, and the challenge is that there are specialist retailers serving each need state that do a better job than the supermarket.


    • Very focused retail specialists like warehouse clubs and limited-assortment stores deliver exceptional experience to their customers.


    • Some more focused supermarkets, e.g., those focusing on upscale, natural and organic, and/or price impact, deliver stronger levels of experience to shoppers than do the less-focused supermarket operators.


    • The supercenters don’t deliver a better experience to shoppers than do supermarkets. But, in undifferentiated markets, price dominates and supercenters can win on this basis.



    MNB: What’s the biggest surprise to you in this research?

    Bill Bishop: Consumers are really looking for a valuing things beyond price in grocery shopping. For example, new and interesting products are gauged very important, and supermarkets don’t get a very good score in this department.

    MNB: How important is it for a retailer to drill down to make precise connections between specific need states and specific customers?

    Bill Bishop: It’s very important. Here are two examples.

    1) To serve the “Discovery” need state, a retailer needs enough new and interesting items that are generally not evident in most supermarkets. To connect with consumers in this need state, stores have a significant opportunity to showcase new items. For example, in a What’s New? Section and to draw attention through either merchandising or fixture design to specialty and ethnic products. We know this works; we also know that only a minority of supermarkets engage in this kind of merchandising.

    2) Small-Basket Grab & Go need state shoppers just want to get in and out. Some of the things that retailers can do to connect more directly with shoppers operating in this need state include designated parking, self-checkouts, and moving selected, high-demand items to the front of the store. Of course to really get credit for all this, the retailer has to explain and “sell it” to customers.

    That’s what the report is all about.

    For more information, go to:

    http://www.fmi.org/events/may/2004/show/
    KC's View:

    Published on: April 7, 2004

    William Morrison Supermarkets announced that shoppers who patronize its Safeway stores - which it acquired last month after a long battle - now are paying 24 percent less their groceries each week than before Morrisons bought the company.

    Much of the decrease comes because of a series of price cuts that Morrisons announced after the acquisition, which it said would make the prices at the two chains relatively equal.
    KC's View:

    Published on: April 7, 2004


    • The Canadian government reportedly has ordered the slaughter of 19 million farm birds in British Columbia's Fraser Valley as a way of containing the spread of avian flu. However, experts there say that this may not be sufficient to stop the spread of the highly contagious disease.

      It could take up to two months for all the infected poultry to be destroyed.

      So far, about 300,000 of the 500,000 birds known to be diseased have been eradicated.


    • The first of between 30 and 50 7-Eleven stores that will operate in the Beijing region of China is scheduled to open next week, now that the convenience store company has completed a licensing agreement with the government there. The long term goal: 500 stores throughout the country, which is fast becoming both magnet and battleground for foreign retailers.

    KC's View:

    Published on: April 7, 2004


    • Wal-Mart-owned Asda Group announced that it will expand its online shopping offering in the UK from 32 to 53 stores, increasing coverage of the consumer market there from 30 to 40 percent of the country.

      KC's View:

      Published on: April 7, 2004

      In a story yesterday about customer service, we made the following observation:

      If you are a retailer and you really believe that customer service isn’t the most critical part of your business, then you immediately should order and read Feargal Quinn's "Crowning The Customer." (You can get it from Raphel Marketing at www.raphel.com, or from Amazon.com…and we're not just suggesting this because we had the opportunity this week to spend time with both Feargal and Eamonn Quinn, and to walk their extraordinary stores.)

      If, after reading this primer on customer service, you still feel that this is a low priority, we'd suggest you make plans for retirement. Sell the business, close it down, divvy up the money to the family or the shareholders…just get out.

      Because the retailing business is the service business…no matter what kind of store you operate and what demographic you serve.

      If you believe you are just in the business of buying product, getting slotting allowances, and then selling product - without being connected to the needs and desires of the shopper - then you are a fool. And it is no wonder that you’re losing market share and the respect and loyalty of your customer base.


      MNB user Mark Olivito responded:

      I have been a loyal reader of MNB for the past year. The last blurb of this commentary may have summed up the CPG industry better and more precisely than any I have seen. Well done. I am in the business of working with CPG manufacturers to increase brand loyalty through grocery retailers (nearly everyone EXCEPT Wal-Mart) and the challenge continues to be: "how can my brand investments be viewed/leveraged more than a cost of doing business?" Great job and keep up the "tell it like it is" style.

      Thanks.




      We continue to get email in response to the guest column written last week by the Hartman Group's Jack Whelan, "Where Wal-Mart Can't Dance."

      MNB user Art Turock wrote:

      Wal-Mart has "soul" and they can dance .....in the view of their target shopper.

      Gallup organization has done an extensive research study on customer satisfaction. They essentially found that high "satisfaction ratings are meaningless, i.e., they don't translate to more shopping trips per month or total sales per month. Only when high functional satisfaction is accompanied by high ratings for emotional connection do the desired results happen. And Wal-Mart does extremely well on emotional connection with their "target customer," even scoring better than Target in a brand-to-brand comparison.

      In my Strategic Report, "Achieving Sales Growth When Wal-Mart Makes the Rules," I connected the four Gallup research factors that produce emotional connection and here's my take:

      • Confidence. Wal-Mart offers the rock solid promise of "Always low prices-- always." Customers shop with the peace of mind of knowing that if they bought it at Wal-Mart they probably got the lowest price. Wal-Mart shoppers also trust the product selection consisting largely of trusted national brands.


      • Integrity. Wal-Mart offers double money back guarantees when a shopper proves they can get a product for a lower price. If a shopper is dissatisfied with any perishable purchase, Wal-Mart offers a 200% refund. To simplify returns, they are all handled at the customer service desk not at the departments where purchases were originally made.


      • Pride. Wal-Mart shoppers are welcome by the greeter at the front door while other associates convey a down-home friendliness. Wal-Mart's TV advertisements and ad signage feature Robin Hood, a character who symbolizes robbing the rich manufacturers to whittle down price for the Wal Mart customer on a tight budget. This symbolism has powerful emotional connection with lower to middle income families.


      • Passion. Wal-Mart's four store formats are customized for a specific type of customer and shopping trips, such as Sam's Club targeting small business owners and resellers involved in bulk quantity purchases. Store managers and department heads determine which category traits or schematics are appropriate for their shoppers and community characteristics (e.g., college town, retirement community, large Hispanic population). Customization leads to the passion of sensing this store is suited for me.


      Wal-Mart's success makes the powerful point that emotional connection is not just for upscale retailers.


      Another MNB user offered:

      I enjoy reading the varying opinions on Wal-Mart's march across the country.

      I especially enjoyed several of the comments in the column…regarding consultant's view of the real retailing world.

      One reader wrote: "Those that can, do. Those that can't teach. And those that can't even teach, consult."

      Could talk all day on this subject about the tens of millions Fleming spent on consultants the past 10 years instead of listening to their own people about ways to improve performance, manage customers and win at retail. Many of the consultants we used were fresh MBA's with limited real world business experience much less grocery industry experience.

      Another reader wrote, "Too many retailers are touting Wal-Mart and letting them have the business"

      I agree, there are many quality retailers across this country both regional chains and independents that are excellent operators, take customer service seriously and hold their own on market share. While other retailers are content to whine, not reinvest in their stores and blame Wal-Mart for their inefficiency.

      Wal-Mart is a value proposition for many consumers in this economy. Consumers can normally save 10-20% (my estimate) over conventional chains. Last week a new Kroger opened in my area and I shopped the specials, at the bottom of my receipt in a 24 font in bold it said I saved $32.96 with my plus card or 46 percent (in a 10 font) from the regular price, requiring mgr override. Another topic to discuss another day on savings cards and the perception or reality of saving.

      Savvy, value conscious/quality conscious shoppers will continue to shop multiple retailers. The day of shopping at one store because of pure loyalty is over. The independent conventional, chain, or specialty store that offers excellent service, clean stores, competitive prices, quality produce, meat, specialty items will reap the benefits and maintain or grow market share even against the Wal-Mart American success story.

      KC thanks for the daily dose of industry happenings and reader comments.


      And another MNB user wrote:

      The only observation that I will add is this: When Sam first started out and until his death, the Company said, "We sell only goods manufactured in the USA." It didn't take long and offshore they went, cutting out the source of supply in the US. That has got to be a dying legacy of Sam himself and I'm sure that he would like to come and haunt his successors for making those decisions.....perhaps he has!




      Regarding Bashas' expansion plans, MNB user Mike Wieltschnig wrote:

      As a supplier of Bashas', you couldn't find more professional people in the food industry. They will survive with their TOP NOTCH customer service, selection and excellent communication to their vendors.




      In response to our story about veal being raised with synthetic growth hormones and our comment that, having not eaten veal for 20 years, Mrs. Content Guy would probably read this and go another 20 years without, one MNB user wrote:

      I will never eat veal. This is inhumane, and I am shocked that more people don't see that and boycott veal also. I am with Mrs. Content Guy on this one.




      We had a piece the other day about Procter & Gamble courting the dollar store business, which led one MNB user to write:

      Of course P&G is courting the dollar stores...just like they courted Wal-Mart in the Eighties.

      What's incredible to me is that P&G has an army of analysts and support for the grocery trade talking about all the ways that retailers need to protect themselves from channel erosion. One of their favorite recommendations is to tell you to leverage the big P&G brands since alternate channels don't carry them...so much for that idea.

      I'm not denying their right to pursue their business, but in order for P&G to play at the $1 level, they will have to create special sizes that are exclusive to those channels. The average customer will not recognize that the Pert shampoo bottle at the supermarket is 13.5 oz and the one at Dollar General is 10.25 or that the Charmin roll is 25% smaller.

      P&G brands will take dollar stores to a whole new level of credibility with customers...and help strengthen that competitor format.





      Regarding the Safeway situation, one MNB user wrote:

      Clear indicators (really a hundred) of why Burd should go:

      Safeway quit selling groceries when he took control. The focus went to driving up margin (had to cover debt and finance private label) at the expenses of vendors and consumers, cost controls (many justified, but the company's focus was lost), service reductions and in-store standardization (really sterilization).

      He has suppressed some of the greatest talents that came from the divisions, especially Vons (they used to sell groceries before centralization).

      However, the best example that I could find is that our nearest supermarket was about 8 miles from our previous home, then they built a Safeway around 2 miles away. Unprompted, my wife said she tried the Safeway but the prices were ridiculous and mostly she didn’t want to have a choice of buying Maraschino Cherries, and not be forced to buy Safeway Select. She continued to make the drive (as most our neighbors did) to the competitor, only stopping in for a hurried gap fill trip.





      About the growing popularity of branded beef, one MNB user wrote:

      It appears that once again consumers are either not educating themselves or aren't being educated by the retailer or supplier. Branded beef is no guarantee of "safe" beef. Nor is "natural" or "antibiotic or hormone free". Only cattle that have not been feed ANY animal parts can really been seen as safe -from what I understand.

      Consumers and retailers should demand that cattle be treated humanely and feed a vegetarian diet.





      We've been sharing with you some of our culinary adventures in London and Dublin over the past week, which generated a lot of mail.

      One MNB user wrote about our saying that we'd never had a bad meal in London:

      You actually liked the food ? I can honestly say, my trip to London was the only vacation I have ever taken that I came home weighing less than when I left.

      I had actually thought about promoting Travel-Diet excursions to the British Isles. The world has certainly seen worse fad diets.


      One MNB user wrote us to express shock about our good luck eating in London, to which one London resident who is a regular MNB user wrote:

      Your correspondent has a very good point. Until the late twentieth century, the UK was a barren wasteland in terms of cuisine.

      Fortunately, various restaurant chains began to emerge that started to fill the yawning void that was the UK culinary experience. Charming eating places such as McDonald's and Burger King - which served tasty nutritious foods in stylishly decorated premises - began to proliferate, spreading the joy of healthy meals served by attentive and courteous waiting staff. The rapid growth of these chains now mean that affordable, balanced diets are now available to all residents of London and any visitors who choose to grace us with their presence. If only the
      city could one day offer a variety of Michelin-starred restaurants,
      gastro-pubs or an extensive array of outlets serving cuisines from around
      the globe, then we truly would have something going for us. Until then, I am led to believe that larger supermarkets are able to provide ranges of international delicacies, such as Pop Tarts, Oreos and Doritos.


      We think a tongue may have been firmly in cheek while writing that one…

      We wrote about Delhi Brasserie, our favorite Indian restaurant, which is in London's Soho district, and one MNB user responded:

      Oh, Kevin, you ate in one of my favorite restaurants! In fact, I think some of best Indian food around is in London. There are also great Thai restaurants, and the cheese is good, not to mention the pints.

      First the wine descriptions, now the food...you really shouldn't torture your readers this way.
      Hey, this is tough duty…as MNB user Ted File pointed out:

      I will wager that you just picked up 10 pounds without even trying. Good luck on your return diet.

      No kidding. We finish MNB this morning and we're going jogging.
      KC's View: