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    Published on: May 25, 2004

    CHARLOTTE, NC – One of the most revealing things about the new Bloom store being opened here tomorrow by Food Lion is that, during an extensive tour and discussion of the store and its position in the marketplace, nobody ever used the word “prototype.”

    That’s a good sign, because “prototype” implies a finished product, which Bloom very definitely is not. Bloom is just the beginning of an evolutionary process for Food Lion, the latest symbol of a company intent on creating open communications among its various departments and personnel, among the other US and Belgian divisions that belong to Delhaize, and between the store and the shopper…though not necessarily in that order.

    Bloom is a big idea for Food Lion, not just the kind of small, timid step that some retailers take and define as progress. It is a store that at once embraces the importance of produce and fresh foods in the grocery retailing mix without abandoning the price orientation upon which Food Lion has built its reputation. It is a store that embraces technology, but uses technology to address specific consumers needs and desires, as opposed to imposing technological advances on the store for technology’s sake.

    “It’s about putting the customer first,” says Robert Canipe, vice president of business strategy with Food Lion. “It is not about us. It is about creating a unique experience, a hassle-free experience” that gives the shopper an emotional connection to the shopping experience.

    Robin Johnson, a “concept creator” who is on the concept team that has been laboring over the Bloom format for some two years, notes that as the company did research – talking to countless consumers and visiting stores in the US and Europe – it came to some basic conclusions:

    • There were three basic shopping trips that needed to be addressed by the store – the major weekly shop, the “tonight’s dinner” shop, and the fill-in shop.

    • There were four things that the store needed to do – minimize the irritations and hassles connected to the food shopping experience, cut down on the amount of time spent in-store, help the consumer address the question of “what’s for dinner tonight?”, and help the customer be more efficient.

    • At the same time, the concept team learned that customers wanted ease of navigation and personal assistance when they need it, plus a pleasant checkout experience and prices that were in line with expectations.

    All in all, a tall order. “People just want a sensible, uncomplicated, hassle-free shopping experience, says Johnson.

    In concocting the Bloom approach, the creative team at Food Lion decided to create a series of universes within the store that would allow customers to visit the departments that they needed when they needed them…and, even m ore importantly, to avoid the ones not needed during specific shopping trips. The old conventional wisdom about supermarket shopping – make people walks every aisle during every trip – was tossed out the window.

    A key factor in the creation of varying universes was the development of the Table Top Circle at the front of the store – a 1,400 square foot circular section just inside the front door devoted to high-traffic convenience items such as milk, bread, eggs, soft drinks and beer, as well as frozen and chilled meal solutions offerings that will be rotated in and out in order to keep the selection fresh. There’s also a self-service Boston Market case with a number of entrees and side dishes. The goal here is to provide options that are ready to eat, ready to heat up, or ready to cook – therefore meeting the various “need states” of local consumers.

    This is a power section in the best sense of the word; it has its own checkout, and provides an easy-to-access convenient alternative to people wither looking for that night’s dinner or for a quick fill-in on basic commodity items.

    Go straight back through the Table Top Circle section, and one finds the nicely laid out produce department, featuring both bulk and specialty items; go off to the right, and you find the service deli and bakery, both of which seem better merchandised and staffed than might be expected at traditional Food Lion stores. (People are being hired at the store based on attitude, and then being trained for specific jobs; management believes firmly that they’ve got to keep associates upbeat, engaged and optimistic in order to create an upbeat, engaging and optimistic shopping experiences for consumers. It sounds like a no-brainer…but amazingly, this is a leap of faith taken too rarely by many food retailers.)

    There are other elements that impress.

    • Bloom is adopting the self-scanning technology used by its Delhaize parent, allowing customers to scan items as they take them from the shelf and bag them as they go into the cart.

    • The store features eight different informational kiosks, some of which serve as interactive directories to the store, and some of which key into specific departments. In the wine department, for example, consumers can either browse for information on the kiosk, or choose a bottle of wine, scan it and then get data about price, origin, taste, and even meal and serving suggestions. The kiosk even allows user to plan parties by the kind of liquor enjoyed by guests, and whether guests are non-drinkers, moderate drinkers, or “party animals.”

    • In the pharmacy, a kiosk allows people to measure their blood pressure, weight and body mass – and then store the information in a private account so they can track their progress on a day-by-day, week-by-week, or even month-by month basis.

    • Half the store’s eight checkouts use self-scanning technology, reflecting consumers’ desire to get through the end experience quickly. The staffed checkouts allow the cashier to sit down, European-style, and utilize pop-up cash drawers seen in Europe. (The Delhaize influence can be seen in such innovations.)

    The store has been separated into food and nonfood sections, with the food aisles running front to back and nonfood sections running side to side; but it is in how the food categories are merchandised that Food Lion is making an interesting statement.

    In many stores, all Coke products will be merchandised together, as will Pepsi products, private label soft drinks, and so on. But at Bloom, all the colas are side-by side, as are the diet colas, the citrus-based sodas, and so on. The goal, according to Canipe, is to organize the experience the way shoppers want it, not the way vendors prefer it.

    Mike Haaf, senior vice president of sales, marketing and business strategy, put it bluntly: “We are creating a sales-driven organization.” One, by implication, that is driven by consumers not vendors – from how products are merchandised to what products are chosen.

    A word about the creative team that put Bloom together. Made up of a number of people from within the Food Lion organization, this group was supplemented by people who had experience in Delhaize’s Hannaford and Kash n’ Karry chains, as well as from corporate headquarters in Belgium. This is more than a little interesting, because it seems clear that while many organizations have trouble breaking down internal silos, Delhaize is intent on doing that as well as smoothing the lines of communications among its various operating entities. Again, this would appear to be a no-brainer…but it doesn’t happen a lot.

    This is just the beginning for Bloom. Five test stores are planned for the Charlotte area; this 38,000 square foot store is the only one that will be a ground-up venture, with the others being remodels. And as different concepts are tested in different units, according to Cathy Green, the company’s senior vice president of fresh merchandising, distribution and quality assurance, “We hope to learn from concepts here to see what is applicable to the rest of the Food Lion chain (1200+ stores).
    KC's View:
    It is, we think, an interesting dilemma in which Food Lion finds itself.

    Sunday afternoon, we drove from Myrtle Beach, SC, to Charlotte, NC, with Jimmy Buffett on the CD player and the stark humidity outside the car threatening at any moment to break into an enormous thunderstorm. During the more than three-hour trip, the Food Lion sign popped up more than any other, in front of both freestanding stores and strip shopping centers. And it occurred to us that it could not have been that long ago that Food Lion probably figured it had it made – it owned all the best locations in the southeast US, and it owned the low price food image. It probably figured that in those two areas, the Food Lion name was pretty much untouchable.

    This, of course, turned out not to be true. One of the other things we noticed during our drive through the Carolinas was how many dollar stores there were, many of them sharing shopping centers with Food Lion. And, at a certain point in the drive, you start seeing Wal-Marts. The geography is getting crowded, as is the competition in the low price side of the business. Food Lion clearly needed to do something different.

    When we posed this scenario to Food Lion’s Mike Haaf, he emphasized that Bloom is not a response to specific competition, but rather a response to specific consumer needs. “We looked for the competitive white space, and then filled it in,” he said. And we think that’s a pretty good definition of what Food Lion has done.

    What’s also interesting is to speculate what’s possible in the future. While the folks at Food Lion and Bloom prefer to think in terms of the next four stores they plan to open, we couldn’t help but imagine the possibilities that Bloom creates.

    We looked at the Table Top Circle (a name Food Lion has trademarked, by the way), and see 1,400 square feet that could in fact be spun off as an independent c-store concept. It has all the makings of a fresh-oriented convenience unit, and it would be interesting to see it either standing alone on a street corner or incorporating a gasoline station into its operations. We can also imagine a time when Bloom could embrace an e-commerce strategy, and use Table Top Circle c-stores as depots where large orders from full-service supermarkets could be picked up.

    This first Bloom, it appears to us, is just the foundation. There are many different directions in which the format could venture, many different shapes that it could take. As it is, we are impressed. As it will be…well, we look forward to it with anticipation.

    Published on: May 25, 2004

    The Wall Street Journal reports this morning that major US food manufacturers are pursuing a new marketing strategy – encouraging doctors to recommend different foods to their patients as a way of combating specific diseases and medical conditions.

    Whether pitching seafood for brain power (Omega-3 fatty acids) or fruit juices with vitamins to boost immunities, food companies are hoping doctors will give their products new legitimacy by, in essence, prescribing them to patients.

    The WSJ writes, “Doctors are being asked to hand out everything from coupons for Baked Doritos, made by Frito-Lay, a unit of PepsiCo, as an alternative to higher-fat regular chips, to sample packages of Molly McButter, a low-fat butter substitute made by Alberto-Culver Co. Other products being marketed in this way range from walnuts to specialty steaks.

    “Some food companies are sending representatives right to doctors' doors, just as drug companies do. Revival Soy, a North Carolina snack company, has sales representatives visit doctors' offices to drop off samples of snacks such as Chocolate Raspberry Zing soy bars and Honey Mustard soy chips. The company leaves pamphlets encouraging doctors to ‘pseudo-prescribe Revival.’”

    The pattern gives new meaning to “functional foods,” which have generally been considered to be products engineered to have specific health benefits. Now, however, the magic seems not to be in the product creation but in the marketing, as manufacturers seek new ways to build sales and consumer loyalty.
    KC's View:
    One can only imagine what will happen the first time a food manufacturer gets sued for malpractice. They’ll be blaming the lawyers…but it’s possible they’ll have only themselves to blame.

    There’s nothing inherently wrong with suggesting that someone eat or drink more of something to get natural benefits; it certainly seems like a better first option than taking a pill or getting a shot. But we think the manufacturers ought to tread lightly in this regard, and not necessarily assume that all doctors will behave in a responsible manner in dealing with marketing onslaughts. Doctors are no more ethical or intelligent as a group than anyone else, and some of them will be overly influenced by marketing pitches…which could put the manufacturer at risk.

    We’re not saying that this is a bad trend, or even a bad idea. We’re just suggesting caution.

    After all, we can still remember our mother telling us that carrots would make us see better and peas would make our hair curly. Or was it the other way around?

    Published on: May 25, 2004

    The Tampa Tribune reports how Publix is testing a number of new business models as a way of building volume:

    • The company’s Pix gas/c-store concept, currently being tested in central Florida, is slated to be tested in Tampa later this year…though some analysts believe that the current volatility of the gasoline business is making Publix wary of moving too far and too fast.

    • Publix has become part owner of Crispers, a Florida-based restaurant chain.

    • The company also has launched a liquor store business.

    Publix’s new ventures haven’t always worked out; its e-grocery business was closed down after two years when it failed to deliver on high expectations.

    But in a stagnant grocery business where competition is everyone and everywhere, Publix apparently has recognized that it needs to spread itself out a bit and test new approaches to the marketplace…slowly, perhaps, and tentatively…but with the recognition that the old way of doing business is in fact the old way of doing business.
    KC's View:
    We’re betting that five or six years from now, Publix will be getting back into the e-grocery business in some way or another, and that internally they’ll be regretting the fact that they didn’t give it more time.

    We think the biggest mistake they made at Publix was buying into the dot-com hype. The second biggest mistake could end up being paying too much attention to the post-Webvan reverse hype that the c-commerce sky was falling.

    Published on: May 25, 2004

    • The Financial Times reports that Wal-Mart CEO Lee Scott, on a self-described “charm offensive” to meet with European Union officials in Brussels, has said that he would like to have Wal-Mart stores throughout Europe, either through acquisition or ground-up development.

      Scott also said that Wal-Mart was considering the use of its Asda brand stores, which originated in the UK, as the vehicle for such expansion, and that there is no European country in which Wal-Mart would not like to operate.

      At the present time, Wal-Mart only operates in the UK and Germany. The Asda stores in the UK have been remarkable successful, growing to become the nation’s number two food retailer behind only Tesco; the company’s German operations have been more problematic, as consumers there have not embraced the format.

      The “charm offensive,” as Scott put it, was designed to put EU officials at ease in the wake of negative publicity that has plagued Wal-Mart in the US of late.

      For example…

    • The National Trust for Historic Preservation has placed the entire state of Vermont on its 2004 list of the most endangered historic places in the US.

      Why? Because Wal-Mart plans to build several supercenters there.

      It apparently is the only time an entire state has been put on the list.

      The Associated Press quotes the trust’s president, Richard Moe, as saying that the building of supercenters by Wal-Mart would ruin Vermont’s “special magic,” and that the retailer “will totally change the character of Vermont over time, and that would be a tragedy.”

      Moe also noted that "Vermont is uniquely a state of small towns, and many of these downtowns would be decimated by this. A lot of small businesses just disappear in the face of a huge Wal-Mart."

      The goal isn’t to tell communities what to do, said Moe, but rather to make sure communities “have their eyes wide open when they make these decisions because it's within the ability of a community to affect the location, size and design of these stores."

      The AP reports that the trust believes that communities would be better served if Wal-Mart would build smaller stores “in existing buildings that have been abandoned or are otherwise not being used, saving rural landscapes and not having quite the devastating impact that a superstore would have.”

      Mia Masten, a Wal-Mart spokesman, responded, “It sounds as if we're trying to go and push our way in. But we are asking for and getting local input. We want a project that everyone likes at the end of the day." She also characterized the trust’s designation as “dramatic.”

    KC's View:
    Pardon us for remembering yesterday’s news, but wasn’t it just 24 hours ago that we had a story about Wal-Mart plans to sue Florida’s Manatee County to allow it to build a supercenter there – after both the County Commission and local residents rejected the company’s proposals?

    That doesn’t exactly sound like “wanting a project that everyone likes at the end of the day” to us.

    And is the trust’s designation “dramatic”? Damn right.

    We think that was the point.

    And as for Wal-Mart’s plans for a European invasion…well, if there is resistance to Wal-Mart in Vermont, one can only imagine how the French, Spanish, and Italians will react.

    Published on: May 25, 2004

    • Toys R Us has filed a lawsuit against, saying that the online retailer has violated their contract guaranteeing that Toys R Us would be its exclusive seller of toys and games.

      The two companies have been in business since 2000, when they joined forces in the wake of what had been a disastrous Christmas season for Toys R Us – it had plenty of online sales, but had an awful time trying to fulfill all its order.

      The New York Times reports this morning that “under the contract with Amazon, Toys R Us agreed to pay $50 million a year for 10 years for the exclusivity provision, which had a few exceptions, as well as a percentage of Toys R Us sales on the Amazon site.”

      The deal actually has provided Amazon with a template for profitable growth, and it has created similar deals with a variety of different retailers in select categories; Amazon has become a full-service “portal” of sorts, and even has begun competing with eBay in the auction business.

      Amazon said that the lawsuit by Toys R Us is without merit, but did not go into details.

    • A new study by predicts that online retail sales will grow 27 percent to $144 billion in 2004, but notes that this growth rate is far below the 51 percent growth seen in 2003.

      Expected to be the best performing categories – apparel, flowers, cards, and gifts.

      Total online sales in 2004, the study predicts, will account for about 6.6 percent of total retail sales, up from 5.4 percent a year ago.

      In addition, the study says that about 79 percent of e-tailers were profitable in 2003, up from 70 percent in 2002.

    KC's View:

    Published on: May 25, 2004

    USA Today reports this morning that there’s a new fast food chain working to find its way into the American consciousness - Cereality Cereal Bar & Café, which will offer “about 30 hot or cold cereals; 34 toppings; seven types of flavored and unflavored milk; cereal-and-yogurt-based smoothies (Slurrealities); and fresh-baked breakfast bars.”

    The paper notes that employees wearing pajama tops will help consumers “construct their own mixes and store the formula in an on-site computer for their next visit. Or they can buy a prepackaged designer mix such as Devil Made Me Do It, consisting of Cocoa Puffs, Lucky Charms and chocolate-milk-flavored crystals, topped with malt balls.”

    A basic cereal meal - two scoops of cereal, one topping and milk - will cost about $4. It gets served in a carton that looks like it should contain Chinese food.

    After a successful eight-month test at Arizona State University, the owners of the format are now prepared to roll it out, with the first unit expected to be open by fall.
    KC's View:
    We have to be honest. Our first reaction to this story was that it was the dumbest idea we’d ever heard of.

    But the more we think about it, the more we think that these guys could be onto something. Cereal is the ultimate food, and its not like they’re investing in a lot of new technology to create these particular products. The stuff already comes in boxes and cartons, and they’re just providing a new place to get it.

    As a novelty, it’ll probably be a big hit. Hard to say if it’ll have legs.

    But one thing we’d be worried about if we owned Cereality would be that Kellogg’s or General Mills might decide to get into the business.

    Published on: May 25, 2004

    The Los Angeles Times reports on how the national debate over reimportation of inexpensive medicines from Canada to the US “is being played out this year in 42 state legislatures that are weighing 330 separate pharmaceutical-related bills, including 19 under consideration in California.”

    As the fight rages, drug companies are spending a small fortune warning lawmakers about the potential dangers of reimported drugs, spending more than a million dollars during the first quarter in California alone.

    The concern on the part of the drug companies seems almost certainly linked to the upcoming presidential elections, as they worry that political expediency – which they would perceive as allowing the import of Canadian drugs – takes precedence over their own interests (which would keep current bans on reimportation in place).
    KC's View:
    Good luck keeping this one out of the headlines. Health care is just too juicy an issue not to be made political.

    Published on: May 25, 2004

    • The US Supreme Court has agreed to decide the constitutionality of the federal government’s farm checkoff programs, which requires cattle ranchers and farmers to pay for an industry marketing program.

      A US Appeals Court had ruled the checkoff program to be unconstitutional, but the US Department of Agriculture (USDA) appealed.

      The beef promotion program raises more than $80 million a year by requiring American farmers to contribute $1 per animal from their cattle sales. Objections to the program come mostly from small livestock producers, who say that it amounts to an unfair tax that favors bigger companies with deeper pockets.

    • Target president Gregg Steinhafel said last week that the company intends to do more outsourcing of product from non-US manufacturers. While globally sourced products now represent a little more than 15 percent of the company’s SKU count, he said, the hope is to double that within the next few years – clearly a way of bridging whatever pricing gap there may exist between Target and Wal-Mart.

    • Trader Joe's reportedly will open a new store in Easton, Ohio, this fall, the second unit it has opened in the Columbus region.

    • Wild Oats reportedly has ruled out buying up vacant Thriftway sites in the Cincinnati market, preferring to find smaller ground-up locations that will better suit its needs.

    KC's View:

    Published on: May 25, 2004

    • Campbell Soup Co. posted third quarter profits of $142 million, compared to $129 million in the third quarter of 2003, a 10 percent increase. Sales were $1.67 billion in the quarter, up 4.2 percent from $1.6 billion a year earlier.

    KC's View:

    Published on: May 25, 2004

    The Los Angeles Times reports this morning that Paramount Farms Inc., the nation's largest almond grower, is recalling 13 million pounds of almonds – or roughly 25 percent of its annual production.

    The reason? Five people in Oregon stricken with salmonella poisoning had in common the fact that they bought shelled raw almonds bought at a Costco. The recall, which is the largest ever of California almonds, has been done voluntarily despite the fact that no almonds examined by health officials have been found to contain salmonella.
    KC's View:

    Published on: May 25, 2004

    …will return.
    KC's View: