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    Published on: June 14, 2004

    The Sacramento Bee reports that July 17 is a key date in the next chapter of management-labor relations in California, as a contract expires between more than 15,000 workers and Sacramento-area grocery companies that include Raley's, Safeway Inc., Albertsons Inc. and Kroger Co.'s Ralphs Grocery.

    The expected points of contention include, as they have elsewhere in the country, both compensation and health benefits issues, as grocers look to cut costs to be more competitive with Wal-Mart and the unions look to avoid give-backs. Union officials in Sacramento say they will not accept terms similar to those agreed to in Southern California, where a four-month strike/lockout cost Kroger, Safeway and Albertsons a combined $1.5 billion in sales.
    KC's View:
    You have to figure that while a lot of the union locals and chains have been coming to agreements since the Southern California conflagration, at some point the unions are going to have to try taking a hard line.

    Look for some sort of stoppage in Sacramento…unless, of course, the Governator decides to step in.

    Published on: June 14, 2004

    Sheetz, the Pennsylvania-based convenience store chain, has opened its first “convenience restaurant,” a 10,000-square-foot store that the company describes as a “food theater” that combines casual dining and traditional c-store features.

    The unit is the company’s 300th, has both dine-in and drive-thru options, and features foods that include pizza, paninis, sub sandwiches, espresso bar and salad bar. It also has wireless Internet access, DVD rental and five large-screen television sets.
    KC's View:
    As much as traditional supermarket retailers worry about the competition coming from the likes of Wal-Mart, we think that the convenience store industry is an equally huge threat…and the Sheetz store is a perfect example of the direction being taken by this segment of the business.

    Remarkably, the unit came out of a desire by owner Steve Sheetz to create a format that would put his existing stores out of business…a desire that he was very verbal and public about. He elicited opinions and ideas from his customers and employees, and this is what he came up with.

    We’ve seen others in the same vein…such as The Market stores operated by Tiger Fuel down in Virginia…which are terrific units that transcend the mainstream c-store image.

    And it isn’t just c-stores that the supermarket business has to worry about…

    Published on: June 14, 2004

    Richard Melman’s Lettuce Entertain You chain is partnering with Minnesota-based Lund Food Holdings’ Lund’s and Byerly’s stores to create in-store Asian take-out food departments in the company’s supermarkets.

    It is the first move into grocery stores by Lettuce Entertain You, which has created more than 30 highly popular restaurants – mostly in the Chicago area, but also elsewhere in the US, including Minnesota. The concept will not use brands already established as restaurants, though the company leaves the option open for the future.

    The Lettuce Entertain You departments replace those run by Leeann Chin, a Minnesota icon, who is moving her grocery-related operations over to Rainbow Foods.
    KC's View:
    When companies like Lettuce Entertain You get a whiff of the opportunities available to them in the grocery business, we think they are going to end up becoming great partners or worrisome competitors.

    We’d start wooing them now…which is what the folks at Lund’s/Byerly’s seem to be trying to do.

    Published on: June 14, 2004

    Retail Forward’s new ShopperScape newsletter reports that “as the price of gas accelerates above $2.00 a gallon, consumers are beginning to feel the burn at the pump and most are already or at least planning to modify their driving accordingly. Watch for consumers, especially in the Down and Middle Markets, to down shift travels and shop closer to home this summer.”

    According to ShopperScape, “more than half (55%) agree that they are planning trips to run errands to minimize distance traveled,” while “about 44% agree that they are going to stores that are closer to home so that they don't have to drive as far.” However, “only one-fifth are ready to change their vacation plans due to high gas prices, but if prices stay high consumers plan to further change their driving behavior.”
    KC's View:
    While reports over the weekend suggested that gasoline prices were beginning to back off a bit, the increasingly unstable political situation in the Middle East makes any long-term prognostication problematic at best.

    One thing seems sure, though. Retailers would be wise to incorporate this apparent trend into their marketing plans, figuring out ways to save their customers time and money by catering to their concerns about petrol prices.

    Published on: June 14, 2004

    • Retail Forward’s June 2004 ShopperScape newsletter reports that “in the past four weeks two-thirds of primary shoppers visited a Wal-Mart versus 43% for Target and 29% for Kmart.”

    • As part of its 2004 plans that will have it opening between 320 and 345 new stores, Wal-Mart Stores announced it will hire 83,000 new employees during the coming year.

      Wal-Mart says 4,800 of the new jobs will be management positions and 66,000 will be full-time.

    • CNN reports that the majority of employees at a Wal-Mart in
      British Columbia have applied for union representation with the United Food and Commercial Workers Canada (UFCW Canada).

      An official vote among the employees now will be conducted by the Labour Relations Board (BCLRB) of British Columbia.

      Wal-Mart, of course, has managed to this point to avoid unionization at its stores.

    • Press reports out of Israel say that Wal-Mart Stores has placed a $1.5 million order for 50,000 units of SheAgra, which is described as “a natural herbal sexual stimulant for women” manufactured by an Israeli company. A five-capsule package of SheAgra reportedly retails for about $70.

      The $1.5 million, 50,000 unit order is described as a “trial order” by Wal-Mart.

    • Meanwhile, Wal-Mart’s Sam’s Club division is planning to aggressively market Mel Gibson’s controversial film “The Passion of the Christ” when it comes out on DVD on August 31. The warehouse club chain reportedly will be selling “church bulk packs” – 50 DVDs for $898, or 50 VHS tapes for $795 – that it feels have appeal for the same church groups that made the film a financial success when it opened in theaters earlier this year.

    • In Leominster, Massachusetts, northwest of Boston, a battle is being waged over a proposal that would have a Wal-Mart Supercenter built there. And Arthur "Jay" DiGeronimo Jr., president of Victory Super Markets there, reportedly has contributed more than $15,000 to a group opposing the development proposal.

      Several members of the opposition – but not DiGeronimo – reportedly have filed a suit to stop the building, while the mayor say they are looking after their own interests, not that of the community.

    KC's View:
    A couple of points about the Leominster situation.

    One has to do with the role of competing retailers in such situations. While we’ve been fairly vocal about the rights of residents to determine the kinds of retail that come into their communities, we’ve always been a little uneasy about retailers being active in anti-Wal-Mart crusades. It isn’t that they don’t have the right to be active, but that by saying ‘we don’t want Wal-Mart” they may be perceived as actually saying that “we cannot compete with Wal-Mart.” And that is a dangerous admission to make.

    It always has seemed to us (and we debated this point at an industry event with self-described “sprawl buster” Al Norman a few years ago) that retailers are better off just competing…being tough and unpredictable and aggressive in their pursuit of customers.

    And this leads us to our other point. It is ironic that Leominster is just 20 miles or so from Acton, Massachusetts – a community written up in MNB just last Friday as being “a hotbed of supermarket competition, with three retailers – Stop & Shop, Roche Bros., and Donelan’s – all playing hardball.” Two of those players are independents, and they are all working overtime now to compete with Wal-Mart, which hasn’t opened a store there. Yet.

    We’ve said it before. “Compete” is a verb.

    As for the SheAgra story…well, we couldn’t help ourselves. Three reasons. One, only Wal-Mart could place an order so large and call it a trial. Second, it just seemed like a product category that Wal-Mart might not ordinarily seem to be associated with. And third, we kept thinking how this category created a while new context for the smiley face that Wal-Mart uses in its ads…

    Published on: June 14, 2004

    • The Omaha World-Herald reports that rumors are rampant that Albertsons could decide to close or sell off its 10-store Omaha division, which could put more than 1,000 people out of work.

      According to the paper, “Officials of the Boise, Idaho, chain declined to comment, and other businesses that may be part of the deal also would not confirm the reports. But some employees, fearful of job cuts that would follow an ownership change, have left already.”

      Two possible scenarios seem to be popular. One is that Nash Finch would buy the stores and lease them back to local chains. The other is that Wal-Mart would buy the locations for its Neighborhood Market concept; coincidentally, Wal-Mart said a year ago that it would like to have such stores in Omaha.

      The reason for an Albertsons divestiture of the stores seems clear – the city doesn’t meet the GE standard (which refers to Albertsons CEO Larry Johnston’s former employer), making it imperative that the company be either number one or a strong number two in the markets it serves.

      Albertsons is ranked fourth in Omaha, with about a tenth of the market.

    • The Bradenton Herald reports that Albertsons plans to remain a strong presence in Florida, though it is not committing to whether it has plans to expand or contract its number of stores there.

      Company CEO Larry Johnston affirmed the company’s position regarding Florida at a shareholder meeting last week. Florida was a discussion point at the annual meeting this year because it was held in Florida.

    KC's View:

    Published on: June 14, 2004

    Fascinating series of pieces in the Sacramento Bee, based on an eight-month investigation, looking at biotechnology and its potential benefits and hazards. “What we found,” writes the editors, “was propaganda where there should be probing; superficial talk where there should be deeper truths.”


    • ”Born a generation ago, partly in California laboratories and farm fields, biotechnology promised a banquet of benefits: It would bring more choice to consumers, pose no environmental threat to organic and conventional farmers, create little or no regulatory burden for government and, most tantalizingly, help feed the world's hungry.

      “So far…biotechnology has not delivered.

      “Consumer wariness and environmental opposition have slowed its progress, of course. Government regulations are convoluted.

      “But other problems are home-grown. In moving from public to private ownership of genes and gene technology, universities got snarled in a patent system so complex and conflict-prone it has slowed the flow of innovations from their labs. In licensing their discoveries to industry, universities have turned over the fruits of taxpayer-funded research to private biotechnology companies, where earning a profit can eclipse the public good.”

    • ”Biotechnology didn't invent genetic tinkering. All farming springs from it. Corn was once a wild grass in Mexico. Generations of careful plant breeding have brought a cornucopia of choice to store shelves: sweeter onions, seedless grapes, monster melons. But biotechnology works in ways nature does not.

      “It shuffles genes - tiny biological units that shape life - between species. It imagines a world of frost-resistant tomatoes, drought-tolerant corn, even crops that grow medicines. But so far, most of its magic is tied to two genes, each tailored to U.S. industrial farming: One transfers resistance to the weedkiller Roundup into a crop, making farming easier; the other allows a plant to kill certain insects.

      “Something else sets biotechnology apart from other farming revolutions: Much of its promise is private property.

      “No longer do universities routinely make discoveries available, for free, to poor nations - as they did during the Green Revolution. Today, most universities typically patent them first, then license the technology to private companies. The idea is to speed discoveries to market and, as public funding declines, generate money for research.”

    • ”A decade since the debut of gene-spliced food, biotechnology is a dominant presence in world agriculture. But the distribution of biotech foods is uneven. Dancing around deeply divided opinions over the technology's health and environmental safety, and over its social and economic effects, the global food industry approaches genetic engineering with a double standard.

      “In much of Europe and parts of Asia, where consumer mistrust is greatest and labeling is required, food manufacturers take pains to eliminate genetically engineered ingredients as much as possible.

      “In the United States, a land of seemingly infinite grocery choices, food purveyors rarely make distinctions between what's genetically engineered and what's not. People who want to avoid biotech foods are left trying to sort it out on their own.”

    KC's View:
    This is a great series of pieces - in-depth, thought-provoking and informative.

    You can read the whole series at:

    Published on: June 14, 2004

    • The Cincinnati Enquirer reports that Kroger has reached a tentative agreement with Winn-Dixie to acquire some of its 21 Cincinnati-area Thriftway stores.

      Terms of any agreement have not been disclosed.

      Winn-Dixie has said that it plans to sell or close the units. Kroger, which owns almost 45 percent of the local food market, is maintaining that it is “not a done deal.”

    • The Des Moines Register reports that Hy-Vee has acquired the only enclosed mall in Newton, Iowa, with plans to run it while deciding whether to either build a new store there or expand an existing unit.

    • Marsh Supermarkets reportedly plans to create a new format, dubbed “Arthur’s,” and will open two stores under the banner next year. The company also plans to open a third of its “Lifestyle” units this year at an undisclosed location.

    KC's View:

    Published on: June 14, 2004

    • Pathmark Stores has named James Moody Jr., the former CEO of Hannaford Bros., to be its non-executive chairman. The company’s former non-executive chairman, Steven Volla, left the company last Friday when his term expired.

    • CEO Kal Raman resigned unexpectedly Friday, after the company predicted a larger-than-expected loss would occur in the second quarter.

      The company’s CFO, Robert Barton, reportedly will take over the CEO duties while a search is conducted.

    KC's View:

    Published on: June 14, 2004

    • Royal Ahold reported a first quarter loss that was the equivalent of $484 million (US), compared to earnings of $100 million during the same period a year ago. The shift was blamed ion a charge taken by the company when it sold assets in Brazil and Thailand.

    KC's View:

    Published on: June 14, 2004

    We got the following email from MNB user Claire Burbage:

    I am but one of many who has finally quit shopping at Shaw's since it was purchased by Albertsons. In the past year the Middletown, RI store where I'd shopped since its opening, has been completely re-vamped. And now the customer can find nothing!

    The more expensive, all natural type foods are at the beginning of the store where they are easily obtained by the young and healthy who generally purchase them, while the disabled and elderly have to travel across the entire, newly enlarged store for a loaf of bread.

    What finally did it for me is the lack of caring about the needs of those of us who need the electric carts to shop.

    The same two broken down carts haven't been working correctly for years and the majority of the time they don't work at all. I know I've gone in, filed a complaint about them not working and gone to shop else where more times than I can count.

    There comes a point in time when money has to be spent for new ones which will pay for themselves as people will be able to purchase groceries but Albertsons apparently doesn't care about people like me who have the money to spend but need assistance getting around.

    There are many of us who've simply decided to no longer shop their store.

    It is clear that this consumer has a problem with Shaws…but we’re not sure that blaming Albertsons for the problems is fair. After all, the ink is hardly dry on the sale agreement.

    We had a piece Friday about a Wall Street Journal story noting the generosity of Coca-Cola’s severance agreements. “As a result of management shake-ups and with the approval of a star-studded board,” the WSJ reports, “Coke has agreed to give a total of more than $200 million to two exiting chairmen CEOs, two presidents and a handful of other Coke officers since the end of 1999.”

    To which one MNB user responded:

    Shame on us and shareholders...We have let CEOs prove that they only care about themselves. They lie, cheat and steal from us and get away with it. How much money does it take to live a "wonderful life." Do they take pride in the companies they work for or the products they represent? No...they are only there for their GREED...more and more you hear about "corporate greed." How of the many give back to their communities? How many give back to their employees (the people on the front lines)?

    They hire lawyers for thousands to find loopholes to hide, keep and pay minimum taxes. Everyone looses when they don't help or do their fair share for society. They want us to think its o.k.

    Another MNB user chimed in:

    Who's minding the stockholders interests? Why is all this after the fact? Why is it not based on results?

    In response to our piece about supermarket competition in Acton, Massachusetts, one MNB user wrote:

    I live in Acton (and have also lived / shopped in several markets around the country). You are absolutely right about the impact of competition on the marketplace. Acton has the best set of food options that I’ve seen, for such a comparatively small community.

    Roche Bros. is superb, with great prepared food offerings, numerous programs designed to engage kids (my daughter’s class did a field trip to Roche Bros!), escorts helping you to take groceries to the car, etc. Their cashiers actually walk out from behind the register to great you, or bring you over from a slower moving line! In response, Donelan’s has made major upgrades to their store, buying up adjacent space and turning it into a dinette, improving cheese and bakery offerings, etc. (Part of the Donelan’s response is due to Roche Bros., part is due to the Trader Joe’s that just opened up less than a mile away)

    So, where we do we shop? We’re in the process of moving to another part of town, where the closest store will be a Stop & Shop. Yet my wife and I have already agreed that we will drive out of our way to get to Roche Bros.

    And before everyone jumps down your throat for your (expected? obligatory?) Wal-Mart reference, you make a good point. Wal-Mart has made an impact - the new space that Roche Bros is adding is due to the closing of Ames…. It would be interesting to see what would happen if a Wal-Mart SC came to this area. My sense is that the Donelan's, Roche Bros., and Trader Joes folks have nicely insulated themselves. For my family, Wal-Mart can open wherever they want to --- someone else has earned our business.

    And finally, continued discussion of the game of golf.

    One MNB user wrote:

    The best thing about "watching' golf is not the "competition", the "suspense" or the performances of "world class athletes", its that it provides the perfect "white noise" for a nice mid-afternoon nap!

    But another MNB user observed:

    Playing golf takes 4 hours…about the same amount of time it takes to sit on your duff and watch a football, basketball or baseball game. However, golf is just too challenging for most people and therefore many simply say it “takes too long”.

    Which makes us wonder…if it is the rest of us who are sitting on our duffs, how come they call golfers “duffers”?

    Just curious…
    KC's View:

    Published on: June 14, 2004

    Late today, we’ll be heading to Rome, Italy, where we will be covering the 2004 CIES World Food Business Summit and filing exclusive reports here on MNB.

    That said, the next day or two may feature some odd MNB posting times, depending largely on how airline connections are made and where Internet access is available to us. But we’ll do our best to stay on schedule…and to provide you with original perspectives on big ideas from and for thought leaders.

    KC's View:

    Published on: June 14, 2004

    Facts, Figures & The Future, the monthly newsletter from the Food Marketing Institute (FMI), ACNielsen, and Phil Lempert, writes that “while it seems that almost everyone is focused on Atkins-like diets these days, results from a new Homescan Panel Views survey indicate that reducing carbohydrate intake may not be consumers' highest priority.

    “When ranked by importance in deciding which new products to purchase,= consumers place foods ‘low in fat’ as number one, with products that are ‘high in protein’ and ‘low in carbohydrates’ way down the list tied for sixth place. Results from this survey also show that fully one-third of consumers actively limit the amount of fat or cholesterol in their diets.

    “The survey also found that consumers are paying attention to the Nutrition Facts label on foods, with almost 60 percent reporting that they read the Nutrition Facts label either ‘always’ or ‘usually’ when buying a product for the first time.”

    Other subjects addressed by this month’s F3 include:

    • The best way to cater to baby boomers.

    • How to uncover opportunities among Hispanic consumers.

    • The continuing dominance of supermarkets, despite channel blurring.

    • The truth about fast food.

    For more insights about these and other stories, go to:
    KC's View: