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    Published on: September 24, 2004

    In an open letter to Californians published in ads purchased in 15 of the state’s newspapers, Wal-Mart says it is attempting to set the record straight about its reputation, intentions and contributions to the community.

    Conceding that it has become a target for criticism from a number of sources – including “certain elected officials, competitors and powerful special interest groups” – the company notes that “our company will continue to attract attention and even criticism in California. We will continue to listen and react to criticism that is valid. But we also will continue to react to half-truths and misinformation about our company.”

    Wal-Mart’s goal has been to open 40 supercenters in the state over the next few years, but has met pockets of successful resistance in selected markets.

    The complete text of the letter reads:

      A Letter from Wal-Mart to the People of California.

      At Wal-Mart we understand our ability to operate and grow in California depends on the support of you -- our customers. Each day we work to keep your trust by offering quality merchandise at low prices, being a good neighbor in the communities we serve and supporting economic growth throughout the state.

      As the company has grown, we've become a target for negative comments from certain elected officials, competitors and powerful special interest groups. While we are always willing to consider constructive criticism, much of what has been said publicly about Wal-Mart in California is simply not true.

      We think that our customers and the people of California need to know the facts:

      • Wal-Mart pays competitive wages. In California our average wage is $10.37 per hour -- a rate that is in line with comparable retailers. Nearly 80 percent of our California associates (that is, employees) work full time. Many of our jobs are held by working "retirees," working spouses supplementing a family income and students working through school. For many young people, this is their entry into the work force. Wal-Mart simply could not continue to grow if we didn't offer a desirable place to work. In fact, virtually every time we open a new store, we receive a flood of applications. For example, when we prepared to open our National City, Calif. store last year, we received 15,000 applications for 350 job openings.

      • Wal-Mart offers medical coverage to both full- and part-time associates. In addition to medical and dental care, our associates receive benefits like a profit sharing and 401(k) plan, merchandise discounts, performance-based bonuses and life insurance. A large percentage of associates -- 40 percent -- covered by Wal-Mart's healthcare plan didn't have any medical insurance before joining the company.

      • Wal-Mart provides tremendous career opportunities. Nationally, more than 9,000 hourly associates were promoted into management jobs last year and two-thirds of our store management started their careers with Wal-Mart in hourly positions.

      • Wal-Mart is planning to open as many as 40 Supercenters in California over the next few years. Supercenters combine a traditional Wal-Mart store with a full line of groceries under one roof. Customers in 47 other states currently enjoy the convenience and low prices that Wal-Mart Supercenters provide. According to a recent study by the Los Angeles Economic Development Corporation, with the entry of Wal-Mart Supercenters into Southern California, area consumers will save at least $3.7 billion annually, or $589 per household per year, once Wal-Mart reaches 20 percent market share in the region.

      • Wal-Mart is an integral part of the California economy, purchasing goods and services ranging from agricultural to entertainment, high tech to consumer package goods. Last year, Wal-Mart purchased more than $8 billion in goods and services from 4,600 California suppliers. Much of what California grows and manufactures is distributed to Wal-Mart stores across the country and around the world.

      • Our stores generate significant tax revenue for local communities, helping to fund important city services, including police and fire protection. In California last year, Wal-Mart generated more than $650 million in sales tax revenues.

      • Giving back to our communities by supporting local organizations is very important to us. Last year, California Wal-Mart stores and SAM'S CLUBs raised and contributed more than $11 million for local causes and organizations throughout the state. Overall, Wal-Mart is the largest corporate cash contributor to charity in the United States.

      In closing, we expect that our company will continue to attract attention and even criticism in California. We will continue to listen and react to criticism that is valid. But we also will continue to react to half-truths and misinformation about our company. Our customers, communities and associates in California deserve nothing less.
    KC's View:
    Is the letter emblematic of a kinder, gentler Wal-Mart? Or is the company serving notice that “resistance is futile”?

    Either way. you can’t blame Wal-Mart for trying, though it is interesting that the advertisement doesn’t really address the “culture change” that CEO Lee Scott said just a few weeks ago that the company needed to achieve. Rather, this ad seems almost completely defensive…

    It’s a neat trick, suggesting that Californians are going save gobs of money…but only if Wal-Mart is allowed to achieve a 20 percent market share. Maybe the Governator should simply close down some of Wal-Mart’s competitors so that he and the Bentonville Behemoth can provide the public service of giving consumers the lowest prices. On the other hand, maybe…just maybe…low prices aren’t always everybody’s biggest concern.

    Based on the way Wal-Mart describes the people it is hiring, one would almost expect that the company would be posting plaques over the front door that say, “Give us your tired, your poor, your huddled masses…”

    We clearly aren’t going to debate Wal-Mart on its numbers and statistics, though we would point out that it is big enough to qualify as its own “special interest group,” and that the “economic growth” that Wal-Mart is most interested in is its own.

    And while we don’t have specifics with which to question the Wal-Mart numbers, we have to say that the line that most surprised us was the assertion that almost 80 percent of its store employees in California are full-time – a statement that, if true, would fly in the face of conventional wisdom. (What’d we really like to know is how Wal-Mart is defining “full-time.” We suspect it might be different than we’d define it…)

    Wal-Mart also better hope that the courts don’t blow a hole in its attempts to repair its image…that it doesn’t lose the lawsuit that charges it with gender discrimination, which could give it something of a black eye.

    Ironic that on the same day that Wal-Mart was advertising its good intentions, the company was sued in a federal court by a job applicant who charged that the company discriminates against black employees seeking work as truck drivers. The plaintiff’s attorney reportedly is seeking class action status in the case…which just goes to show that Wal-Mart is right about one thing – that rightly or wrongly, it continues to be a lightning rod for controversy and attacks.

    Doesn’t matter, though. Resistance is futile.

    Published on: September 24, 2004

    Delhaize and its Hannaford Bros. division are acquiring the 20-unit Victory Supermarket chain with units in Massachusetts and New Hampshire for $175 million.

    Hannaford CEO Ron Hodge called the purchase a “highly complementary acquisition.” Victory generated $385 million in sales last year.
    KC's View:
    This seems like a smart move by Delhaize, which continues to impress us with its US initiatives.

    They will, however, eventually have to change the company’s website…which currently says that Victory “is a family owned chain.” It hasn’t been a great week for the independent sector, which lost two small companies this week – Bristol Farms, and now Victory.

    Published on: September 24, 2004

    Texas-based HE Butt Grocery Co. plans to increase its store-based customer service staff by about 300 people, while eliminating about 100 administrative positions mostly at headquarters, according to a report in the San Antonio Express-News.

    The company says that the moves are being made as part of an annual budget review, not in response to any single issue or event.
    KC's View:
    As always, we refer to our friend Glen Terbeek on this subject, who says that one of food retailing’s biggest mistakes is to spend countless dollars and hours hiring CEOs while spending very little to hire most store personnel. Since customers have very little idea who the CEO is, this simply doesn’t make sense, he says – and we agree.

    This is a matter of HEB having its priorities straight. Being HEB, that’s hardly a surprise.

    Published on: September 24, 2004

    The Los Angeles Times reports that there seems to be a more hopeful attitude on both sides of the labor talks currently ongoing in the San Francisco Bay Area, as both labor and management seem focused on avoiding the strike/lockout that affected the Southern California for more than four months.

    That’s not to say the more civil discourse is resulting in solid and acceptable proposals. The contract between some 30,000 unionized employees who work for 382 Safeway, Kroger and Albertsons stores expired on September 11, and the LAT says that no formal proposals have been made by either side. But no ultimatums have been issued, either, and the old contract has been extended while the two sides talk – and that seems like a positive sign.

    The chains almost certainly are looking for wage and benefits concessions like those achieved in Southern California, which would create a tiered system that compensates new employees at lower levels than existing workers. But the chains also want to avoid the kind of devastating economic impact that they continue to experience in Southern California – sales that migrated to small chains and other formats, and that in some cases show no sign of returning.
    KC's View:

    Published on: September 24, 2004

    The Seattle Post-Intelligencer reports that a new study done by the Fred Hutchinson Cancer Research Center suggests that drinking four or more glasses of red wine a week cuts the risk of prostate cancer by 50 percent.

    Prostate cancer is the second-leading cause of cancer deaths among men in the United States, according to the American Cancer Society.

    The study did not find that white wine, beer, or other kinds of alcohol have the same effect.

    The impact on prostate cancer rates that comes from drinking red wine is in addition to believed benefits that red wine has in preventing heart disease.
    KC's View:
    Sláinte!!

    Published on: September 24, 2004

    The National Grocers Association (NGA) and the Food Marketing Institute (FMI) will co-sponsor the food industry’s “Day in Washington” meeting June 6-8, 2005.

    “The Day in Washington meeting provides an important opportunity for the food retailing and distribution industry to educate the new 109th Congress about critical issues affecting the grocery business and American consumers,” N.G.A. President and CEO Tom Zaucha said. “We will discuss with members of Congress a number of important issues that affect our members’ businesses — including the repeal of the estate tax, health care and other important issues that will arise in 2005.”

    “The timing of this event is critical. In mid-2005, we expect Congress to be making decisions on a host of major issues crucial to the future of our industry. These include tax reforms, health care costs, and pension legislation just to mention a few,” said FMI President and CEO Tim Hammonds. “Another reason to attend is that there is no more effective way to shape public policy than to meet with your members of Congress face to face.”
    KC's View:

    Published on: September 24, 2004


    • Ahold announced that it plans to sell its Deli XL foodservice operation in the Netherlands as part of its overall strategy of divesting non-core businesses in the wake of its multi-million dollar accounting scandal.


    • Chocolate candy manufacturer Mars has completed a licensing deal with Bravo! Foods that will have the latter company creating vitamin-enhanced milk drinks using familiar brand names like Milky Way and Starburst.

      The products reportedly will be made with either low-fat or skim milk, and will be advertised as having “10 essential vitamins and all the benefits of milk”.


    • PepsiCo reportedly plans to introduce three new products next year – a reformulated version of its Pepsi One soda that uses sucralose instead of an aspartame blend, a sparkling Aquafina water, and a no-calorie or low-calorie flavored water, possibly called Splash, according to Beverage Digest.


    • Insignia Systems, an in-store advertising company, has filed suit against News Corp.’s New America division and Albertsons, charging that New America paid large fees and bundled services to the retailer in an effort to lock out the competition.

    KC's View:

    Published on: September 24, 2004


    • Rite Aid Corp. reported that second quarter earnings rose to $9.8 million, compared with last year's second quarter loss of $10.6 million. Revenue rose 1.8 percent to $4.12 billion from $4.05 billion in the prior year, with same store sales up two percent.

    KC's View:

    Published on: September 24, 2004

    …will return on Monday.
    KC's View:

    Published on: September 24, 2004

    Ruminations…

    • Just back from Las Vegas this morning, where we had the opportunity make a couple of presentations. As always, we find Las Vegas to be more foreign to us than some cities in other countries. Part of it is the fact that we don’t gamble, so much of the experience is lost on us. (We walked by the quarter slot machines, fished in our pocket, found two quarters, lost them both, and was done with it. “What happens is Vegas stays in Vegas…”)

      Actually, this raises an interesting marketing point. Vegas has had an fascinating marketing history, moving from its gangster roots to its Rat Pack heyday, then moving into its Disney-esque phase, and now back into more of an adult approach. Hence, the advertising slogan, “What happens in Vegas stays in Vegas.”

      But the interesting thing is that the city has managed to change its image so quickly, to the point where we must have heard dozens of people use that ad slogan in casual conversation. It was like the joke that everyone was in on…which sounds to us like a pretty successful marketing effort.

      There are other ways in which Vegas is noteworthy, though. Walk into any casino, and there’s this odd smell in the air…and it takes a moment or two before you realize that it is tobacco – making Vegas perhaps the only place left in the US where you can smoke indoors without fear of retribution, and where second-hand cancer comes free of charge.

      And it’s got to be one of the few places in America where the hotel can upgrade you to a suite…but there’s no in-room coffee pot. (There was, however, a fully stocked bar. Ring-a-ding, baby.)

      And finally, Vegas is this amazing place where many of the household names seem to be familiar only to households there. Out jogging early one morning, we were struck by how many enormous billboards and posters were devoted to supposedly major stars that we’d never heard of, but who apparently are headliners in Vegas. Who, for example, is Danny Gans? And why does he get a bigger poster than Celine Dion (who at least we’ve heard of)?

      And by the way, in case you didn’t know – David Brenner is alive and well and playing a small room at the Hilton.

      At least his name we recognized…


    • While everyone else spends their money at the gaming tables, we went right to one of two restaurants owned by Emeril Lagasse in Las Vegas. At Emeril’s New Orleans Fish House in the MGM Grand Hotel, we enjoyed a wonderfully rich Seafood Gumbo, a Grilled Sweet Barbeque Atlantic Salmon on a Homemade Andouille Sausage and Potato Hash with Spicy Onion Crust, and washed it all down with a fantastic 2001 "Provocateur" Pinot Noir from the JK Carriere vineyards in Oregon’s Willamette Valley (which was hearty enough to stand up to the gumbo without overwhelming the salmon).

      Amazing what we’ll do to ward off prostate cancer and heart disease.

      Yumm…


    Have a good weekend. Sláinte!!
    KC's View: