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    Published on: March 10, 2005

    The Modesto Bee reports that South Dakota Gov. Mike Rounds has signed into law legislation creating the South Dakota Certified Beef Program, which will allow consumers to find out where in the state the beef that they buy came from, tracking the animal from birth to the feedlot and eventually to the meatpacking plant. "We're going beyond country of origin labeling here. We're going right down to the producer who raised that calf," Rounds said.

    The traceability is provided through a code that will be put on every label of meat coming from South Dakota, and is conducted via an Internet site.

    Rounds said that part of the goal was to encourage higher prices for South Dakota beef. "We believe consumers will step forward and they will be paying premium prices for this premium product,” he said.

    State officials said it was the first time a state has created a beef certification program, and that only beef that qualifies – having been tracked through the system – will be able to carry the certification label.

    Rounds also signed into law legislation that will start a state beef identification program. It won’t just apply to new cattle, but also to existing cattle for which ample and appropriate records have been kept.
    KC's View:
    Of course, this only works if beef suppliers actually sign up for the program. Otherwise, they’re going to have a lot of extra labels sitting around.

    We’re also not sure about the notion of raising beef prices, since the speculation has been that one of the reasons some US cattlemen don’t want the border opened to Canadian cows is that it’ll affect the high prices they’ve been able to get since the border was closed due to mad cow disease concerns.

    But the idea of this kind of traceability does have its attractions. Certainly, when there is another mad cow incident in the US (and yes, we think it is a matter of “when,” not “if”), South Dakota cattlemen who are involved in this program will have a hoof up on their competitors.

    Published on: March 10, 2005

    Published reports say that there are a half-dozen schools in the Orlando, Florida, suburb of Kissimmee that are testing a modified version of the South Beach Diet on their students, trying to find out whether school cafeterias are able to supply healthier food, whether kids will like it, and whether it will have a positive impact on their health.

    While the study is being sponsored and conducted by a research center founded by Dr. Arthur Agatston, the author of "The South Beach Diet,” the center is quick to say that this does constitute a strict rendition of the popular low-carbohydrate diet plan, but rather a healthier approach to food that consists of healthier options prepared in a healthier fashion. Both the district and the center say that the program is very much a response to the growing childhood obesity epidemic, in which about 15 percent of the nation’s young people are either grossly overweight or obese.

    The research center weighed and charted the blood pressure and pulse rates of every one of the 3,000 children in the six schools (though if it knows what percentage was overweight or obese, it isn’t saying). Once the new school lunch program was put into place, as many as half the kids who simply didn’t eat there rather than partake of the healthier options; now, however, the schools say that just 15 percent of the student population isn’t eating the healthier food. And there seems to be evidence that the students are trying new foods, though no conclusions have yet been reached about the impact it is having on their overall health or even their eating habits off school property.

    In addition, there has been another problem. Because the schools are part of a buying group that includes schools not on the healthier food program, getting access to fresh produce, whole grains and other, more nutritious options has been both a challenge and more expensive.
    KC's View:
    It irritates us just to write the phrase “schools not on the healthier food program,” since we cannot understand why any school would want to serve foods that are less than healthy for the students.

    Let’s face it. Most schools serve slop that is masquerading as crap. Nothing more.

    There is a lot of discussion about what role schools ought to be playing in helping to solve the childhood obesity epidemic. Some suggest listing weight and body mass index on report cards as a wake up call. Others want to ban junk food from school vending machines. Others propose enhanced nutrition and physical education programs. We think that many of these are good ideas worth considering, if only because it is important to teach the body as well as the mind.

    But the first thing that schools ought to do is start providing food in the cafeteria that is tasty and nutritious.

    We’re not entirely comfortable with turning the determination of what such a foodservice program ought to be over to the folks from the South Beach Diet…but frankly, even if there are commercial instincts at play here, there also is a greater good being served.

    Published on: March 10, 2005

    From Kentucky to Arizona, legislatures seem to be taking a more activist role in addressing the nation’s childhood obesity problem.

    The Arizona House of Representatives has voted to ban the sale of junk food – defined as sugary and fatty foods – from the cafeterias, snack bars and vending machines located in the state’s elementary, middle and junior high schools.

    High schools were deleted from the bill last week. The bill does not include after school sales.

    The bill now goes to the state Senate.

    At the same time, the Kentucky General Assembly has approved legislation that will encourage (as opposed to mandate) 30 minutes of exercise for school children every day, as well as ban the sale of sugary soft drinks in elementary school vending machines and school stores during class hours.

    The bill also requires school districts to hire a credentialed nutrition specialist to plan lunches.

    Gov. Ernie Fletcher is expected to sign the legislation.

    These moves come at the same time as California Governor Arnold Schwarzenegger, said he supports legislation that would, he said, “ban all the sale of junk food in the schools.” He said that schools should be selling milk and fresh vegetables, not sodas and junk food.
    KC's View:
    It is interesting that the Kentucky lawmakers had to water down the language from “mandate physical education” to “encourage physical education” in order to get it passed.

    There is a legitimate argument that there are certain things that lawmakers shouldn’t be mandating…though we’re not sure that this is one of them. Maybe 30 minutes a day is a bit much; perhaps 30 minutes two or three times a week would have been more reasonable.

    But “encouraging” gives school districts a lot of wiggle room. It’s wiggle room we’re not sure they should have.

    Published on: March 10, 2005

    ABC News reports that a contract offer by Safeway to unionized workers in Colorado has been forwarded to workers there without a recommendation by the United Food and Commercial Workers (UFCW).

    The offer is reported to be similar to one accepted last week by employees at Kroger’s King Soopers division, with lower starting pay and increased health insurance premiums.

    While it not known when the unionized workers will vote, Safeway told ABC that the offer is contingent on being accepted by March 21.

    Negotiations with Albertsons reportedly are underway.

    The contract that covered employees for all three chains expired last September 11.
    KC's View:

    Published on: March 10, 2005

    The Detroit News has an interesting story speculating about how Martha Stewart’s apparently improved fortunes may help Kmart, especially as the company expands its retail base through its merger with Sears.

    “Martha Stewart emerged from federal prison as not only America's most stylish felon but with a more down-to-earth image that could boost sales for her products at Kmart,” the News reports. “Martha Stewart Everyday merchandise brings in about $1.5 billion for the Troy-based retailer each year, and analysts say she could do even better as Kmart acquires Sears.”

    The consensus seems to be that Kmart played this one right – de-emphasizing Stewart’s name and visage instore while maintaining its relationship with the jailed style maven.

    The feeling seems to be that “Stewart's image as a standoffish queen of domesticity has been replaced by that of a kindler, gentler Martha, a woman who earned pennies scrubbing toilets in prison,” the News writes.
    KC's View:
    Give both sides credit. It wasn’t that long ago that both brands seemed about to implode. For the moment, both survive…though we’d bet dollars to doughnuts that the Stewart brand will last a lot longer than Kmart’s.

    By the way, and we surprise even ourselves by writing this, we think it is time for people to back off Martha a bit. This week, all the stories have been about how her plane violated a curfew when it landed at Westchester Airport in White Plains, NY, suggesting that this was Stewart ignoring the concerns of the little people.

    Well, give her a break. She gets out of prison, she wants to go home, and that’s the closest airport for the private jet to land.

    Besides, there are no “little people” in the neighborhoods near that airport. The houses tend to be mansions and fortresses, the cards they drive tend to Mercedes and Hummers, and they tend to be people like Ivan Lendl, Ron Howard, and Bill Clinton.

    Published on: March 10, 2005

    Good piece on about the marketing dilemma facing Dunkin’ Donuts, which traditionally has been a blue-collar morning refuge with its roots in the blue collar neighborhoods near Boston.

    Today, of course, that’s not a position that Dunkin’ Donuts wants to maintain. Instead, it is seeking to improve its food offerings with such items as steak, egg and cheese sandwiches, offering such amenities as wireless Internet access and a nicer place to sit and have a cup of coffee, and a shifting emphasis to gourmet espresso drinks – though doing so in a more populist manner that doesn’t position it directly against Starbucks.

    The problem is that Dunkin’ Donuts has to expand its market without alienating its core – a problem for any retailer looking to grow a business in a highly competitive marketplace.
    KC's View:
    Achieving this goal is a challenge. Just ask Krispy Kreme.

    We actually think that Dunkin’ Donuts is doing a pretty good job. The doughnuts are still pretty good (though we haven’t forgiven them for dropping the “doughnut with a handle” that was a mainstay for decades), and the coffee excellent.

    And that’s a pretty good base upon which to build.

    Published on: March 10, 2005

    Contrary to the growing airline industry trend, Delta Air Lines announced that it will begin offering an expanded menu of free snacks to passengers, but will no longer be offering meals-for-sale to customers in coach class.

    The company said that only 25 percent of passengers generally bought food on-board, which made it hard to plan and created spoilage problems.
    KC's View:
    Delta’s current slogan is “good goes around.” Whoever wrote it obviously never ate any of the food they were selling on the airplanes.

    This is a great opportunity for food retailers, because it creates an obvious niche of airline passengers who will be hungering for convenient, tasty, nutritious food that can be easily brought on board. Whether these meals are ready-made, or filled to-order, it seems to us that this is a terrific way to demonstrate relevance to consumers’ needs. (Where appropriate, of course. If your store is hundreds of miles from the nearest airport, it may not be such a good idea.)

    Sometimes you can’t wait for the customers to go to you. You have to go to the customers.

    Published on: March 10, 2005

    • The effort by a Wal-Mart-led coalition to extend the workday for truckers to 16 hours, as opposed to the 14-hour days they now are allowed to work - with only 11 hours of consecutive driving permitted – has failed.

      Published reports say that Rep. John Boozman (R-Arkansas) decided to withdraw the amendment he had offered to the transportation reauthorization bill that would have allowed truck drivers to work longer hours – a move that was opposed by labor unions and safety advocates that feared it would make roadways more dangerous.

      In a prepared statement, Boozman said, “It has become clear that there is a lot of misinformation about why I am seeking to change the rules governing truck drivers’ hours. These rules are rigid and lead to unsafe roads. For this reason, I have been working to add flexibility to the rules for over two years now. I withdrew my amendment today, but pledge to keep working on this issue. I will attempt to work with my colleagues on the other side of the aisle, as well as officials in the administration, to soothe their concerns and provide the nation’s truckers with a little relief.”

    • The Associated Press reports that Wal-Mart may be preparing to apply for an industrial loan company charter in the state of Utah, which would allow it to actually process credit card and debit card transactions, though the move would not permit the company to offer retail financial services such as checking accounts.

      Wal-Mart did not confirm the report.

    KC's View:

    Published on: March 10, 2005

    Kmart announced yesterday that about 400 of its 1,480 stores will be rebranded as Sears once its $11 billion merger with that retailer is finalized.

    The conversions are expected to take about three years.

    Details about what kinds of Kmart stores will be converted were not available.
    KC's View:
    Just the beginning of what no doubt will be the demise of a retailer with a proud, then ignominious history.

    Published on: March 10, 2005

    Supervalu Inc. said this week that in the coming fiscal year, it plans to “continue our tradition of fresh thinking with more new store openings and remodels across our banners. We remain committed to growing Supervalu's retail business and supporting our expansion plans, ensuring that our regional banners continue to hold a strong share in their respective markets,” according to a statement released by John Hooley, the company’s executive vice president and president for retail foods.

    Among the retail moves being made by Supervalu:

    • It is opening a new bigg’s store in the Cincinnati area, a 76,000 square foot former Thriftway store.

    • It plans to open two new Cub Foods store in the Minneapolis area this summer, bringing the Twin Cities fleet of Cub units to 52, including franchises.

    • A new Shop n’ Save store is on tap for the Pittsburgh area, plus an aggressive remodeling program is in place for Shop ‘n Save stores in the St. Louis area.

    • Two new Shopper's Food and Pharmacy stores are scheduled to be opened, one in Maryland and the other in Virginia.

    • Supervalu recently expanded its Farm Fresh retail brand to North Carolina,

    • In Indiana, Supervalu is remodeling two of the 18 Scott’s Food & Pharmacy stores that it owns there.

    KC's View:

    Published on: March 10, 2005

    A study published by General Dentistry suggests that consumption of certain sports drinks – specifically AMP energy drink, Gatorade lemon-lime, KMX energy drink and Powerade Arctic Shatter – can break down calcium erode tooth enamel.

    Which led Bruce DeGinder, president-elect and spokesman for the Academy of General Dentistry, to issue this statement: "We recommend altering or limiting the intake of soda and sports drinks and choosing water or low-fat milk instead, to preserve tooth enamel and ultimately protect teeth from decay."
    KC's View:

    Published on: March 10, 2005

    • Published reports say that A&P Canada management has told store managers there that there is no truth to rumors that the business is for sale.

    • Office supply retailer Staples is expected to announce today that it will sell its merchandise in all 550 of Ahold’s Stop & Shop and Giant supermarkets in the northeast US. Depending on the size of the store, 500 to 1,200 SKUs will be carried in the supermarkets.

    • Dave Hirz, president of Ralphs Grocery Co., is to be inducted today into the California Grocers Association (CGA) Educational Foundation’s Hall of Achievement, recognized for years of service to the California food industry.

      “Dave is certainly a worthy addition to the Foundation’s Hall of Achievement,” said CGA President Peter Larkin. “He is highly respected in the industry, not only by his peers, but by his employees as well. His work ethic, character and integrity in both his personal and professional life are unmatched. He truly is deserving of this honor.”

    KC's View:

    Published on: March 10, 2005

    • Kmart reported that its fourth quarter sales dropped seven percent to $5.91 billion, from $6.33 billion a year ago, while same-store sales were off 4.5 percent.

      There was, however, good news. While same-store sales were down, they were down as much as in the previous two quarters; in the second quarter they were off 12.8 percent, and in the third quarter they were down 14.9 percent. The fourth quarter, however, did include the holiday season.

      Kmart’s fourth quarter net income was up 14 percent to $309 million, from $270 million in the same period last year. Excluding gains from sales of assets and bankruptcy-related recoveries, the company said, earnings would have been $259 million.

    KC's View:

    Published on: March 10, 2005

    • Transora CEO Judith Sprieser has resigned, to be succeeded on an interim basis by Bob Noe, the company’s chief commercial officer. Sprieser will remain with Transora as a consultant.

    KC's View:

    Published on: March 10, 2005

    • Further evidence of the pervasive influence of the Internet: Chicago officials are considering a plan that would turn the entire city into a wireless “hot spot,” giving citizens high speed access to the Internet.

      Making this happen would require placing about 7,500 small antennas on street light poles every couple of blocks throughout the city, which would cost $18.5 million.

      There are a number of payment options on the table, ranging from charging users a fee for Internet access to making it a free service as a kind of public utility.

    KC's View:

    Published on: March 10, 2005

    MNB reported yesterday about how McDonald’s Corp. has announced a new healthy living initiative that will, on a worldwide basis, endeavor to teach people how to eat right and get enough exercise.

    The slogan: "It's what I eat and what I do ... I'm lovin' it"

    The campaign will be featured on new packaging, new ads, and on the company’s website.

    We were a mite skeptical, and wrote: This is an example of negative publicity and threatened lawsuits having a positive effect…though we remain a little cynical about Mickey D’s motivations in this matter.

    And we were taken to task for our attitude.

    MNB user David Coia responded:

    I think we need to give McDonald's credit for keeping up with the times. A couple of years ago, the company took the bold step of telling its suppliers to come up with non-antibiotic infested meat by 2005. Don't know where that initiative is now, but it is an extremely important move with broad national ramifications. Most people don't yet understand that the use of antibiotics as a prophylactic in meat production is wiping out (admittedly, with help from a lot of societal ignorance, high & low) our ability to fight diseases.

    The available antibiotics are increasingly ineffective. If you think I'm overstating this, I can recommend a huge pile of medical and science journal articles and books that will adequately sober any doubter.

    My family and I watched Super Size Me. We shop McDonald's maybe once every couple of weeks, and generally for a quick item rather than a meal. Even my children (ages 9 and 12 - both athletes) know that many things tagged as bad are really ok in moderation. Sometimes McDonald's leads and sometimes it just adapts with the times, but the fact that such a huge corporate structure does introduce change on a fairly regular basis is impressive. My children's response to the movie was: "nobody eats every meal like that at McDonald's."

    Sorry, Kevin, I'm siding with McDonald's on this one.

    Another MNB user wrote:

    Why are you questioning McDonalds’ motivations on this initiative? No one should be naïve enough to believe that this program is being executed solely for altruistic reasons. McDonalds’ management’s job is to protect and build its brand, grow revenue, and make money for its shareholders. If they can protect their brand by aligning it with the more health-conscious consumer base, then they are simply doing their jobs. Let’s face it, even when a company gives money to charity or helps out its community, the end goal is to build the company’s brand/image/status in some way. As managers, reporting to a board of directors which answers to shareholders, we should expect nothing else.

    Okay, maybe we were a little cranky yesterday. But we have to be honest, no matter what McDonald’s says in ads, no matter how many athletes it enlists in its cause, we’re just skeptical about its commitment to healthy food. Mickey D’s may encourage people to go jogging, but when they’re done, they’re just as likely to ask people if they’d like some fries (still made, by the way, in trans fats, even though the company committed to finding another way).

    Want to get healthy? Run. Away from McDonald’s.

    We also got several emails responding to yesterday’s story about Whole Foods’ new store in Texas, which combines a unique environment with its differentiated product lines. MNB user Art Turock wrote:

    While providing shopping experiences that are world's apart, Whole Foods is actually a lot like Wal-Mart. Both practice hardball strategy. No competitive advantage is ever enough.

    Wal-Mart is already the most efficient operator. Once Kroger started closing the gap, Wal-Mart took the lead in initiating RFID which promises major cost savings.

    The supermarket industry should begin viewing Whole Foods as yet another hardball player who threatens now to capture a large share of trading up customers, discovery shoppers, care for family shoppers. What Wal-Mart did in discount grocery, Whole Foods is liable to repeat in the upscale grocery segment. Be warned!

    And MNB user Paul Schlossberg added:

    Whole Foods defines success differently from most of their competition. If they defined success in the typical grocery approach they would not have a store described as "pulsating." Companies should be very careful in how they define the stores and at headquarters. It is part culture, part management expectations and part how people are evaluated and paid. There are hard measures (sales, costs, keeping stores clean/sanitary) and soft measures (how employees interact with customers, making the shopping experience enjoyable). They know how to go after both the hard and soft measures of success. Maybe that is the real lesson in how to be an effective competitor in the grocery any business.

    Responding to the piece we ran the other day by the University of Missouri’s Illumination about the less-than-expected impact of Wal-Mart on local economies, one MNB user wrote:

    It might be interesting for your readers to note that Wal-Mart heirs Ann Walton Kroenke and Nancy Walton Laurie, Bud Walton's daughters, and their respective husbands have contributed millions to the University of Missouri over the years. Makes the story in Illuminations potentially a little less objective, doesn't it?

    Good point. Thanks. (Though the notion of academics being less than honest because of financial considerations is one that we find distressing and shocking…)

    On the subject of Tops deciding to eliminate meat cutters in its northeastern Ohio stores, one MNB user wrote:

    Here's what I know about Tops and the decision to get rid of meat cutters in Ohio...the average store employee at the Tops Ohio stores makes over $16.00 an hour (not counting benefits). Does this strike anyone as a little "over the top?" (pardon the pun). Since meat-cutters are basically at the top of the pay scale, this change would dramatically cut the average wage rate.

    With that said, there are 2 things to note:

    First, this division has constantly struggled with poor customer perception. It was inherited from the Finast days. If they eliminate all cutters, Giant Eagle will definitely seize the opportunity to market against Tops with GE superior service...don't be surprised to see a campaign targeted at "custom meat." GE's close alliance with HEB and Wegman's should be a hint about what to expect.

    The second thing, is that the majority of associates in that region have been with the company for a very long time and have quite a bit of knowledge and expertise. They have earned the high pay rate through years of raises. They are a very close group who are very supportive of each other with strong union support. I wouldn't be surprised to see a strong union reaction.

    Tops had better have a good trick up their sleeve if they have to defend
    against both a Giant Eagle attack and union unrest.

    Regarding Wal-Mart’s decision to sell health insurance through its Sam’s Club stores, MNB user Sue DeRemer wrote:

    Rest assured that those 50% Wal-Mart health care discounts will be passed on as higher premiums to United Health Group's other customers...

    On the subject of Wal-Mart getting more and more into the gas station business, MNB user Gerardo I Lopez wrote:

    With the price of gas on a rocket this past month and about to go even higher, don’t you just wish it was the Wal-Mart crew instead of the local corner independent negotiating with Exxon and the Saudis for the gas in your tank? Between Exxon, OPEC and Wal-Mart, I know who I want on my side.

    Safeway has expanded its online service to Phoenix, which led one MNB user to write:

    It's been in the Phoenix market since Feb. 22, and my wife loves it. We used it in the Bay Area, and the convenience and service are real selling points for her. The order pickers always select items that are of good to excellent quality, the prices are the same as in the store, and all of the club card benefits are available to online shoppers. The driver delivered a 5% discount certificate that was earned when our online order exceeded the threshold of required purchases. If she could just figure out how to get them to deliver lattes from the instore Starbucks, she'd call it perfect!

    And, responding to our piece the other day about supermarket CEOs who are not marketers, one MNB user wrote:

    Just about zero are good marketers. There are a few who understand and they are huge successes – Wegman’s and Ukrops for example. Most do not understand what marketing is and therefore cannot use it. Just look at their inability to harness loyalty programs as an example. Loyalty programs are real marketing tools, not merchandising techniques. As a marketer I often feel lost in the food retailing world; not many understand or care to try.
    KC's View: