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    Published on: March 11, 2005

    Retail Forward’s monthly ShopperScape study reports that “Wal-Mart's aggressive expansion in supercenters, coupled with low prices, is driving the retailer's market share gains in the grocery market.” The report says that “Wal-Mart's overall share of grocery purchases has increased 3 percentage points from July 2004 to February 2005.”

    In addition, ShopperScape says that down market consumers “spend the highest percentage of their grocery budgets at Wal-Mart (29%). In less than one year, this share has grown 5 percentage points. At this rate, Wal-Mart will control one-third of Down Market grocery purchases within the next few months.” Still, the largest gain in grocery share in the last six months has come from middle market consumers, who now are buying 24 percent of their groceries from Wal-Mart.

    Up market consumers buy about 16 percent of their groceries from Wal-Mart, a number that is unchanged from six months ago.
    KC's View:
    While we think that Wal-Mart’s growth certainly can be attributed to the fact that it has more stores and the perception of the lowest prices, we also believe that its growth can be attributed to not enough stores providing consumers with compelling alternatives.

    Wal-Mart believes it can legitimately grab 35 percent of US grocery share in just a few years. If it achieves that goal – and there is no reason to think it can’t – it will be because not enough retailers decided to do what is necessary to compete with them, and too many retailers decided to let Wal-Mart set the rules of the game being played.

    Published on: March 11, 2005

    The CBC reports that some Canadian truckers are concerned about the reception they are going to get when the US border is finally opened to Canadian cattle.

    In fact, one trucker, Darrin Peterson, tells the CBC that he’ll probably wait a few months to start driving cows to the US even when the ban is eliminated. "There are radicals down there," he tells the Canadian news service. "I can see...stupid stuff like that happening, plain and simple."

    The border was supposed to open this past Monday for cattle younger than 30 months, but a federal judge granted a temporary injunction to stop it because a group of cattlemen launched a lawsuit to stop it because of concerns about the spread of mad cow disease. The US Senate also voted to stop the opening of the border, though the House hasn’t voted on a similar bill and President Bush has said he’ll veto the legislation if it actually reached his desk.

    Meanwhile, the motives of the objecting cattlemen have been questioned, as some have said that they are merely trying to protect the raised beef prices that have resulted from the ban on Canadian beef.
    KC's View:
    Having spent a lot of time in Canada the past few weeks, we can report that there is a lot of concern expressed by industry folks there about what they feel is a lack of US appreciation for the fact that Canada is a traditionally loyal trading partner that has been an enormous and profitable market for US manufacturers. Many seem to feel that Canada is incorrectly perceived by an increasingly conservative US as a leftist nation, and they’re simply not sure how to make their case to Americans.

    We’re not sure, though, if concerns about being attacked by US cattlemen are necessary. It could be that there is just a lot of talk, but not much to back it up once you get beyond litigation and legislation.

    Or, in the words of a great old Randy Newman song, “big hat, no cattle.”

    Published on: March 11, 2005

    Sheetz Inc. the Pennsylvania-based c-store chain, has opened its second “convenience restaurant,” this one in Raleigh, North Carolina. The first of the breed was opened last June in Altoona, Pennsylvania.

    The 10,000 square foot unit offers both dine-in and take-out options, and features a broad range of hot and cold entrees prepared in an open “food theater,” along with an espresso bar, smoothie counter, DVD rental, bulk candy, and more traditional convenience offerings.
    KC's View:
    We like the way Sheetz is trying to redefine the experience, as if continually trying to reinvent the c-store is the best and maybe the only way to keep it relevant.

    Published on: March 11, 2005

    Carrefour announced that it is selling its eight-store Japanese operation to Aeon, which will also have the exclusive marketing rights there for Carrefour’s private label lines.

    At the same time, Carrefour is selling its 29-store Mexican operation (plus two more stores scheduled to open later this year) to local hypermarket retailer Chedraui.

    And, Carrefour said that it will become a 51 percent shareholder in Finiper, an Italian retailer in which it already is a 20 percent owner.

    No financial details of the transactions were disclosed.
    KC's View:
    You’d think someone from General Electric were running the company, as Carrefour seems intent on bailing out of operations where it saw little room for improvement, and building up its share where it thought there was an upside.

    Probably just a coincidence that Wal-Mart happens to be really strong in Mexico, has targeted Japan for a major push, and doesn’t have any operations (at the moment) in Italy.

    What’s the French word for “chicken”?

    Oh, yeah.

    “Poulet.”

    Published on: March 11, 2005

    The Washington Post reports that President Bush is pushing the Japanese government to lift its ban on US beef imports, but that Japanese Prime Minister Junichiro Koizumi is giving no assurances as to when this will occur.

    Before last November’s presidential election, Japanese and US officials said that there was a “framework” for an agreement that would lift the ban, but there is some speculation that this was a political favor to make Bush look good to US voters.
    KC's View:
    We still feel that the US has to lift the ban on Canadian cattle before it can expect Japan to lift its restrictions.

    Published on: March 11, 2005


    • Apparently objections to Wal-Mart in some circles of California are such that if you support the retailer your political career is at risk.

      The Los Angeles Times reports that two city council members in Rosemead, a dozen miles from Los Angeles, lost an election this week to two people who had criticized Wal-Mart’s plans to build 40 supercenters in California.

      The Rosemead council voted in favor of allowing Wal-Mart to build a store there last year, and support for the project remains despite this week’s election results.


    • Erik Winborn, Wal-Mart’s vice president of national government relations – in other words, its chief lobbyist – has resigned from the company, effective March 19.

      He said he was doing so because he is turning 55 and wants to do other things.


    • Wal-Mart’s Asda Group announced that Tony De Nunzio, its president/CEO, will leave the company “to pursue other business interests.” De Nunzio has joined Royal Vendex KBB, the nonfood retailer in the Netherlands, as chairman of the executive board.

      De Nunzio joined Asda in 1993. No replacement has yet been named.


    • Forbes has released its annual list of the world’s top 10 billionaires, and for the first time in years there is only one Sam Walton heir on the list.

      Wal-Mart Chairman S. Robson Walton, with a personal wealth of $18.3 billion, was the only Walton to make the top 10 this year. Four other Waltons who were on the list dropped off this year – apparently because their wealth is dependent on the retailer’s stagnant share price.

    KC's View:
    Maybe we should schedule a benefit…

    Published on: March 11, 2005

    The Oklahoma State Senate has passed a bill banning junk food in the state’s elementary and middle schools, effective 2007. The bill prevents the sale of soft drinks and low nutritional snack items, except on “special occasions.” In the state’s high schools, junk food is not banned, but officials are required to offer healthier options.

    The bill now goes to the House of Representatives, where it is thought to have a “good chance” of success.

    At the same time, the West Virginia House of Representatives is considering a bill that will ban soft drinks from elementary, middle and high schools during the school day, and require them to offer healthy alternatives in vending machines. However, the committee has amended the bill so that sports drinks such as Gatorade are included as being “healthy,” despite some criticism that they have too much sugar to be included in that category.
    KC's View:
    We’re not saying this is a good idea, but we’re wondering when someone is going to offer legislation on a junk food ban at the federal level. It is almost beginning to seem inevitable.

    Published on: March 11, 2005

    McDonald’s CEO Jim Skinner told a Bear Stearns conference this week that the company is considering a strategy that would have it outsourcing its drive-through order-taking process, hiring people with good communications skills in central locations to take orders from people in their cars. These communications specialists would then send the order via computer back to the individual McDonald’s outlet, where local personnel will fill it.
    KC's View:
    The only problem with this plan is that it assumes the incompetence that we often run into at Mickey D’s is on the part of the people taking the order, not the folks preparing the order.

    Published on: March 11, 2005


    • The Wall Street Journal reports that Congressional investigators are warning that “fewer inspections of imported food and limited access to animal vaccines are hampering the nation's ability to prevent and respond to a terrorist attack on the U.S. food supply,” and that significant gaps remain.

      Perhaps most troubling was the fact that US officials were unable to explain why, even in a post 9/11 world, why agricultural inspections at the nation’s ports of call decreased from 40.9 million in 2002 to 37.5 million in 2004.


    • Safeway has unveiled its new Dominick's prototype in Northfield, Illinois, a “Lifestyle” format that puts a greater emphasis on fresh foods, specialty goods and a design package that management believes will be more pleasing to shoppers.

      Dominicks’ president Bruce Everette described the store’s improved bakery offerings as being “so good, it'll make your tongue flap around in your mouth and beat your brains out.”

      The company says that it plans to convert the entire chain to the format, though no timetable has been set for the conversions – and the plan does not take into account the possibility that the chain could be sold.


    • The Wall Street Journal reports that a $5 billion bid has been made for Toys R Us by an investment group that includes Cerberus Capital Management. The bid, if accepted, would preempt the company’s consideration of a plan that would have had it selling its toy retailing business while keeping its baby goods chain, an initiative it was considering because of intense competition from Wal-Mart.


    • The Wall Street Journal reports that Heineken plans to introduce Heineken Light in the US, positioned to target consumers who want a low-calorie, low-carb beer. The risk, according to the WSJ, is that the move could damage the company’s core upscale image.


    • The Wall Street Journal also reports this morning that cereal manufacturers are “adding vanilla, French toast and other flavors to once-bland adult cereals and redirecting some of their existing sugary brands at grown-ups. The aim is to pump up sales of breakfast cereal, which have slipped as many consumers have shifted to energy bars, yogurt and other morning alternatives.”


    • Delhaize announced that it has acquired a 43-store Belgian supermarket chain, Cash Fresh, for the equivalent of $151 million (US).

    KC's View:

    Published on: March 11, 2005


    • Delhaize reported an increase in fiscal 2004 net profit to the equivalent of $262.7 million, compared to $193.4 million (US) a year ago. Annual sales were off 4.5 percent to $22.3 billion, in part because of currency fluctuations.


    • 7-Eleven Inc. reported that its February sales climbed 6.3 percent to $919.9 million from $865.2 million.

    KC's View:

    Published on: March 11, 2005

    We got the following email from MNB user Brendan Haslam about the proposed junk food ban in California:

    Yesterday, you posted a brief on how Schwarzenegger wants to ban Junk Food from all schools, which I couldn’t disagree more with. I think it’s just going to encourage students to buy from convenience stores (where the prices will be incredibly higher then prices in a public school) on the way to school and stockpile more junk and bring the junk into the schools, that is, assuming the parents aren’t the suppliers. I assume steroids will be listed in the junk foods ban list? If something like this is going to work, wouldn’t you need to ban junk food from being eaten at school, and not just the sale of it for it to truly work?! In terms of the governor of Arkansas losing 110 pounds, it’s a wonder what a doctor saying you might not live six months will do to you, which is what happened. Eating Junk is ok in moderation like all things, but if you need to lose 110 pounds, the issue isn’t junk foods- it’s really an issue of self-control. Why should those who can tolerate the image of junk foods and can consistently process the damage the over eating of those foods will do suffer because of those who can’t? It’s a band-aid bill if you ask me.

    We would agree that it is a band-aid bill if other issues – like serving nutritious school lunches and offering enough physical education – are not addressed.

    MNB user Ward Eames wrote:

    Junk food bans are going to be the trend over the next 4-5 years and coming election cycles. Our school in Minneapolis did a complete overhaul of their food service and has now changed it into a profit center instead of a cost drain. Food companies need to get going and embrace the "right thing for kids" or they will see their market shares dwindling. I support what Wendy's has recently done with their introduction of a fruit cup instead of french fries. Unfortunately, they seem to be marketing their new offering to women only. Why has it taken so long?

    We also got an email, from MNB user David Goldbeck, about a piece we wrote about a Salon.com article suggesting that the anti-trans fat movement might be a little off the mark:

    As someone who has campaigned for better diets for more than thirty years I disagree with Katharine Mieszkowski. She is confusing two different issues: One is the quality of the food we eat and the other, the amount, formulation and variety in our diet.

    Trans fats, nitrates, the food colorings and additives that have been banned in the past should simply not be in the food we eat. They are not food. Moreover, shelf stable hydrogenated fats make it possible for the food industry to market items that can sit on shelves for a very long time. Do we know what happens to the nutrients in these foods over time? With the use of natural fats, perhaps their food will be fresher.





    The other day we reported that Roundy’s CEO Bob Mariano said that the company was “not currently” in discussions with Safeway about the possible acquisition of Dominick’s, and we commented that the phrase seemed carefully crafted. One MNB user agreed:

    You are right, KC, about the real meaning of that statement. It was technically true. He was talking to a reporter and therefore was not "currently" in discussion with Safeway. Perhaps Roundy's is not talking to Safeway but Roundy's owner, Willis Stein, is talking. Or perhaps they are using an investment banker go-between. Odd, when you talk to the employees at both companies you would think the deal is done. While Roundy's and Dominicks are not sister companies yet, there are so many former Dominick's employees who have moved to "Dominicks North" in Milwaukee that they are at least kissing cousins.




    Also got a comment from an MNB user about the new “don’t be blah” slogan adopted by the Pork Board:

    If it weren't for the fact that you broke this story on March 7th, I would have thought it was an April Fool's joke. "Don't be blah." What is that?

    Please don't tell me some high-priced Chicago-based, or Madison Avenue, ad agency came up with this bit of promotional genius for the National Pork Board. I suppose they even did "consumer research" before making their final decision. Can you imagine what the losing slogans must have been?


    No.

    On a related subject, one MNB user commented:

    I find it interesting with the BSE controversy and lack of affordable beef on the market that the pork industry is considering a change right now. My personal pork consumption is up and will continue to be up. Our family, for years, has consumed a lot of beef and occasionally served pork for variety.

    That has now flip-flopped. Pork and chicken is the main stay of our diet with occasional beef on the menu. No advertising campaign has influenced that. Supply/demand and prices are the motivators. If the pork industry is changing its tack, it needs to be splashy and innovative with recipes that show new ways to use pork--show some competition to chicken.





    We got a pair of comments about our phraseology the other day in our story about Tops getting rid of its Ohio meat cutters.

    MNB user Lin Lauve wrote:

    The term "boxed beef" is being used incorrectly in the Tops story. Boxed beef is what Tops is currently buying, and trying to move away from. The correct description for the product that allows elimination of meat cutters is "case ready."

    And another MNB user wrote:

    It is not really “boxed beef” that has been around for years. What it is is “centrally cut” meat. That concept has been in use in Canada since the mid 90s. It does improve in stock position as it relies on scanning data for ordering and stocking the meat case if properly executed. However, it is a mass market thing and will not work with a “service” concept. It will reduce your costs but not improve your “meat image”.

    Consider us admonished. Corrected. And chastened.




    On the subject of Wal-Mart increasing its presence in the gasoline business, one MNB user wrote:

    Remember when gas was cheaper if you pumped it yourself? Virtually eliminating the careers of pump jockeys everywhere? Is gas any cheaper now?

    Same goes for retail prices...sure stuff is cheaper NOW at Wal-Mart, BECAUSE they have to be competitive. But, as soon as "dedicated Kroger shoppers" have no where else to go but their local Wally World, and therefore no higher price to compare to, you can bet that prices will normalize and there will be no one left to pass the stone tablets to the next generation.
    KC's View:

    Published on: March 11, 2005

    I’ve always been a big fan of Mike Lupica, the brash, outspoken and highly opinionated sports columnist for the NY Daily News as well as a regular on ESPN’s “Sports Reporters.” (Can’t imagine why “brash” and opinionated” would be so appealing…)

    These days, Lupica has two very different novels in bookstores, each of which is a terrific read.

    “Too Far” takes place in a Long Island town where the teenaged manager of the highly ranked high school basketball team has washed up on the shore, presumably murdered. A reporter from the high school paper teams up with a washed-up, self-pitying columnist, Ben Mitchell, to find out if the kid’s death has anything to do with allegations of hazing among members of the team – hazing that may have gone too far. This is a fast moving, twisting and turning novel, with Lupica’s command of both the mystery form and his understanding of sports both serving the story well. It also makes a serious point as it builds to an unexpected ending – that communities lionize their sports heroes way out of proportion, and put the blinders on when it comes to these players’ personal behavior and responsibility. I happen to live in just such a community – and Lupica has it dead-on.

    While his other novel, “Travel Team,” also takes place in a Long Island town and uses basketball as its backdrop, it is a book written for teenaged readers – but I have to admit that I loved every page of it. “Travel Team” is written from the perspective of 12-year-old Danny Walker, a wonderfully talented basketball player who has been cut from his age group’s travel team because he is too small. The coach, you see, has big plans for the team, and he only wants big kids…and plans to push them as hard as he has to in order to reach the championship game. Danny is devastated…but help comes from an unexpected place as Danny forms yet another travel team made up of misfits and less talented players – and yes, even a girl. The story may be about kids and basketball, but the book is about heart – and it is flat-out inspiring without ever being overly sentimental or maudlin.

    Lupica is a writer at the top of his game…and you should make some time for him in your schedule.

    Being that I spent most of the week in Canada (doing some speechifying for the Canadian government), I thought it appropriate to recommend a couple of British Columbia wines this week – a 2002 Jackson-Triggs Merlot Proprietor’s Reserve from the Okanagan Valley, and an Inniskillin Lake Bench Reserve Meritage. Both were excellent reds; the Merlot complemented a terrific salmon that I enjoyed at Earl’s, and the Meritage was perfect with lobster ravioli at a restaurant called Joey Tomato’s (both in Calgary, near the airport…time was such that I had little time to explore, which broke my heart).

    Finally, if you didn’t see it on PBS, you should make an effort to rent Ken Burns’s excellent documentary “Unforgivable Blackness,” the story of Jack Johnson, the first black heavyweight-boxing champion of the world. It is a story not just about boxing, but about a black man trying to live without restraints during the early days of the 20th century, and facing prejudice and unspeakable insults from the sport he loved. Johnson was no saint, anything but, which makes the story all the more interesting as he attempts to do what he wants while defying society’s attempts to define him. It is yet another wonderful piece of work from Burns, who gave us such landmark documentaries as ‘Baseball” and “The Civil War.”

    Hey, have a good weekend.

    Sláinte!!
    KC's View: