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    Published on: February 14, 2006

    • Published reports in the UK note that Tesco, which has announced that it will be coming to the US next year with a chain of convenience stores on the west coast, may encounter a small conflict of interest.

    The problem is the Dunnhumby data analysis firm, in which Tesco owns a controlling interest – but which has been working with Kroger in the US to exploit that retailer’s database. At some level, it seems likely that Tesco and Kroger will end up competing with each other – if not on the west coast, soon afterwards.

    Adding to the potential conflict is the fact that Tesco has named Tim Mason to lead its US charge…and Mason has been pivotal over the past decade in working with Dunnhumby in analyzing data generated by Tesco’s Clubcard program.

    • In the UK, a columnist for the Observer, Frank Kane, notes that it was just a month ago that Tesco CEO Sir Terry Leahy was being loud and clear that he had no plans to enter the US market – while at the same time, Tesco had been running a “dummy store” inside a Santa Monica warehouse for about a year.

    Kane writes that while it may not be a crime to mislead the press and the general public, “misleading the financial markets is another matter. I do not mean in the narrow, legalistic sense, which is a criminal offence under the Financial Services Act, and which I am certain is not the case here. But in the broader interpretation of sending out the wrong signals to investors, Tesco looks culpable. The markets are often spooked when a British company says it will take on Uncle Sam in his own backyard, and especially when retailers say it.”

    He continues: “The flip-flop nature of the US decision has done nothing to reassure investors that it is the right one. The complaint from most analysts was that Leahy was very short on detail. Tesco has trialled its concept, they were told, but no detail was given of branding, trading figures or financials.” However, Kane writes, “the venture bears Leahy's personal hallmark, and he has been regarded as the best retailer in Britain for some years now, making Tesco into such a soaraway success that the competition is barely within sight.”

    Kane writes that it well be that “Tesco has spotted the perfect slot and the strategy for exploiting it. The Californian consumer is still spending dollars prodigiously, and the 24-hour convenience store concept does appear to have been overlooked by the likes of Wal-Mart.” But the British markets are worried because, as he notes, “the corporate graveyards are littered with the tombs of British/US disasters.”
    KC's View:
    The one thing that we’re sure of is that Tesco has its ducks in a row and is ready to enter the west coast with a store that both breaks new ground and makes sense for the California consumer.

    As for misleading the press…well, that goes with the territory. Public relations can be one of the dark arts (we say this having practiced that profession for a relatively short time for both CNN and The New Yorker, two entities that didn’t mind publicity).

    Published on: February 14, 2006

    The Montreal Gazette reports on how fresh food-to-go is all the rage for stores in that Canadian province – in part because food retailers are having to get more aggressive with them as a way of differentiating themselves from discounters who are making inroads into their traditional territory.

    While some companies, such as Loblaws, are doing battle with discounters by expanding their nonfoods offerings, other retailers – including “Provigo, Metro and IGA are renovating or enlarging their stores, and the first thing you meet when you walk in the door is a growing array of fresh take-away meals.”

    The Gazette writes, “Metro has already renovated about 30 per cent of its 241 stores in Quebec, and is forging ahead with work on five to 10 more this year. And it isn't just expanding the display space for take-away meals - it's adding kitchens to its stores and making the food on the spot, adjusting the lineup for each store's location. Stores in residential areas might be awash in meals such as shepherd's pie and beef bourguignon. If there are a lot of office workers nearby, they do a lot of salads. If there's a lot of young people about, they pile up the pizzas.”

    According to the paper, “About three years ago, take-away meals accounted for about three to four per cent of sales (for Metro). Today, they're double that, and in five years (the company) expects they will be about 50 per cent higher, accounting for as much as 12 per cent of sales.”
    KC's View:
    Meal solutions, as this trend has popularly been called, always has been a good idea…it’s just that many retailers did a lousy job with it and assumed that the concept was flawed as opposed to the execution.

    The real trick to making meal solutions work is to create a food-driven culture in the supermarket.

    Published on: February 14, 2006

    • The Wall Street Journal reports this morning that Wal-Mart has managed to dominate the Dallas grocery market to the extent that it collects $1 out of every $3 spent on groceries in the marketplace.

    “As Bentonville, Ark.-based Wal-Mart increasingly turns to big cities as its last untapped market for growth in the U.S., the reverberations from the retailer's dominance in Dallas-Fort Worth provides a glimpse of what might await other urban centers -- Chicago, Los Angeles, Seattle, among others -- where Wal-Mart has yet to establish itself as a major player,” the WSJ reports. “Some aspects of Wal-Mart impact in Dallas-Fort Worth defy long-held assumptions: Retail wages in the so-called metroplex do not differ much from those in similar markets. And others provide amplified examples of Wal-Mart's impact elsewhere: Dallas-Fort Worth shoppers have flocked to Wal-Mart for low prices, earning Wal-Mart a 32.1% share of the grocery market and relegating former leader Albertson's Inc. to third place with 13.8%, according to TDLinx. Meanwhile, competitors are scrambling to get out of Wal-Mart's way by tailoring their fare to upscale customers or, in at least one case, exiting the mainstream grocery business entirely.”

    Wal-Mart’s dominance is only likely to grow, the Journal suggests, since it will continue to build stores and Albertsons grows steadily weaker as the company changes hands.

    As for the competition, the Journal reports that “Safeway so far has converted seven of its Tom Thumbs in Dallas-Fort Worth to its ‘Lifestyle’ format, including wood-plank flooring; earth-tone tile; an expanded floral section; sample stations for Safeway's private-label soups and meats; made-to-order items such as hot panini sandwiches in the deli; and a sushi preparation table within shoppers' view. Safeway intends to convert 20 additional stores in the market this year.

    “Kroger has remodeled 50 of its 80 stores in Dallas-Fort Worth to its ‘Signature’ format. That entails surveying residents near the store regarding what merchandise and amenities they prefer. Among the items Kroger has installed in various stores: an enclosed play area for children; expanded wine sections; additional organic-food categories; seating areas for customers who want to eat in the store; and a sushi-preparation table.”

    Meanwhile, Ron Johnson, CEO of Minyard Food Stores, tells the Journal that he “plans to spend $80 million to $100 million over five years to convert the entirety of his Dallas-Fort Worth chain into Latino supermarkets.”

    • In the UK, Wal-Mart owned Asda Group has been fined the equivalent of $1.4 million (US) in a case where it was found guilty of trying to bribe warehouse employees into voting against unionization. The company reportedly offered its workers a 10 percent raise if they would against recertification of the union.

    Asda says it may appeal the ruling.
    KC's View:
    Sounds like a subtle bribe to us.

    Hard to Wal-Mart to argue that it is changing its stripes when stories like these pop up.

    Published on: February 14, 2006

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    KC's View:

    Published on: February 14, 2006

    In what probably was an inevitable surge in popularity, considering that salsa already is a more popular condiment than ketchup, the Chicago Tribune reports that tortillas are pushing their way into American menus.

    Sales of tortillas have doubled to more than $6 billion over the past decade, not surprising since the country’s Hispanic population has increased from 35 million to 41 million during the past give years. Of course, it isn’t just Hispanics who are buying tortillas, and the dramatic growth in popularity reflects enthusiasm for the product on the part of non-Hispanics as well.

    At the same time, the category has been goosed by a simple change of name – just calling it a “wrap” instead of a tortilla opens the consumer imagination to putting non-Mexican food on it.

    "Americans are taste junkies," says Bill Briwa, who teaches Mexican cuisine at the Culinary Institute of America at Greystone, located in California's Napa Valley. "Tortillas are riding on the back of a lot of other things that are going on--interest in ethnic food, interest in low carbs. And, people want good value."
    KC's View:

    Published on: February 14, 2006

    The Chicago Tribune reports that Sears Holdings CEO Edward Lampert, trying to cut costs, is looking to sever ties with possibly the company’s highest profile celebrity endorser after Martha Stewart – Bob Vila.

    “Sears Holdings Corp. has terminated a long-standing contract with Vila to act as a spokesman for Sears' Craftsman tool line,” the Tribune writes. “It also has dumped its sponsorship of his nationally syndicated home remodeling show.

    “Vila has sued, charging Sears wrongfully breached the contracts, and is seeking more than $14 million in damages. Sears is countersuing Vila and says he has been paid more than he was due. The suit is headed for trial in October.”

    Vila’s multi-million dollar contract was scheduled to end in 2009.
    KC's View:
    As is always the case in such matters, the only sure winners in all this will be the lawyers.

    It is hard from reading the various positions as reported by the Tribune who has the upper hand in this case. But one thing seems obvious – that Fast Eddie Lampert is more concerned with the immediate bottom line than long-term celebrity endorsements, and that he will do anything possible to cut costs.

    Now, we’re not qualified to judge the legal case, nor do we have any idea if Sears/Kmart is better off without Vila than with him – and vice versa. But we are fairly sure that this reflects a broader problem for Sears/Kmart – the fact that Lampert may well be managing the company without regard for marketing concerns, but only with an eye on the bottom line.

    There’s an old saying – you can’t save your way to prosperity. But maybe Fast Eddie isn’t paying attention, or maybe nobody has the guts to tell him.

    Published on: February 14, 2006

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    Where Big Ideas Mean Business
    KC's View:

    Published on: February 14, 2006

    BrandWeek reports on a new study saying that the nation’s 78 million baby boomers spend more on food than their older and younger counterparts. “Boomers aged 45-54 spend $123 weekly on food vs. $102 for 25-to-34-year olds and $75 for 65-to-74-year olds. Overall, they are the largest food spenders in the U.S.”

    The good news for food retailers – not only are baby boomers willing to experiment and spend money on foods that are both high quality and convenient, but they also will drive the functional foods trend.
    KC's View:
    No surprise that we are the most self-indulgent generation in modern history.

    Not that there's anything wrong with that...

    Published on: February 14, 2006

    The San Francisco Chronicle reports that a bill has been introduced in the California legislature proposing that Zinfandel be named the official state wine. The logic behind the proposal is that Zinfandel “warrants the distinction because it is inextricably twined with California's history,” though there are other wine enthusiasts who believe it unwise to celebrate any single wine.
    KC's View:
    Not schnapps?

    Actually, the Chronicle cheekily points out that the California state animal is, in fact, the California grizzly bear. Which is extinct.

    So maybe these kinds of distinctions aren’t always a good idea.

    Published on: February 14, 2006

    It was just over a week ago that McDonald’s announced that its French fries actually have more trans fats than previously acknowledged, saying that the change had more to do with how such things are measured.

    Now, the company is saying that wheat and dairy ingredients are used to flavor its French fries – which means that they also are potential allergens, and can cause negative reactions in people who are sensitive to such products.

    Previously, McDonald’s had said that its fries were free of gluten and dairy and therefore safe to eat for people who suffer from food allergies. Three years ago, the company acknowledged that its fries were cooked in beef-flavored oil, not vegetable oil as had previously been stated. (The company paid $10 million to settle a lawsuit in this case.)

    McDonald’s management said it was making the admission voluntarily because science had improved enough for it to know things it didn’t know before.
    KC's View:
    We’re not an expert on such things. But if McDonald’s French fries are being cooked in beef-flavored oil and also contain traces of dairy, doesn’t that also create problems for people who have religious reasons for certain dietary restrictions?

    Published on: February 14, 2006

    • Local press reports say that the Indiana legislature is considering a bill that would regulate where retailers can display alcohol products and how beer and wine sales can be expanded into convenience stores in the future. Pushing the legislation is Marilyn Peffley, whose daughter was killed by a drunk driver almost three decades ago, but who remains resolute about getting laws passed that would prevent gasoline and alcohol from being sold by the same establishment.

    • The Orlando Sentinel details the problems facing the Florida citrus industry: 1) “Citrus canker is so widespread, the federal government has declared that eradication is no longer feasible.” 2) “A new and even more deadly tree disease called greening has invaded the state; the insect that spreads it is everywhere.” 3) “Urban growth continues to gobble up grove land for homes and highways.” 4) “Few want to labor in the fields, forcing the industry to rely on illegal immigrants.”

    While these add up to enormous obstacles facing the state’s growers, the Sentinel notes that the citrus industry is worth $9 billion to the state’s economy, and therefore is far too large to allow to collapse. But it will require much rethinking of how the citrus business operates, and will almost certainly result in a smaller, leaner industry.

    • The Asbury Park Press reports this morning that “an investor group led by the Saker family has upped its offer for Foodarama Supermarkets Inc., which owns 26 ShopRite supermarkets in New Jersey, including 11 in Monmouth and Ocean counties.

    “The investors — including CEO Richard J. Saker and six other Saker family members who together control 51 percent of the company — offered to pay $53 a share for all outstanding shares, Foodarama said in an e-mailed statement. The price is $1 a share more than the Sakers's initial offer of Dec. 2 and a 43 percent premium to the Dec. 1 stock price.”

    The deal will have to be approved by shareholders and Wakefern Food Corp. If so approved, the deal could close by May 2006.

    • The Wall Street Journal reports that Starbucks will begin selling a music video DVD, "We are... The Laurie Berkner Band," which is geared for young kids and that the company believes will appeal to Starbucks-drinking moms.
    KC's View:

    Published on: February 14, 2006

    • Pathmark Stores announced today that Ted Williams has been promoted to Vice President of Non-Foods Merchandising. Williams joined Pathmark in 2005 and was previously Director of Non-Foods Sales and Merchandising.

    KC's View:

    Published on: February 14, 2006

    We got a number of emails yesterday about our story detailing the “Marsh morass.”

    MNB user Mark Heckman wrote:

    Your interpretation of the Marsh situation is unfortunately more accurate than not. But now that the Board of Directors has taken charge, I think the talented remaining executive group, that has been somewhat thwarted by the family situation there in the past, will make surprising and significant progress in the weeks and months to come. It is a shame when “avoidable” disasters are not averted, but “Marsh” remains a very strong local brand and is poised to make a strong comeback with the right management team in place. I am betting on them to recover as a slightly smaller, but much more focused and profitable company.

    Another member of the MNB community wrote:

    I read your comments on Marsh with interest, if only because one cannot help but be stunned at how quickly this company has moved from being emblematic of the “great, independent, family-run chains” (Wegmans, Publix, Schnuck’s, Giant-Eagle, etc.) to being the latest corporate neer-do-well.

    But what is interesting is how simple the issue is. Just like Adelphia Cable, it all boils down to one thing – you cannot decide to take your company public, and then still behave as if you own the whole thing.

    Every “bad deed” ascribed to Marsh would be total acceptable if the Marsh Family still owned all of the company. The problem is simple, common, and incomprehensible. It seems that when you build up a company, even after you sell it, you still think it is yours.

    My emotion is not disgust at the greed, it is dismay at the stupidity.

    MNB user David Livingston wrote:

    The situation at Marsh was never a big secret. Nobody bought stock in Marsh as an investment. People bought stock in this local grocer the same as when someone buys stock in a local sports team. It's just a novelty stock.

    Marsh is a very sick company right now and firing all those ineffectual family member executives with "make-work" jobs was the right thing to do. Regardless, the "family" is still in charge and will probably continue to guide the company towards bankruptcy or a sale.

    Over the past two years or so, Marsh made so many blunders that even an industry novice could predict it's future. Building a store in the Chicago suburbs with no knowledge of the Chicago market made them a laughing stock. Opening a small upscale fresh market in a low income rural farming community was a real head scratcher. Opening a single store in Ft. Wayne where they were completely out-gunned by Meijer, Wal-Mart, Kroger, and Scotts will soon be a dark building.

    We could go on with more. It was over a long time ago. Marsh never was a good retailer and consistently had sales per sq. ft. performances 15-20% below the competition in any given market.

    Then at the last second they open up all these Hail Mary stores and gadget play formats. It was like having a pro football team and having the owner and his family coach the team, with each member allowed to pick the players and call the plays.

    We had a story yesterday about how Netflix is accused of “throttling” its DVD supply, actually slowing down the shipments of DVD rental to the most frequent shoppers because it hurts its profitability – an unusual (and dismaying) case where the best customers may actually be getting the lesser service.

    MNB user Randy Aszman wrote:

    I am in an on-going dispute over this same issue with Netflix. I used to receive DVD’s very promptly after returning them but over the last three months the wait times have been ridiculous. And Reed Hastings is full of it if he thinks their customer service is top notch; it’s terrible! It takes well over a week just to get a response from an email and forget trying to call them to speak with an actual person.

    My frustrations with Netflix are so great I have contacted the LA Times to relate my story. And to think I used to recommend Netflix to friends and family.

    And another MNB user wrote:

    When I read this story on Sunday in our local paper, I thought of you right away. I know you are a big fan of Netflix and I wondered what your thoughts would be on this matter. I, personally, felt it was wrong to punish high use customers, especially when they advertised unlimited rentals.

    I agree with your comments.

    We also had a story yesterday about how a new study says that “the odors from foods ranging from garlic and onions to ginger and strawberries may be nutritional signals that the human nose has learned to recognize.” In other words, often the foods and ingredients that smell the best are the ones that are healthiest for us. However, the study – first published in the journal, Science - also notes that modern breeding techniques have focused on increasing “color, shape, yield and disease resistance instead of flavor and nutrition.” And so, the healthiest foods sometimes are having the best nutritional qualities bred right out of them – developed as lowest-common-denominator foods rather than robust, aromatic products that also happen to be good for you.

    One MNB user wrote:

    There was something in the news here in Washington State a few years ago about how, in order to have a prettier, redder Delicious apple to ship overseas, growers were breeder for the red and not for flavor. Problem was, the uglier fruit was the better tasting fruit. Seems that the growers were shooting themselves in the foot because they were breeding for perfection instead of health.

    And MNB user Jim Ayers observed:

    I am so happy to hear this news… I can hardly wait to add a healthy serving of bacon into my daily diet!
    KC's View: