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    Published on: August 15, 2007

    The Federal Trade Commission (FTC) yesterday filed court documents intended to bolster its case that the proposed $565 million acquisition of Wild Oats by Whole Foods should be blocked, but in doing so created a controversy about the release of supposedly confidential and proprietary information.

    In the filing, the FTC charges that if the acquisition takes place, Whole Foods plans to close as many as 30 Wild Oats stores. In addition, the FTC said that it could prove that the opening of a Whole Foods store could reduce sales at a nearby Wild Oats by as much as 30 percent, that Whole Foods believed that the shutting of the … stores could increase revenue at nearby Whole Foods stores by as much as 90 percent, and that the takeover will send as many as 80 to 90 percent of Wild Oats shoppers to Whole Foods.

    In addition, the FTC charges that Whole Foods sets conditions for its suppliers that prevent them from selling to Wal-Mart.

    According to the New York Times story, “Many of the details in the documents, which FTC lawyers filed electronically, were not meant to be released publicly, but words intended to be inaccessible were actually just electronically shaded black. The words could be searched, copied, pasted and read in versions downloaded from court computer servers. Court officials realized the mistake and replaced the filing with a version using scanned pages of the edited documents. The Associated Press downloaded the document from the public server before it was replaced by an edited version.”

    Whole Foods released a statement yesterday saying: “Whole Foods Market is investigating the apparent improper release by the Federal Trade Commission of confidential proprietary business information belonging to Whole Foods Market, Wild Oats and other third parties, in violation of the Court's confidentiality order. In fact, the District Court has twice ordered this information to be held under seal.

    “Until the merger is complete, Whole Foods will not have sufficient information, including store level financial statements, to make any final decisions regarding future operations. All information shared with the FTC was done so with the reasonable understanding that it would be handled appropriately.”

    In addition, Bloomberg is reporting that Wild Oats is withholding certain severance payments from its former CEO Perry Odak, in apparent retaliation for Odak’s recent testimony in a separate antitrust case that Whole Foods is the only retailer capable of taking business away from Wild Oats. However, Wild Oats is denying this allegation.

    The FTC is not commenting on the situation.
    KC's View:
    The FTC would be well advised to keep its mouth shut until the courts hand down a ruling. To this point – whether it was by accident or on purpose – it appears to have said quite enough, and analysts say it probably hasn’t helped its case.

    Me, I think it is much ado about nothing.

    Apparently if the deal goes through, Whole Foods will shut down less than half the combined fleet of stores that it owns. Gee, I’m shocked. Shocked. It isn’t hard to imagine that there are 30 or so locations out there where Whole Foods and Wild Oats go head to head, and it would only make good business sense to shut the lesser locations down.

    If those stores get closed, it seems entirely reasonable to assume that at least some of them will go to other food stores. If those locations were so strong demographically that both Whole Foods and Wild Oats thought they could have stores there, it also seems reasonable to believe that these other food stores might sell natural and organic products. Which sort of works against the anti-competition argument being made by the FTC.

    Now, let’s parse the following paragraph: “The opening of a Whole Foods store could reduce sales at a nearby Wild Oats by as much as 30 percent, that Whole Foods believed that the shutting of the … stores could increase revenue at nearby Whole Foods stores by as much as 90 percent, and that the takeover will send as many as 80 to 90 percent of Wild Oats shoppers to Whole Foods.”

    Well, of course the opening of a Whole Foods reduces the sales and attracts shoppers away from nearby Wild Oats stores; Whole Foods is generally believed to be the bigger competitor, and that’s why it is doing the acquiring here, not Wild Oats. There have been questions for years about whether Wild Oats could even continue to survive on its own, which is one of the reasons that Whole Foods stepped in and took advantage of the opportunity.

    I still think that it is possible that if and when the deal is closed, Whole Foods will be able to reduce its prices because of greater buying power. But if it doesn’t, there are plenty of places where people will be able to get cheaper organic foods … and there are more sources of such product almost each day.

    The FTC’s filing of a late affidavit in this case strikes me as a kind of desperation ploy. I hope it backfires.

    Published on: August 15, 2007

    The Des Moines Register reports that Hy-Vee is building the largest store in its fleet at 91,000 square feet on the city’s south side. The unit is actually a 39,000 square foot expansion of an existing unit that is expected to be completed early next year.

    “When complete,” the Register reports, “the store will include a Starbucks coffee shop, a room for cooking and wine classes, a walk-in medical clinic, and a wine and spirits store. The selection of baby products and pet products will also be expanded, and a health market, which will employ a dietitian, will sell organic products. A Hy-Vee convenience store and gas station will be built in front of the grocery store.”

    Reflecting the company’s broader approach to people management, according to the story, “store employees made their mark on the new structure Monday by signing one of the beams that will be used in its completion. Store Director Wes Snook pointed out the space where the beam will hang, and he told the workers they would always be part of the new store.”
    KC's View:
    That is just very, very cool. And it is what separates Hy-Vee from so many other companies.

    The employees may be signing a beam. But what they are providing, in a very real sense, is the company’s foundation.

    Published on: August 15, 2007

    The Milwaukee Journal Sentinel reports that Brookfield, Wisconsin, will be getting a new Fresh Market store, a 22,000 square foot store that is part of the Greensboro, north Carolina, chain that “strives for a European ambience … with classical music, soft lighting and red tile flooring. It offers 400 different produce items, has a large floral department and a big deli that dominates the center of the store.”

    According to the story, the Fresh Market entry – its first in Wisconsin – is part of a broader trend in the region, which also has competitors such as Whole Foods, Sendik’s, and Trader Joe’s, as well as improved offerings from Pick 'n Save.
    KC's View:
    Not to beat a dead (albeit organic) horse, but it seems to me that a lot of competitors in the organic/natural segment are being mentioned in the same breath as Whole Foods. They may have different formats, and they may not be as “pure,” but they are legitimate options for consumers.

    Published on: August 15, 2007

    ª Wal-Mart reportedly has signed a multi-year deal with Information Resources Inc. (IRI) that, according to a statement, “enables IRI to align its … IRI Consumer Network, a 100,000 plus household panel, with Wal-Mart’s unique consumer segments to provide IRI manufacturing clients with a clear picture of the key consumer dynamics that drive Wal-Mart’s brand and category performance. The agreement also enables IRI to align its panel with Wal-Mart’s unique category definitions and geographies … As a result of the agreement, IRI will be launching a new panel-based service to reflect these capabilities as well as significantly increasing its onsite presence in Bentonville. Additionally, IRI is engaging in specialized marketing and merchandising analytic- and auditing-related services for Wal-Mart. These specialized services are for Wal-Mart’s internal use only and will not be made available to manufacturers.”

    • Ahold-owned Albert Heijn has opened its 34th convenience store in the Netherlands – but this one is in Amsterdam’s Schiphol Airport. The company released a statement saying that the 46 million people who go through the airport each year made the location extremely attractive for a c-store, and said that has it grows the chain of ‘AH” stores, it plans to locate them in such unorthodox places as train and subway stations and hospitals.
    KC's View:

    Published on: August 15, 2007

    • Kroger announced yesterday that Jon Flora, senior vice president of the company and a former president of its Great Lakes division, has been named President of the company's Fry's division, based in Phoenix. He succeeds Mike Donnelly, who has been named to lead Kroger's Ralphs Division in California.
    KC's View:

    Published on: August 15, 2007

    • Duane Reade reports that its second quarter sales rose 8.3 percent to $431.9 million from $398.8 million in the year-ago period, on same-store sales that were up 7.9 percent. The chain’s net loss for the quarter narrowed to $20.1 million compared with a loss in the year-ago period of $21.1 million.
    KC's View:

    Published on: August 15, 2007

    Phil Rizzuto, the Hall of Fame baseball player who spent 11 years playing for the New York Yankees and then more than four decades talking about them as a broadcaster, died yesterday at age 89 of complications from pneumonia.
    KC's View:
    It has been both wonderful and kind of sad to read all the tributes and obituaries about the ballplayer and broadcaster best known in the New York area as “Scooter.” This won’t be a unique memory, but it is a highly personal one…

    While I’m not old enough to have seen Rizzuto play, I grew up with his voice. As a kid, I would listen to Yankee games on hot summer nights, hearing the sights and sounds as described by Mel Allen, Red Barber, Jerry Coleman, and, yes, Phil Rizzuto, with his “Holy cow!” and his enthusiastic calls that made me think that this was a guy having a great time … and those memories are as vivid as if they happened yesterday instead of during the late fifties and early sixties. What those men had – and what they expressed in different ways – was real and consuming passion for the games they called.

    I can remember my dad would come to my room at 10 o’clock or so and tell me to turn off the radio, that eventually I’d fall asleep and the radio would stay on, wasting electricity. And I’d turn it off, reluctantly, and then, as soon as he was gone, would turn it on again, and hang on every verb and adjective and adverb, living those games as if I were in the stands.

    A lot of people are mourning Phil Rizzuto today, but I think they are mourning something more. They are grieving for days gone by that we’ll never see again. And I think in some small sense, we are all mourning for our childhoods.

    Published on: August 15, 2007

    …will return.
    KC's View: