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    Published on: October 10, 2007

    UK-based Tesco has chosen Thursday, November 8 to be the opening day for its first six Fresh & Easy Neighborhood Market stores. The specific locations have not been revealed, but Tesco said that the new 10,000 square foot stores would be located in Los Angeles, Orange, Riverside and San Bernardino counties.
    KC's View:
    Finally.

    I know that Tesco could have started opening stores a long time ago, but needed to wait to have its distribution center and infrastructure to the point where it could deliver on its promises. But I have to be honest – I’m glad the wait is almost over, and that we’re going to see exactly what Tesco thinks the US market has been missing.

    Published on: October 10, 2007

    Fascinating story in Business Week about a kind of coffee gap that typifies how people drink coffee these days – a gap that actually has some questioning the long-term viability of some well-known and even iconic brand names.

    In essence, there are two problems. One is that younger people are drinking less coffee than their elders. Business Week writes, “Youngsters drink far less coffee than their baby boomer parents, and, when they do, it's more likely to be on the go. Only 37% of young adults between 18 to 24 drink coffee, compared with 60% for those between 40 and 59 and 74% for Americans over 60, according to National Coffee Assn. data.”

    However, national coffee consumption continues to grow – which illustrates the other problem. Companies like Kraft, which makes Maxwell House, and Procter & Gamble, which makes Folgers, are finding that consumers are hooked on darker, richer coffees made by the likes of Starbucks, Dunkin’ Donuts and even McDonald’s. They perceive basic canned coffee from the supermarket as being dull and even generic in nature, and not reflective of their more sophisticated tastes.

    Business Week notes that the manufacturers are trying to compensate: “Procter has recently started distributing Dunkin' Donuts coffee at supermarkets, while Kraft handles the Starbucks brand. Still, the labels have been slow to ratchet up the quality of their canned coffee, perhaps for fear that their core customer wouldn't tolerate a twofold or threefold price increase for, well, supermarket coffee.”

    It isn’t like Maxwell House and Folgers are vanishing brands, however; the story makes clear that each brand generates more than a billion dollars in annual sales. But the market for these coffees is slipping and P&G, at least, reportedly is considering the sale of its Folgers brand t a company that might be better positioned to reinvigorate it.
    KC's View:
    Funny how habits sort of take over. I only make Starbucks coffee at home, and I don't think I’ve bought canned coffee at the supermarket in more than a decade. But it never occurred to me that I was making a choice … it is just what I do, part of the routine.

    This is a great example of how cultural and consumer habits can create an enormous shift…and how it can almost happen without consumers realizing that they’ve fomented this kind of change. The problem is when retailers and manufacturers don't notice until it is to late…and they’ve achieved a kind of category irrelevance.

    Published on: October 10, 2007


    • The New York Times this morning reports that Wal-Mart “doesn’t believe just in lower prices — it believes in lower property taxes, too. The big discount chain has sought to reduce the property taxes it pays on 35 percent of its stores and 40 percent of its distribution centers, according to a report to be released today by Good Jobs First, a group that is critical of Wal-Mart.” And, Wal-Mart wines the battle for lower taxes in half the cases that it files, according to the report.

    Business Week reports that Wal-Mart is going back to its roots.

    Chastened after various frustrating efforts to restyle itself as a retailer that could appeal to more affluent and urban consumers, Wal-Mart seems to have decided that it might make more sense to simply sell more and different stuff to its core shopper base.

    The strategy, according to the magazine, is “based not just on price cuts, but on a more holistic approach with deeper and broader services aimed at its core customers. The latest offer is high-speed Internet access, a costly proposition in many remote corners of the country. On Oct. 9, Hughes Network Systems announced it will sell satellite broadband at Wal-Mart stores. The satellite broadband offering at 2,800 stores is just the latest in a litany of services the retail giant has rolled out this year … The Web initiative follows others—check-cashing for the ‘unbanked,’ inexpensive medical care at in-store clinics—in which Wal-Mart has boosted its services in a bid to regain customer allegiance.”
    KC's View:
    Key to whether this will work, it seems to me, will be whether Wal-Mart and the investor class accept the notion that these shifts will not change the company’s sales and profit numbers overnight. There is no magic bullet, especially when you are a company the size of Wal-Mart.

    It is easy for me to say, but Wal-Mart has to stop worrying about hitting growth targets that simply may be unreasonable. It is time to make sure that its existing store fleet and personnel do a better job taking care of business.

    This isn’t easy. I was chatting with a regional retailer this week who advertised on the Internet for a store manager, and fully one-third of the applications he got were from Wal-Mart store managers and department managers who told him that they were fed up with being micromanaged by Bentonville, and that the culture has changed – and not for the better – over the past few years.

    Published on: October 10, 2007

    Numerous published reports say that Mark Price, managing director of Waitrose in the UK, has called on Britain’s Competition Commission to slow Tesco’s growth and dominance there, let the nation become “Tescoland.”

    Price accuses Tesco of using its marketing and financial muscle to capture virtually every decent site in the UK, and that proximity – rather than choice – dictates why so many consumers decide to shop at Tesco.

    And, Price said, “Tesco says it doesn't underprice, but they put millions into their offers and bombard people with them and that is how they stamp out competition.”
    KC's View:
    The question, I suppose, is whether governmental agencies ought to be in charge of what company gets which sites…and whether such actions would promote rather than inhibit competition. I can see both sides of the argument, but I tend to think it is up to retailers to be competitive rather than depending on government intervention.

    Published on: October 10, 2007

    The Wall Street Journal reports that CVS is launching a new $25 million advertising campaign using the theme, “For all the ways you care.” The goal of the campaign, according to the story, is to celebrate and honor women’s roles as nurturers and caregivers – which makes sense since the company says that 85 percent of its shoppers are women who control their families’ health care spending. It also helps that CVS’s research showed that many of these female caregivers feel that they are not supported by the retailers with which they do business.

    “Our research showed that women find enjoyment and reward in their roles as caregivers, despite sacrifices,” Helena Foulkes, senior vice president of marketing and operation services for CVS/pharmacy, tells the Journal. “This campaign is an opportunity to celebrate these women and to show that we understand what it means to care.”
    KC's View:
    I’m a little skeptical about the idea that these caregivers are saying that they need support from retailers, but what do I know? After all, I’m just a guy.

    I’ll be more interested in seeing how CVS changes the way their stores operate to reflect this new approach. Paying an ad agency to come up with a new campaign is one thing, but the store is where the rubber meets the road.

    Published on: October 10, 2007

    The California Grocers Association (CGA) announced yesterday that Peter Larkin, for 11 years the organization’s president/CEO, has resigned to establish his own public affairs consulting firm.

    Larkin will remain on the job while a search for a replacement is conducted.
    KC's View:

    Published on: October 10, 2007

    MarketWatch> reports that Home Depot, “responding to long-time criticism that its warehouse environment was simply too rough for many women,” is opening two new test stores this month that are designed to romance the woman shopper who enters the store.

    “Big professional construction products like lumber and building materials will make way for bath and kitchen showrooms that are more extravagant and carry more products than those in the traditional Home Depot.

    “There's also a bigger section concentrating on home organization. The new products, for example, will give color to the home's interior design, as will other home improvement items for products such as doors and windows.”
    KC's View:
    Doesn’t exactly sound like a Home Depot. Not that this is a bad thing, but it sounds like a different store.

    The stated goal is to “romance” women shoppers, but I’m not sure this is going to work, mostly because it seems to work against the retailer’s strengths while putting to much emphasis on areas that could fairly be described as its weaknesses – like customer service.

    Besides, there’s a faint whiff of condescension about this project. I could be wrong, but there is a hint of it somewhere.

    Published on: October 10, 2007

    • The Wall Street Journal reports that the Oregon-based United Food and Commercial Workers Local 555 has filed charges against Safeway, Supervalu, and Kroger, alleging that the three retailers are not negotiating in good faith. The unionized employees have been working under a contract extension since last February, but collective bargaining has not yet led to a new deal.

    • Springfield, Massachusetts-based Big Y announced that it has named online institution Excelsior College to be a “preferred educational provider,” and committed itself to contribute up to $2,000 toward the continuing education of each full-time employee, and $1,000 a year for part-timers.

    • The Boston Globe reports that Greenpeace is charging that Anheuser-Busch is using experimental, genetically engineered rice to make its Budweiser beer. A-B, on the other hand, said that the rice it uses is approved for human consumption and completely legal.

    • Starbucks has recalled some 250,000 plastic children’s cups because it has received reports that they were breakable and that children have choked on the broken pieces. The cups were made in China.
    KC's View:

    Published on: October 10, 2007

    • Costco reports that its fourth quarter sales were up 2.9 percent to $20.06 billion, compared to the same period a year ago. Net income was up 4.7 percent to $372.4 million. Same-store sales were up five percent.
    KC's View:

    Published on: October 10, 2007

    …will return.
    KC's View: