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    Published on: February 27, 2008

    In the UK, the Evening Standard reports that an analyst at brokerage Piper Jaffray, Mike Dennis, is saying that Tesco’s US Fresh & Easy Neighborhood Markets are generating sales that are short of the company’s targets: “The Fresh & Easy concept is not right and they need to quickly find out what the issues are and reset the concept,” he says.

    Dennis suggests that the stores are doing an average of $170,000 a week in sales, and that the company was hoping to do $200,000. “The overall indication seems to be negative,” he says, according to the Evening Standard. “This begs the questions of how bad it could be for Tesco's Fresh & Easy stores across California, Arizona, Nevada and what it would mean to Tesco's long-term growth rates and international strategy in the US.” The paper suggests that it could cost close to $800 million for Tesco to pull out of its US venture.

    A Tesco spokesman responded: “This appears to be a bit of scaremongering particularly as Mike Dennis hasn't even spoken to us about Fresh & Easy's performance. It is ridiculous to make judgments just four months after the first store opened. I don't know when Mike last visited California but the up-to-date picture is one of growing sales, increasing customer numbers and more repeat visits.”

    KC's View:
    I repeat – it is way too early to judge Fresh & Easy a success or failure, especially because the next generation of stores undoubtedly will learn much from the first 50. Tesco is smart and wealthy…I’m not sure that quitting, just three months into a venture, is the intelligent thing to do.

    Published on: February 27, 2008

    BusinessWeek has a nice profile of Trader Joe’s, reporting that back in 1967 “Joseph Coulombe owned a small chain of convenience stores in the Los Angeles area that were struggling to compete against a fast-growing newcomer named 7-Eleven. That's when the Stanford University business school grad read a surprising fact—that alcohol consumption rose along with education levels. Coulombe stocked his stores with what he says was the largest assortment of California wines at the time—17 brands. Then he watched them fly off the shelves, as a new demographic now known as yuppies discovered his stores.

    “As the 1970s came, Coulombe was among the first to turn Southern California shoppers on to treats such as brie, wild rice, Dijon mustard, and Vermont maple syrup. Coulombe modeled his approach on that of Stew Leonard’s, a Connecticut food merchant famous for carrying a limited assortment of quality products, and to that of Brooks Brothers, which sells only its own label suits. ‘We adopted a policy of not carrying anything we could not be outstanding in, in terms of price,’ Coulombe told BusinessWeek in a telephone interview. ‘It took us about five years because we had to create a whole new chain of logistics. We especially encouraged small businesses as vendors’.”

    BusinessWeek notes that in the 41 years since Coulombe made that fateful strategy decision, the company has grown to 280 stores in 23 states, generating roughly $6.5 billion in annual sales; the company’s stores carry about 2,000 items, just a fraction of the number carried by mainstream supermarkets; about 80 percent of Trader Joe’s products are own-label, five times the number carried by most traditional food stores.

    And the differentiated strategies continue: “Unlike most supermarkets, for example, Trader Joe's doesn't accept coupons, collect customer shopping info from loyalty cards, or feature weekly sales,” BusinessWeek writes. “Instead it adopts an everyday, low-price strategy. The company does run folksy radio ads in local markets. In a current ad, Trader Joe's Chief Executive Officer Dan Bane pokes fun at other supermarkets that have installed flat-screen TVs for customers to watch at checkout counters. At Trader Joe's, he says, customers can entertain themselves by ‘actually talking’ to employees.”

    KC's View:
    Most remarkably, the Trader Joe’s employees talk back.

    This is a wonderful story, because the scenario that the company faced 41 years ago isn’t all that different from that being faced by many retailers today – overwhelming competition, and the likelihood that only a strategy that creates a differential advantage can distinguish a company in the minds of shoppers.

    Differentiated products. Unique and engaged employees. Sharp prices that particularly stand out because they are on products that can't be found elsewhere.

    It doesn’t seem all that complicated, and yet how many retailers actually do it?

    Published on: February 27, 2008

    Interesting piece in the Boston Globe about a new Roche Bros. store that opened in Wellesley, Massachusetts, sparking some conflicting reactions in the writer.

    On the one hand, he describes the place as “intergalactic,” and writes: “Most impressive are its open vistas. Forget what's on the shelves, space is everything. Now I've always judged a supermarket by the width of its aisles. If I can make snow angels on the floor between the porcini olive oil and the tofu burgers, I'm feeling good about a place.

    “The aisle spread in Wellesley is a healthy 8 feet, and there are long stretches flanking the aisles that could handle a spirited game of in-line hockey … There's beaucoup natural light at Roche-Wellesley. The town insisted and Roche Bros. made it happen.”

    But while he is impressed with the store, he suggests that in some ways the place is a Whole Foods-wannabe. “This behemoth … is the latest entry around here in the fevered competition to out-Whole Foods Whole Foods. This race is nothing new, but it has gone white hot in recent years. Every town wants a Whole Foods pretender, if not the real thing. It's a major status symbol and a boon for the local housing market.”

    And, he actually seems to like a West Roxbury Roche Bros. better, noting that the company “opened a relative biggie in West Roxbury six years ago that was considered suburban cutting edge at the time in the non-Whole Foods sweepstakes. Thirty-six thousand square feet. Lots of prepared food. Good meat and fish. But nothing fancy, reflecting the down-to-earth culture of the community. Today, it looks quaint.”

    The conclusion seems to be that in many communities, for better or for worse, Whole Foods is the pace car…and everybody else is trying to keep up.

    “Like Starbucks, Whole Foods has spawned a preciousness that invites ridicule. Its food is generally excellent, if outrageously expensive. But it has long since become the epicenter for terminally earnest conversations about the slow food movement and free range chickens that drive me toward the macaroni and cheese.

    “What we've got here is a retail food arms race that will only heat up. There will be more Whole Foods pretenders, more self-contained, city-state food cultures that provide everything. I'm personally waiting for organic pedicures near the Belgian endives. Then at some point, we'll retrieve our sanity and return to planet earth.”

    KC's View:
    I’m not sure that this is fair to the folks at Roche Bros, a company I have always thought of as having a lot more depth and originality than the “Whole Foods wannabe” moniker would suggest.

    Sure, it is true that Whole Foods is prompting a lot of companies to invest in certain products and services that they might not have considered before. That’s normal.

    And there is certainly nothing wrong with Roche Bros. developing stores that seem to answer local needs in specific places. I think, last time I checked, that this is known as smart marketing.

    Published on: February 27, 2008

    Starbucks, having closed all of its US owned and operated stores for three hours last night to retrain its baristas in the art of coffee-making, reportedly is posting a sign in those stores today that reads:

    "Your drink should be perfect, every time. If not, let us know and we'll make it right."

    According to Forbes, CEO Howard Schultz said that the 135,000 people who were trained last night pledged to uphold "the uncompromising standards and quality that have made Starbucks the world's coffee leader."

    The story notes that “instead of dumping shots straight into the paper cups they'll serve to customers, Starbucks baristas are getting back to pouring espresso into shot glasses first … Starbucks switched to automatic espresso machines years ago, but it still takes skill to work them. Baristas have to adjust the grind to make sure a shot doesn't pour too quickly, making it watery, or too slowly, making it bitter. And Starbucks – criticized by the public markets for sales growth that was not living up to expectations, and concerned that the economic downturn could impact people’s willingness to spend $3.50 for a cup of coffee – believed that the three-hour respite was in order.

    KC's View:
    First of all, let’s be clear. I think that what Starbucks did last night was very smart. It made a statement to employees, and it made a statement to customers, about the importance of quality and the need not to get lazy or sloppy. It was a cultural statement, and Starbucks is nothing if not a cultural icon.

    That said, when they asked the employees to make that pledge, I keep wondering if they were asked to raise their hands and say, “I, state your name…” and that they responded, “I, state your name…”

    And while I love Starbucks dearly and remain a loyal customer, there are things they have to address. For example, while in Boston this week I went into a brand-new Starbucks and found a small pamphlet on the counter that was a guide to its various beverages. Unfortunately, the cover said it was the “2005 Guide To Starbucks Beverages.” And there was a pile of them on the counter.

    Not exactly the right message to send. And, I trust, the kind of mistake that the company wants to make sure does not happen with any kind of regularity.

    Published on: February 27, 2008

    McDonald’s reportedly has focused on a new way to build market share in China – it has begun doing home delivery in Shanghai. The fast feeder has bought 300 motorcycles that are being used to deliver food from 42 restaurants to an area of the city that houses some seven million people.

    The chain may need to buy some more motorcycles, however; it has committed to opening 125 new units this year and 150 new ones next year.

    The business goal is simple – to catch up with Yum! Brands, which has twice as many restaurants in China and has been doing home delivery from its KFC and Pizza Hut restaurants for more than two years.

    KC's View:
    Good luck. I’ve been to Shanghai, and about the last thing I’d want to do for a living is navigate the streets on a motorcycle while trying to get fast food someplace while it is still hot.

    Then again (and I’m probably going to be accused of being a snob for saying so), maybe if we’re talking about Big Macs, it doesn’t really matter. (The fries, on the other hand, are a different story.)

    Published on: February 27, 2008

    • In Canada, the National Post reports that Cott Corp. announced that “it has received notice of a reduction in shelf space and merchandising support for Wal-Mart's private label carbonated soft drinks in the U.S., including Sam's Choice, the retailer brand produced by Cott .. (which) went on to say that 2008 programs have not yet been finalized and Cott is still actively negotiating with Wal-Mart appropriate space allocation and other merchandising programs associated with Sam's Choice brands.”

    The story notes that “Cadbury is likely gaining Wal-Mart shelf space for its Royal Crown and Diet Rite soft drinks at the expense of Sam's Choice.”

    KC's View:

    Published on: February 27, 2008

    Advertising Age reports that the Coca-Cola Co. is “hitching its wagon to the sustainability marketing train already hopped on by General Electric Co., Toyota, IBM and others.” According to the story, Coke’s initial $10 million marketing efforts don’t “focus at all on environmentalism and instead paint the soft-drink giant as a corporate good guy concerned with meeting consumer needs and supporting worthy local education and sports programs.”

    “We're thinking of well-being from a mental, physical, community and environmental perspective that encompasses every part of our North American business," a Coca-Cola spokeswoman tells Ad Age. “We're using this to talk to all of our stakeholders and show our desire to be a better partner to all of them.”

    KC's View:

    Published on: February 27, 2008

    • The Great Atlantic & Pacific Tea Co. (A&P) reportedly has closed three of its Food Basics discount stores in New Jersey for being noncompetitive in their markets. The company is saying that this does not reflect on the overall health of the Food Basics concept – though the closures reduces the number of A&P stores using that banner to eight.

    • The Associated Press reports that Kroger-owned Fred Meyer is the subject of a sexual harassment complaint filed by the US Equal Employment Opportunity Commission (EEOC), which charges that senior level managers at one of the company’s stores subjected several female employees to “a constant barrage of sexually offensive and degrading comments.” In addition, the complaint says that corporate management did not take appropriate actions to address the problem.

    • ConAgra Foods has announced what it calls “simple and unique packaging enhancements designed to help consumers make better-informed food choices to improve their diet and health.”

    The new nutrition guide will be featured on the packages of such brands as Healthy Choice, Chef Boyardee and Orville Redenbacher’s. The package graphics will leverage the U.S. Department of Agriculture’s (USDA) MyPyramid and use simple, clear facts to show consumers how the company’s products can help them satisfy the government’s dietary recommendations.

    The new labels will begin appearing in stores in May 2008.

    KC's View:

    Published on: February 27, 2008

    • The Stop & Shop Supermarket Company/Giant Food has named Jim Dwyer to be executive vice president of strategy and business development; he also carries the title of chief business development officer for Ahold USA. Dwyer most recently was president of Global Bath and Kitchen Products for American Standard Companies

    Robin Michel has joined the company as executive vice president and general manager, Giant-Landover, overseeing Giant’s sales, operating profits, organization and employees.
    Michel previously was group vice president procurement and merchandising at Roundy’s.

    And, Jeff Slater was named executive vice president, people, leading the company’s human resource efforts. Most recently, Slater served as a human resource executive for Dunkin’ Brands, which includes Dunkin’ Donuts and Baskin Robbins.

    • Food Lion LLC has named Hans Lefebvre to be its vice president of Meat and Seafood, reporting to Derrick Penick, senior vice president of Merchandising and Distribution. Lefebvre joined Food Lion LLC in 2003 and has served as a produce merchandising manager, director of research, director of renewal and prototype development and director of merchandising and training for Bloom.

    KC's View:

    Published on: February 27, 2008

    • Target Corp. reported that its fourth quarter profit was down 8.1 percent compared to the same period a year ago, declining to $1.03 billion from $1.12 billion. Revenue rose 0.8 percent to $19.9 billion, on same-store sales that were up 0.2 percent.
    KC's View:

    Published on: February 27, 2008

    On the subject of a proposed ban on plastic bags in Santa Monica, California, one MNB user wrote:

    On Saturday morning, Santa Monica has a big and good farmers market complete with tons of plastic bags and the tree huggers lap ‘em up there in the People’s Republic. Absolutely amazing to watch - there are a few cloth bags but most people take the plastic the farmers use and put it in the cloth sack! Let’s be politically correct but not necessarily behave correctly!

    Go figure. Shopper habits are hard to change.

    I’m shocked you think those Santa Monica communists would be any different.

    MNB user David J. Livingston chimed in:

    I recently spent a weekend on Fisherman's Warf in San Francisco. I thought this was the land of the canvas bags. Wrong. Went to Walgreens and they gave me a plastic bag. I thought it was a law in San Francisco but apparently I was mistaken. Some retailers like Trader Joe's have stepped up and stopped using them. Other retailers have been giving the canvas bags away while others are trying to sell them. I suggest a happy median such as a free canvas back with a $50 purchase. If there is always a handful in the trunk, you will use them.




    Regarding Wal-Mart upscale moves in select markets, MNB user Matthew Muir wrote:

    If you lived in a non-affluent area, do you think that after shopping at an Upmarket Wal-Mart, that you'd be prepared to go back to your "non-affluent" non-upmarket local Wal-Mart?

    A bit of a risk when that's what their entire fleet basically is. Not a great way to define your customer base.


    Another MNB user was even less effusive:

    Lipstick on a pig…

    While I understand this reaction, I do think it underestimates and diminishes what Wal-Mart has accomplished … and what it is likely to achieve in the economic downturn we are now experiencing.




    I love it when MNB user file reports from the field, such as:

    FYI our local Wild Oats has been converted to Whole Foods and what a change. We got a cheese department back with a great assortment! We got a fresh bakery back! Meat variety is way up. Seafood is now excellent! What a change for the better! Prepared food is like night and day. And the people’s attitudes all seem better. Wild Oats was being run to cut shrink and increase margins only; no thought to sales. Whole Foods has completely turned that around. Nice to see.

    Agreed.




    Got the following email from MNB user Jan Matsuno:

    Regarding your very interesting piece today about increased incidence of toxic E. coli in cattle fed by-products of corn-based ethanol production, I think it is important to note that this points to a need for not only more vigilant inspection but more importantly: rethinking our agricultural practices. Cattle are not designed by nature to eat corn in the first place! Feeding it to them (to facilitate than magical 89 cent hamburger) makes them unhealthy and thus more susceptible to any sort of disease, toxic E. coli being one. Now it appears we are making it even worse by feeding them something even MORE unhealthy. No amount of inspection can take care of a problem like that. You need to go back and examine the root cause.

    Cattle are not supposed to eat corn? Who knew?

    And MNB user Liz McMann wrote:

    I’d say the real lesson is that prevention is key for any illness, human or animal. The longer our industrial agricultural system thrives, the more E. coli will thrive in the bellies of the animals that suffer.

    I have to say that I’m not sure what this email means. I will grant you that there are problems in the current agricultural system, but when you criticize the “industrial agricultural system,” what are you suggesting that we replace it with? We have a big country to feed, and a big world to help feed. How can it be done economically without an industrial agricultural system?

    This is a serious question – I am not being sarcastic. I just don't know what you are proposing, and whether it makes any sort of economic sense.

    But I trust someone will tell me.

    KC's View: