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    Published on: March 18, 2008

    The Wall Street Journal this morning reports that two Delhaize-owned US companies, Hannaford Bros. and Sweetbay Supermarkets, have been hit by a credit card breach that exposed as many as 4.2 million cards to the potential of fraud. To this point, the company has identified about 1,800 specific cases of fraud related to the breach, with the unauthorized use of cards in places as disparate as Houston, Detroit, San Francisco, France and Brazil.

    In a letter to shoppers posted on Hannaford’s website, CEO Ron Hodge wrote:

    “Hannaford has contained a data intrusion into its computer network that resulted in the theft of customer credit and debit card numbers. No personal information, such as names or addresses, was accessed. Hannaford doesn’t collect, know or keep any personally identifiable customer information from transactions.

    “We sincerely regret this intrusion into our systems, which we believe, are among the strongest in the industry. The stolen data was limited to credit and debit card numbers and expiration dates, and was illegally accessed from our computer systems during transmission of card authorization.

    “The intrusion affected Hannaford stores, Sweetbay stores in Florida and certain independently-owned retail locations in the Northeast that carry Hannaford products.

    For more than 125 years, Hannaford has been dedicated to earning customer trust, and we want to provide you with these recommended steps:

    • “Carefully review your financial institution and credit card statements, and immediately contact your credit card company or issuing bank with any questions or concerns about individual charges.

    • “For more information or with questions, please call our Customer Information Center at 866-591-4580.

    “Hannaford is cooperating with credit and debit card issuers to ensure those customers who may be affected by the theft are protected. We also alerted law enforcement authorities, and are working closely with them to help identify those responsible.”

    On the Sweetbay site, there is an additional caution to consumers:

    “Criminals take advantage of situations like this to try to obtain personal information like credit and debit card numbers, PINS and social security and driver's license numbers. We will not send emails asking for personal information or call you to confirm your personal information. If you receive an email that appears to be from Hannaford or one of our stores, or a telephone call from someone claiming to be a representative of Hannaford or one of our stores, do not provide any personal information (including credit or debit card number, social security number, or driver's license). If you suspect you have received such a ‘hoax’ email or call, please report it to us, using our toll-free number.”

    According to the Journal, it is believed that the breach took place on December 7. “A person familiar with the inquiry said investigators are looking into the possibility that the breach occurred in Hannaford's wireless system for transmitting data between the card-swiping machine and a computer server,” the Journal writes. “Security experts have identified wireless transmissions as a particular vulnerability for retailers.

    “Last year Hannaford Bros. upgraded the encryption system for its credit-card and computer networks to one that is more difficult for outsiders to crack. The system is recommended by major credit-card associations, and the upgrade was completed about a week before the incident is believed to have taken place.”

    The Boston Globe this morning notes that “the intrusion is only the latest to strike a large retailer and comes amid growing scrutiny of the payments industry, which faces tough proposed rules on how customer information is handled. Concern over the issue crystallized last year following the theft of up to 100 million customer card numbers from Framingham retailer TJX Cos. Also last year, four men from Southern California received prison sentences after pleading guilty to US charges they stole payment information at checkout counters at Stop & Shop Supermarket Cos. stores in Rhode Island.”

    And, the Globe writes, “What could make the Hannaford case unusual is that since last spring its stores have met industry standards regarding how customer data is stored and maintained … Many other retailers victimized by breaches, including TJX, had been faulted for lax security.”

    The Globe continues: “Banks have previously complained that Visa and MasterCard system rules put too many of the costs of dealing with data breaches on financial institutions. Yesterday, before Hannaford's disclosure, the Massachusetts Bankers Association said in a statement that up to 70 banks in Massachusetts had been warned by MasterCard and Visa of a data breach at a major retailer between Dec. 7 and March 10, but that the credit card firms had not named the retailer. Not long afterward, Hannaford came forward. A representative for Visa said executives wouldn't comment. A MasterCard spokesman didn't respond to questions.”

    KC's View:
    Beyond the obvious importance of this story from a journalistic point of view, when I first saw the reporting this morning I immediately thought about the fact that I used my debit card while shopping at a Hannaford store late last fall. So I’m thinking I’d better take a second look at my statements.

    That said, job one at Hannaford and Sweetbay is to reassure and advocate for shoppers. I think they’re doing a pretty good job, and other retailers should pay attention … because it seems likely that these kinds of problems are eventually going to get everybody and every company.

    Life in the 21st century simply ain’t simple.

    Published on: March 18, 2008

    by Michael Sansolo

    Sports may be all about playing fair, but business rarely is. The question many businesses have to ask themselves is not how to cheat, but rather how to play by the rules that produce victory. Start by looking at today’s economic turmoil in a different way. Consider it opportunity knocking, but only if you make the rules work for you.

    Mealtime, it seems, is up for grabs in ways that haven’t been seen in years. The weakening economy combined with growing concern about eating healthily presents supermarkets a rare opportunity to win back meals lost over the years to restaurants. Nancy Kruse, a leading foodservice consultant, detailed the steps for victory at the recent Annual Meat Conference run by the Food Marketing Institute, the American Meat Institute and the commodity groups representing chicken, turkey and pork.

    But the steps will require supermarkets to play differently to win and that means doing things differently. For instance:

    • Merchandise your menu by talking about the great attributes of the food. Kruse showed an example from Publix, where the glorious details listed on the chain’s website were sadly missing in stores. Tell shoppers about your recipes, your ingredients, and get them excited about eating. Most of all focus on the freshness of your food offerings, just as restaurants do.

    • Play up your chefs and the culinary experience in your company. Once again, supermarkets can learn from restaurant competitors, many of who play up new dishes, new tastes and the chefs who create them. Nothing prevents supermarkets from doing the same on websites and in stores. Many companies have corporate chefs and menus, but neglect to put them out front of shoppers.

    • Be convenient by better managing lines and time. Every restaurant, Kruse said, has an expeditor whose oversees the preparation process to make sure service is a prompt as possible. Supermarkets need to address the woes of long lines by doing the same and showing shoppers that the store understands their time pressures.

    • Play to your strengths. Kruse says supermarkets have a group of unassailable advantages, but neglect to talk them up enough. The frequency of shopping trips and the convenient locations of supermarkets are both great advantages. But, Kruse says, the advantages go on. Supermarkets are known for freshness, which equals taste, health and value in the minds of shoppers. And in 2008, there is little that more important than health, taste and value.

    Victory isn’t a guarantee, especially as many restaurants are reacting to the same trends. But doing nothing is a sure path to losing. Opportunity is knocking…

    Of course, winning and losing is a national obsession this week as the country plunges headlong into March Madness and the NCAA basketball tournament, which gets my vote for both the best sporting and national annual event we have. This year is especially good as six schools with food marketing or management programs - Cornell, Michigan State, Portland (OR) State, Southern California, St. Joseph’s and Texas A&M - are all in the tournament. It would take an incredible sequence of upsets, but four of those schools could meet on the final weekend. Of course, that’s not likely to happen, so my hope is that Kansas, Texas, Connecticut and North Carolina (my final four) get into food programs. (Oh yes, I have Kansas beating Texas in the finals.)

    Michael Sansolo can be reached via email at .

    KC's View:

    Published on: March 18, 2008

    The Chicago Tribune reports on Hy-Vee’s plans to implement the Overall Nutritional Quality Index (ONQI), a system created by David Katz of Yale University that will evaluate virtually every food item on a scale of 1-100 for nutritional value:

    “Their goal: To cut through the clutter of nutrition claims -- one-third less fat! multigrains! -- bombarding shoppers. In theory, consumers would be able to make healthier food choices, while grocery stores would likely boost customer loyalty and perhaps corral more shoppers.

    “But there's the risk that the Yale-Topco initiative, and other rating systems like it, may only add to consumers' confusion over health and wellness claims, grocery and nutrition experts say. And supermarkets risk alienating their suppliers -- food manufacturers -- who could wind up with weak nutrition ratings, even on products the makers are touting as healthy.”

    The Tribune contrasts the ONQI system with the Guiding Stars program created by Hannaford Supermarkets – and now being licensed to other retailers and manufacturers – that rates products that meet certain nutritional criteria with one, two or three stars as good for you, better for you, and best for you. While the ONQI system has not yet been rolled out, so knowing what impact it will have on sales is an unknown, the Guiding Stars program has demonstrated that it can move the needle significantly on products that carry an imprimatur.

    KC's View:
    While I have consistently said that I prefer the Guiding Stars program to the ONQI system, mostly because the 1-100 rating of every product strikes me as almost too exhaustive and complicated for consumers to understand, Hy-Vee CEO Ric Jurgens made a fairly persuasive case for ONQI when we talked not too long ago. He clearly believes that rating every product, as opposed to just good-better-best products, makes more sense and can have greater impact on consumers … and he makes his case with a clear passion for connecting food with good health. “We want to change the world,” he says…and I believe him.

    In the end, all of these systems are better for the shopper. Maybe they all will be successful, and the marketplace certainly will determine which ones the shopper prefers. The most important thing is that the industry is paying attention, and is advocating for the shopper … which is always the best way to change the world.

    Published on: March 18, 2008

    The Boston Globe has an interesting column about how there may be confluences for the organic farming and genetic engineering businesses.

    Some excerpts:

    “The world faces an enormous challenge: Its growing population demands more food and other crops, but standard commercial agriculture uses industrial quantities of pesticides and harms the environment in other ways. The organic farming movement has shown that it is possible to dramatically reduce the use of insecticides, and that doing so benefits both farm workers and the environment. But organic farming also has serious limits - there are many pests and diseases that cannot be controlled using organic approaches, and organic crops are generally more expensive to produce and buy.

    “To meet the appetites of the world's population without drastically hurting the environment requires a visionary new approach: combining genetic engineering and organic farming.

    “This idea is anathema to many people, especially the advocates who have helped build organic farming into a major industry in richer countries. As reflected by statements on their websites, it is clear that most organic farming trade organizations are deeply, viscerally opposed to genetically engineered crops and seeds. Virtually all endorse the National Organic Standards Board's recommendation that genetic engineering be prohibited in organic production.

    “But ultimately, this resistance hurts farmers, consumers, and the planet. Without the use of genetically engineered seed, the beneficial effects of organic farming - a thoughtful, ecologically minded approach to growing food - will likely remain small.

    “Despite tremendous growth in the last 15 years, organic farms still produce just a tiny fraction of our food; they account for less than 3 percent of all US agriculture and even less worldwide. In contrast, in the same period, the use of genetically engineered crops has increased to the point where they represent 50 to 90 percent of the acreage where they are available. These include insect-resistant varieties of cotton and corn; herbicide tolerant soybean, corn, and canola; and virus-resistant papaya.

    “After more than a decade of genetically engineered crops, and more than 30 years of organic farming, we know that neither method alone is sufficient to solve the problems faced - and caused - by agriculture.

    “It is time to abandon the caricatures of genetic engineering that are popular among some consumers and activists, and instead see it for what it is: A tool that can help the ecological farming revolution grow into a lasting movement with global impact.”


    “Pitting genetic engineering and organic farming against each other only prevents the transformative changes needed on our farms. There seems to be a communication gap between organic and conventional farmers and between consumers and scientists. The stakes are high in closing that gap. Without good science and good farming, we cannot even begin to dream about establishing an ecologically balanced, biologically based system of farming and ensuring food security.

    “It seems nearly inevitable that genetic engineering will play an increasingly important role in agriculture. The question is not whether we should use genetic engineering, but more pressingly, how we should use it - to what responsible purpose. Agriculture needs our collective help and all appropriate tools if we are to feed the growing population in an ecological manner. Consumers have a significant opportunity to influence what kinds of plants are developed and to address the key agricultural challenges. Let us direct attention to where it matters - the need to support the use of seed and farming methods that are good for the environment and for the consumers.

    “What we can hope for is a future in which farmers use the best organic farming methods to grow the most beneficial engineered crops. Any effective approach in feeding the world in a sustainable manner will require us to embrace more than one great new idea.”

    KC's View:
    I have to be honest here – this stuff is way beyond my pay grade. I don't know nearly enough about either farming or genetic engineering to be able to make a judgment about this column. Though I suspect that there will be a lot of argument from the pro-organic community that introducing genetic engineering techniques into their world will subvert and dilute their ultimate goals.

    I have to say, however, that I am intrigued by the notion that people at opposite ends of the scale could come together to create a new approach to agriculture that would, in the final analysis, end up with more people being fed. Which I think is supposed to be the point.

    Is it too much to hope that as a people we should be able to keep open minds and look for complex solutions to complicated problems? As opposed to being narrow minded and open only to knee-jerk solutions to problems defined as simplistically as possible?

    Published on: March 18, 2008

    Dow Jones reports that Wal-Mart plans to make Japan’s Seiyu a wholly owned unit of the company, giving it full control and ownership of the company that it began buying into in 2002. Seiyu has suffered hundreds of millions of dollars in losses as Wal-Mart has tried to bring both efficiencies and its own marketing approach to the Japanese marketplace.

    Business Week writes that “Wal-Mart Stores Inc. will open its latest generation of energy-efficient test stores this week with a Las Vegas Supercenter that uses new cooling technology to cut overall energy use by up to 45 percent. The Las Vegas store opening Wednesday builds on advances in earlier pilot stores that reduced energy use in areas including lighting, refrigeration and water flow … Wal-Mart said the new Las Vegas store adds to those savings with a new cooling system based on water evaporation for total energy savings of between 35 percent and 45 percent.”
    KC's View:

    Published on: March 18, 2008

    • There are reports in the UK that Tesco plans to begin selling energy-saving light bulbs for about a penny apiece, and that the company believes that it can sell as many as 10 million “green” light bulbs a year.
    KC's View:

    Published on: March 18, 2008

    • The San Antonio Business Journal reports that HE Butt plans to start selling digital television converter boxes in its stores, preparing for the time next year when all television signals in the US will be digital, rendering useless all analog televisions that are not connected to converters.

    The drop-dead date for analog television signals is April 7, 2009.

    • The Chicago Tribune reports that Walgreen has spent $300 million to acquire two companies that operate work site health centers - I-trax, Inc. and Whole Health Management. According to the story, “Walgreens said it will have more than 500 work-site and retail clinics in 40 states, including its Take Care Health Clinics, the brand of its in-store retail clinics.”

    • The Daily Camera reports on the stated plans of Wild Oats founder Mike Gilliand, who now is running Sunflower Markets and has his “sights set on quadrupling its store base to 50 locations in five years and becoming a $500 million company, Sunflower Farmers Markets has caught the eyes of a lot of manufacturers. And Whole Foods' acquisition is helping, Gilliland said.”

    • The Chicago Tribune reports that Walgreen Co. is getting into the fashion business, and “is seeking to boost profits by expanding its in-house brands, which range from nuts to trash bags and now clothing. The collection of cotton capris, sweat pants, quilted vests and T-shirts for men and women, will be priced at $7 to $15. ”

    KC's View:
    Hard to imagine that selling clothes is a good way for Walgreen to boost profits…since it hardly seems consistent with the company’s core business. On the other hand, weirder ideas have been successful. So who knows?

    Published on: March 18, 2008

    • The California Grocers Association announced that it has hired Ronald Fong - the former president of independent retailer United Markets as well as, most recently, vice president of government affairs for the California Credit Union League – to be its new president/CEO. He succeeds Peter Larkin, who left the association late last year to go into a private consulting practice.
    KC's View:

    Published on: March 18, 2008

    In response to yesterday’s story and commentary about proposed guidelines on what can be marketed to children aged 16 and younger, MNB user Gavin Hoey wrote:

    I think you hit it right on the head. Purely from a concerned Parent standpoint:

    The Parent with the Money, buying the groceries has the ultimate say in what their children eat at home, and will ultimately influence what those children eat when they are on their own, and when they are all grown up.

    If that parent has no more insight into what is a healthy choice for their children other than TV ads and magazines/news papers that child is doomed to eat what TV tells them to.

    Children need to hear “NO” more than, “maybe just this once for a treat.”

    Cooking a meal at home instead of going out or ordering in needs to be the norm.
    (It takes no more time to make a healthy home cooked meal than wait for the pizza man.)

    I took 3 minutes to count the following food category items that my wife and I have prepared at home for ourselves and our kids.

    Maybe someone can use this as a guideline to get people to start cooking again:

    • 28 different fruits
    • 27 different vegetables (plus mushrooms I think they fall under fungi) and lettuce only counts as one, no matter how many different types you know.
    • 32 cuts of meat from 10 different species, plus fish and shell fish (too many to list).

    Take a class. Try something different. Grow your own garden. Eat real FOOD!!!!

    Responding to my comments expressing surprise the number of people at a recent food marketing conference who had not bought anything from, MNB user Brian Fox had a thought:

    I noticed your remarks this morning about the number of people who haven’t used Amazon. Maybe part of the problem is very similar to the one I have. We left the city for a bedroom community two years ago and since there are only box numbers now (including site#, Compartment #, etc.. for Rural Route’s) which no online supplier will ship to the very folks who would be most likely to use an online source are prohibited from doing so.

    I think that this may be the case in certain circumstances, but I actually think that there’s a lot more intellectual laziness out there. Hate to say it, but that’s what I think.

    I got the following email from MNB user Jonathan Reynolds, who, for purposes of putting his comments in context, I should mention is the Director, Oxford Institute of Retail Management at the Saïd Business School at the University of Oxford. (Plus, I think it is so cool that someone with that kind of title would read MNB!) Reynolds has some thoughts about a Financial Times piece, noted here on MNB, about Tesco growing its Japanese business:

    Enjoyable lunchtime (for me) reading as ever. That FT piece is interesting in the context of Fresh & Easy. It suggests several things to me:
    1. Even with an acquisition, (which in fact Tesco mulled over for quite a while in relation to Japan before making), it takes a long time to get things right-ish outside your home market. Four years is not unusual (some are still not yet profitable in Japan after longer than that – Wal-Mart not least). Investors (and commentators!) are desperate for quick results, but the evidence from research that we have done in Oxford suggests that it takes much longer than anyone expects. One CEO with big international interests we had speak in Oxford told us: “Accept that getting 70% of it right in a new market is a roaring success” . Actually, the FT could even be a little premature: Tesco’s Japanese sales growth hasn’t been that great over the period … Having said that, Tesco’s businesses in much of eastern Europe have been very successful relatively quickly.
    2. What are the lessons for Tesco in the US from this? The biggest mistake UK retailers tend to make is to treat the US like home. My advice to them: treat the US like Japan. Just because you guys speak broadly the same language can lull the unsuspecting retailer into a false sense of security and big mistakes can be made. Just look at what Sainsbury’s failed to do with Shaws and Marks & Spencer with Kings. You say tomayto and I say tomarto.
    3. Tesco doesn’t appear to have made this mistake in the US (although it’s doubtless made plenty of others) For example, it tracked families’ buying behaviour for several months before determining its positioning and format, just as it did in Japan.
    4. Format change is not new for the company: everyone else was opening hypermarkets in Japan, because that’s what they did best (Carrefour, Wal-Mart). Tesco bought and opened convenience stores because they concluded that’s what consumers wanted. Their operational excellence is not necessarily tied to one particular format (again, unlike others).

    I continue to be astonished by the amount of interest, hype, suspicion, cant, rhetoric and other words from Roget’s Thesaurus that has accompanied a UK company, that Wal-Mart could have bought with some loose change from its earnings, opening just 50 small stores in apparently unprepossessing locations in the western US. I’ve counted around a dozen blogs dedicated just to this subject in the US alone. OK, I know that this is a precursor to an invasion of the homeland with several hundred others. But a company like Dollar General has over 8,000 of not dissimilar size. This really seems to have touched a nerve.

    A final thing on the UK market. Sure, there has been some economic tightening and food prices are on the rise. This will have affected overall spending. However, some of Tesco’s market share growth over the past 4-5 years has come as much from the poor performance of others in the market – notably Morrisons and Sainsbury. First Sainsbury and now Morrisons have picked themselves off the floor and are getting back in the fight. Indeed, Morrisons won retailer of the year at the Retail Week Awards last week – a real turnaround story. So I guess it’s no surprise that Tesco’s market share is faltering a little.

    I feel a little smarter now. Thanks.

    KC's View: