retail news in context, analysis with attitude

MNB Archive Search

Please Note: Some MNB articles contain special formatting characters, and may cause your search to produce fewer results than expected.

    Published on: May 19, 2008

    Wal-Mart has launched a new website designed to recruit employees for its new small-store format, Marketside, which it plans to open in four Arizona cities – Chandler, Gilbert, mesa and Tempe - later this year as a response to Tesco's Fresh & Easy concept.

    The site says:

    "If you’re looking for an exciting position with ample opportunity to grow within the world’s largest retail company, then Marketside is the place for you!

    "Marketside associates are enthusiastic people with a passion for fresh and delicious food! We are looking for candidates with superior customer service skills and who enjoy working in a team environment. If this sounds like you, you’ll feel right at home in our fun, fast-paced, small-store environment!

    "Who We Are…

    "Marketside is the neighborhood market for busy people with a taste for fresh and delicious food. We simplify the daily challenge of creating an enjoyable meal by providing inspiring choices, while also offering everyday favorites at great prices in an easy-to-shop environment. Marketside is dedicated to helping our customer answer the question 'What’s for dinner?' Come join our Marketside team and be a part of this brand new shopping experience!"

    The site is: http://www.workformarketside.com

    KC's View:
    The goal here, as for Safeway in its new small-store format, seems pretty simple.

    To be fresher. And easier.

    Let the games begin.

    Published on: May 19, 2008

    The Wall Street Journal reports that in a tough economic climate, Kroger may be ahead of the game.

    The paper writes, "Kroger, the nation's largest conventional grocer by revenue, consistently has been posting some of the best financial results of any U.S. retailer -- food, drug or other type. And among the big traditional grocers, its prices are the most competitive with discounter Wal-Mart Stores Inc. Kroger began a price-cutting program six years ago, and now that is paying off. In a dreary economy, shoppers are especially attracted by bargains … Another revenue booster at a time of high fuel prices: Kroger offers gasoline discounts to frequent store customers who fuel their cars at its pumps. About 700 of its grocery outlets sell gas.

    "The reduced prices have cut into the chain's gross margins -- 23%, compared with 29% at Safeway Inc. But they have helped Kroger woo shoppers and lift sales -- and increase market share."

    And, the Journal notes that analysts say that "one of Kroger's big advantages is its partnership with Dunnhumby Ltd., owned by British retailer Tesco PLC. It analyzes data from Kroger customer choices, so the company can better arrange and tailor promotions to shoppers."

    KC's View:
    While this "Heard on the Street" column is aimed at investors, it also is a pretty good primer on why, in the long run, market share is more important than margin…and that economic hard times are a particularly good time to try to build market share….on the premise that when the economy rebounds, market share will stay consistent and margins can then increase.

    Published on: May 19, 2008

    The Los Angeles Times reported on Safeway's new small-store format over the weekend. Excerpts:

    • "At the Market by Vons, which replaced a tiny and run-down traditional Vons in the Belmont Shore section of Long Beach, the message is upscale simplicity.

    "Shoppers walk through a wood floor entry with an immediate view of stacked produce, a fresh bakery, a prepared-food counter, a selection of 1,000 wines and a Starbucks kiosk … About 50% of the offerings are fresh produce, meats, cheese and prepared foods … The store carries about 15% of the items a large supermarket might offer."

    • "Safeway plans to open as many as four of the smaller markets over the next year to see how shoppers react. If the concept is successful, the chain is prepared to roll out as many as 50 per year."

    KC's View:
    Again, say it after me:

    "Fresher. Easier."

    Published on: May 19, 2008

    The Chicago Tribune reports that when the Bush administration developed its $770 million foreign aid package designed to help alleviate some of the world food crisis, it included a component bound to be controversial – the promotion of genetically modified crops in the package.

    As the paper notes, "The value or detriment of genetically modified, or bioengineered, food is an intensely disputed issue in the U.S. and in Europe, where many countries have banned foods made from genetically modified organisms. Proponents say that genetically modified crops can result in higher yields from plants that are hardier in harsh climates... Opponents of such crops allege that they can cause allergies, illnesses and unforeseen medical problems in those who consume them. They also contend that the administration's plan is aimed at helping American agribusinesses such as Monsanto, which manufactures genetically modified varieties of seed."

    KC's View:
    I'm not qualified to know whether GM crops are part of the answer to at least of some of the world food crisis, though on the surface it certainly seems that they wouldn't hurt.

    It appears, though, that if the aid is seen as a way of forcing the issue on GMOs – something that has been a real point of contention between the US and much of the rest of the world – rather than doing the right thing, it is possible that it'll hurt our image rather than help it.

    What I would hate to see is what should be an act of charity turn into a political hairball.

    Published on: May 19, 2008

    C-Store News reports that Wawa has converted one of its convenience stores, in Yorktown, Virginia, "into more of a drive-in restaurant than a c-store, an initiative aimed at increasing food sales … The newly revamped location features 20 reserved parking spots for customers to pull in, view a menu, and place food and beverage orders through a speaker system. Harkening back to the 1950s, Wawa employees deliver ordered items to customers waiting in their cars."

    According to the story, another Wawa drive-in is scheduled to open in Virginia Beach next month, and more could be on tap if the format works.

    KC's View:
    Yet another indication that the whole notion of format is dying. You decide who your customer is and what your customer wants, and what you can give that customer that is compelling and different and uniquely yours. And then you do it…as fast as possible.

    Published on: May 19, 2008

    The New York Times this morning reports that questions are being raised about Similac Organic baby formula, which has generated more than $10 million in sales and captured more than one-third of the organic baby formula market in its first full year in existence.

    The questions have to do with the organic cane sugar that is being used to sweeten the formula. While the sweetener does nothing to breach the "organic" designation, Similac Organic is said to be the only major brand of organic formula that uses cane sugar or sucrose, which is sweeter than ingredients used in other formulas. The Times writes that "other organic formulas, like Earth’s Best and Parent’s Choice, use organic lactose as the added sugar. Organic lactose must be extracted from organic milk, the global supplies of which have been severely stretched in the last three years, driving up the price of the lactose."

    According to the Times, "No health problems in babies have been associated with Similac Organic. But to pediatricians, there are risks in giving babies cane sugar: Sucrose can harm tooth enamel faster than other sugars; once babies get used to its sweeter taste, they might resist less sweet formulas or solid foods; and some studies suggest that they might overeat, leading to rapid weight gain in the first year, which is often a statistical predictor of childhood."

    Abbott Laboratories, which makes Similac, has responded to the controversy by saying that its formulation has been approved by the US Food and Drug Administration (FDA) and is considered "safe and well-established."

    However, what is good for the FDA apparently is not acceptable to the 27 nations that make up European Union (EU), which has decided to ban sucrose-sweetened formulas by the end of next year, except in cases where doctors prescribe such products because of allergies.

    KC's View:
    Abbott Labs can defend this all it wants, but the ending of this story already has been written. The simple fact is that it is going to have to find an alternative sweetener, because right now parents who use Similac Organic feel betrayed. This isn’t just about ingredients. It is about people's infant children, it is about significant lifestyle choices, and it is about trust.

    The longer Abbott Labs tries to make its argument in this case, the worse it is going to look.

    Published on: May 19, 2008

    The Arizona Republic reports that Bashas has decided to suspend its home delivery business, citing economic pressures. The feeling seems to be that as shoppers look to cut their grocery bills, they no longer will be willing to pay for luxuries like home delivery. In addition, the company says that less than one-half-of-one-percent of its shoppers used the home delivery service…which means that its suspension will hardly be noticed.

    One exception: "The Bashas' store in Page delivers to houseboats on Lake Powell and will continue to do that," the paper reports.

    KC's View:

    Published on: May 19, 2008

    The Wall Street Journal reports that US Secretary of Commerce Carlos Gutierrez met with South Korean officials last week to attempt to ameliorate continuing concerns that US beef is unsafe to eat – a position that South Korea has taken since 2003, when a case of bovine spongiform encephalopathy (BSE), or mad cow disease, was discovered in the US.

    While more than 60 other countries banned and then eventually permitted the import of US beef, South Korea is one of those that has not lifted the ban…though that nation's president, Lee Myung-bak, announced last month that its borders would be reopened to US beef imports. In part, reports say, the decision was made because the US was holding up approval of free trade pacts.

    However, according to the Journal, "about two weeks after Mr. Lee made the deal, some Korean television stations and political activists began to allege that U.S. beef isn't safe, isn't eaten by Americans, and that South Korea wouldn't be able to halt imports if mad-cow disease occurred again in the U.S.

    "Mass demonstrations followed, Mr. Lee's popularity plunged and the opposition party threatened to block the free-trade deal in the South Korean parliament.

    "On Wednesday, the South Korean agriculture ministry delayed issuing the formal legal notice needed to restart imports, giving the Lee administration a new chance to make its case to the public."

    KC's View:
    Which is why the Bush administration sent Gutierrez to South Korea to try to salvage a deteriorating situation that seems to be more about politics than science.

    At the risk of being accused of beating a dead cow, I would simply point out that expanded testing – even by private companies – and greater transparency would go a long way to solving these sorts of problems. But it probably seems easier to simply fight the issue on a case-by-case basis, send envoys to the other side of the planet, and engage the situation politically rather than scientifically.

    Published on: May 19, 2008

    Long piece in the Wall Street Journal over the weekend about Howard Schultz, who retook the CEO job at Starbucks earlier this year as a response to shareholder and board concerns about the company's declining stock price. Some excerpts about how he is trying to reshape the company:

    • "Mr. Schultz has a tricky balance to strike because, like Steve Jobs or the late Sam Walton, he is seen as the soul of his company, the only one who can say if the color of packaging or tone of a promotion fits the brand.

    "Internally, Mr. Schultz is revered like few CEOs. Employees sometimes applaud when he walks into a meeting. Some current and former workers say this status, coupled with his wish to sign off on choices as small as the font size on signs, creates an environment where workers apply a single test to decisions: What will Howard think?"

    • According to the story, Schultz "concedes that employees sometimes lean toward agreeing with him instead of being candid. That cannot continue, he says. 'It's not healthy for the organization if everyone's waiting for me to tell them what to do....I don't want people to view me in any way that puts me in some status or rarefied air'."

    • One of Starbucks's biggest problems, Mr. Schultz says, is that its long success streak and huge size have left it cautious. So he is imploring people to be bolder.

    • Schultz "has been a whirlwind since he took back the CEO reins this year after several years as just chairman. He flew to Italy to look for the next generation of Frappuccino like drinks. He sent executives to a Seattle library to see how it creates community. He himself studied a cheese shop in Seattle."

    • "Mr. Schultz says improvement will take time, and will depend partly on how the now sluggish U.S. economy does. He points to things in the works. This summer, Starbucks will rush out an Italian sorbet-like treat in some California outlets that he hopes will differentiate it from rivals that have copied Frappuccino. By fall, cafés will have a new food lineup that includes healthier items and something to replace breakfast sandwiches. Starbucks will stop selling holiday teddy bears, because they don't fit the brand."

    KC's View:
    It is a fascinating story, in part because of some of the contradictions that seem to be inherent in Schultz's approach. On the one hand he seems to want to empower people, but he also micromanages a lot of issues…which hardly leads to an environment in which people feel a sense of entrepreneurial boldness.

    But there is one thing that I find particularly intriguing. Apparently Schultz doesn't even want to hear about projects that will take as long as 18 months – that the economic and competitive pressures are too intense to consider things that will take that long. One the one hand, I sort of agree with that…especially in a world where Internet time is so much faster than traditional time, 18 months is forever. On the other hand, it seems to me that you have to look long-term as well as short-term…there should be parallel tracks, as long as they are headed in the same direction.

    Published on: May 19, 2008

    Robert Mondavi, the legendary vintner who revolutionized the California wine industry and pioneered the transformation of the Napa Valley into a place where fine and robust wines could be made to compete on a global stage, died Friday. He was 94.
    KC's View:
    Even though the Mondavi family no longer controls the wine business that bears its name, I can tell you that it is well worth a visit to Mondavi's wonderful Oakville, California, winery. And, Mondavi's autobiography, "Harvests of Joy: How the Good Life Became Great Business," is a terrific read.

    We drank a toast to him in the Coupe household this weekend. Anybody who loves wine should do the same.

    Published on: May 19, 2008

    • Published reports in the UK say that the Guardian newspaper there has conceded that it incorrectly accused Tesco of setting up a fraudulent network of offshore companies to avoid paying taxes, but that the paper plans to defend itself in the courts if it cannot reach a settlement with the retailer. In addition to apologizing to Tesco in print, the Guardian also reportedly has offered to compensate the retailer for its legal fees and perhaps pay some sort of settlement.
    KC's View:

    Published on: May 19, 2008

    The Wall Street Journal this morning reports that the US Commodity Futures Trading Commission is "investigating allegations that the nation's largest dairy cooperative, Dairy Farmers of America, has manipulated milk and cheese prices, and are separately reviewing a secret transfer of cash to a former director of the organization.

    "The farmer-owned cooperative, which controls a third of the U.S. milk supply, also faces antitrust lawsuits by farmers and retailers alleging it conspired to suppress prices it paid for raw milk in the Southeast, while raising prices to the region's retailers. Such tactics could have the effect of boosting the co-op's profit as a middleman."

    USA Today reports this morning that JSM Meat Holdings, a Chicago company, is recalling a number of ground beef products from stores in 11 states because of concerns about E. coli contamination. According to the story, "The meat being recalled is used in ground beef products. Included are 30-pound and 60-pound boxes and 47-gallon barrels of "MORREALE MEAT" beef products. The products have the number "ET. 6872" inside the USDA mark of inspection."

    • At the recent Specialty Coffee Association of America conference in Minnesota, Caribou Coffee took top honors for its Ethiopian Yirgacheffe coffee in the Roasters Choice competition. According to the company's description, Ethiopian Yirgacheffe is "a washed coffee, in which the coffee beans are soaked for up to 72 hours in fermentation tanks. Experts describe beans treated with this 'wet' method as having a higher acidity, a cleaner wine-like or floral flavor, and more body than beans processed by the dry method."

    KC's View:

    Published on: May 19, 2008

    Reacting to last week's piece about retail executives testifying in Congress against the credit card companies and their high interchange fees, one MNB user wrote:

    With the high cost of fuel, why don't all stations offer a lower price for cash transactions to save the oil companies the fees paid to the credit card companies? I might pay cash if the savings was significant enough to make a difference.

    Some do. But that doesn’t change the fact that the credit card companies maintain a high level of secrecy about rates, which prevents the kind of transparency that consumers and retailers deserve.




    There have been various references in MNB recently to the importance of eating at home, which led one MNB user to write:

    Just wondering how "eating at home" will "strengthen the family" more than eating at a restaurant. Perhaps because there's no fighting over the check.

    That certainly may help, but there have been studies saying that families that eat dinner together at home five times a week tend to have children with fewer alcohol and drug problems, fewer eating disorders and better grades. That's because it isn't just about sitting around the table eating…it is also about the sense of family and connection that comes from the act of meal preparation. In our household, that's often when we start the dinner conversation – about school, work, the Mets, friends, social plans, the Mets, movies, the Mets. You get the idea.



    Responding to last week's rant about the importance of sampling, MNB user Ron Beltramo wrote:

    Great article! Sampling is the lifeblood of our company and is simply the best way to directly approach, engage, inform and sell your product to the consumer…right at the point where they can buy it. We, like you, hope that retailers will embrace sampling and partnering with companies that spend their time and resources to help them sell the product on this very direct basis at point of purchase (without shackling manufacturers with in-house demo agencies…which end up being another profit center for many retailers).

    Another MNB user wrote:

    I agree — sampling works! I was in our new Hy-Vee last week when one of those, yes, "gray-haired ladies in the supermarket aisle " — and what's wrong with gray-haired ladies? — offered me Dutch gouda cheese and told me about how the milk was from cows who romp on open fields. I had visions of idyllic flower-covered pastures and windmills. Anyhow, I just had to buy it, along with the crackers she served it on. So now I have a rather small $8 hunk of delicious cheese that I never would have bought before and that I can only eat an ounce a day of because it will send me way over my Weight Watchers points, but boy, it is it worth it!

    Exactly.

    Another MNB user wrote:

    I still stand by my comments from over a year ago. Sampling gives the opportunity for a store to communicate with their customer. Previously I had responded to your comment about self-checkout taking the human element out of the shopping experience. My response was basically move on...... sampling is the ideal opportunity with the correctly trained person to communicate to that customer.......... to create an atmosphere, a connection to their customers. My wife came home a couple of months ago with some melon. She said she knew it was ripe because the Produce Manager saw her looking at them and came over. He told her about them and how to choose a ripe one. He cut one open and gave her a sample. He prepared the rest of the melon for samples for others to try. No hard sell just a neighborly thing to do.

    And another MNB user chimed in:

    Amen! and don't forget, rotate your samples...standing at the deli counter, looking at a bowl of spinach dip that has been there all day, with its crusty brown edge and cracker infused contents...is not what I want to sample. Keep it fresh, keep it clean and safe...and keep it changing...

    MNB user David Rigg wrote:

    I think you’re right on with this observation. Too many supermarket chains don’t want to do merchandising unless the manufacturer pays the bill. With that mindset, they end up waiting for brands to come calling with the ideas rather than taking the initiative.




    Got the following email from an MNB user reacting to last week's declaration via press release by Tesco that its Fresh & Easy stores were so successful that it is expanding its private label product selection:

    As a person who has been in the industry for over 40 years and grew up in California, before moving to the Midwest, I would offer you this. First after visiting many of the Tesco stores, I would say that their selection in many areas is weak. Examples of this are HABA, bakery, beverages, both soda, and liquor. They were not competitive to even other retailers across the street. They stores they bought had little to no work done to them and look like it. People in the towns that I spoke to didn't even know who they were or where they were. To talk up gas and not sell it maybe you get I don't. I know you say you and others are fans of Tesco, it's not that I'm not, I hope I'm just more realistic then you. As for all the retailers saying they will be a force to be reckoned with, well my take on this comment is that they're saying this publicly for several reason while laughing to themselves. (Trust me I been in these types of meetings where you don't want to say negative things publicly ). Again Aldi entry was a lot more impressive. To compare Tesco to a Trader Joe's is unbelievable to me, I grew up and know the founder of Trader Joe's, and Tesco both in the UK and US doesn't even come close. Last in working for a retailer who has stores both in the US and UK, I would tell you that my opinion (and I can get a lot of others to back this ) is that the UK market is 10 years behind the US in most food areas.

    MNB user Brian List wrote:

    The article that I read about this story says that the customers were asked upon exiting various Fresh & Easy locations, which is also how they computed the average customers per hour entering the stores. While at the FMI Show this month, I went into the F&E on Tropicana Ave. and the one thing that stood out the most to me was the competitive pricing, both on name brands and private label. And of course, the store seemed bland, no-frills feel, very little color and displays/signage, and the sampling booth was not set up (this was during lunch time). I regret not having a microwave, because some of the pre-packaged meals looked pretty appetizing. I settled for a cold roast beef sandwich for $4, which wasn’t bad. As a single guy, this would be a place I would stop for a quick grab-and-go dinner if there was one in my area. Anyway, after doing much research on Fresh & Easy and finally visiting one, I think Tesco is on to something. But it needs to better understand the certain things that lure and keep American grocery shoppers to stores, and focus on becoming relevant during customer’s shopping trips.

    Another MNB user wrote:

    Regarding Fresh & Easy, from a journalist's point of view, I think they initially made mistakes by being so secretive with the press. Getting any type of interview from them is virtually impossible...similar to Winn-Dixie, Albertsons LLC...weak chains with big plans in an increasingly gloomy economic environment. Generally, the big wigs of these companies are big-time cheerleaders on how wonderful they're doing. Anyone with a smidgen of intellect can easily see through the PR machines.

    I wish I could agree about this, but I have to say that I think that Tesco's approach to the media was actually pretty smart. They just let us speculate and speculate and speculate…and probably got a lot more coverage than if they'd given out interviews.

    But another MNB user offered:

    Nothing has changed. F&E has been about the press release--not the grocery business.

    Tough stuff.




    I was sort of mean about the quality of Taco Bell food last week, which led one MNB user to write:

    I am a Taco Bell eater. It is not something that I eat every day or even once a week, but I do enjoy the food there. Taco Bell is to tacos, what White Castle is to burgers. Neither is known for their quality (or store cleanliness). They are just this guilty little pleasure that people will give in to on occasion. I think that this new (discounted menu) approach will hit a lot of people right where they expect…in the wallet. I think people are going to like knowing that they can dig through the loose change in their car and have enough to buy a couple of tacos.




    On another subject, one MNB user wrote:

    It is interesting that you ran an inspiring story about the problem of obesity in America followed by an article about a tobacco ban by states. As we become more aware as citizens about the harmful effects of overeating, I wonder (and hope) food will face the same scrutiny tobacco has. In addition to government bans on tobacco, there have been huge market-driven bans on smoking and advertising, governments are merely responding to what they see as both public demand and what is in the common good. I don't think you are being inconsistent because I think the market already has decided and government is just catching up.

    This is not so in regard to overeating. The harmful effects of food - and food with no nutritional value that is being sold in mass quantities to Americans - has not received the same backlash as cigarette smoking has, despite a continued campaign to enlighten consumers (Fast Food Nation, Super Size Me, etc.) A government ban, or market-demand, to eliminate unnecessarily large portions of nutrient-void food will be the part of the coming trends that companies will have to respond to. They will have the choice to stand up on the side of health or to continue to serve, and help kill, overeaters.





    One quick note, if I may.

    One or two MNB users wrote to me last Friday complaining (good naturedly) about the fact that there have been more than a few times during the past couple of weeks when "Your Views" has gone missing. Essentially, the message was that as much as they liked my commentary, they really liked reading the comments from other MNB users.

    As do I.

    By way of explanation – not to be defensive – I think it is important to point out that I do my level best to read every email that I get, and some days that can reach into the hundreds. That alone can take hours, and then editing them down into a "Your Views" section takes even more time.

    All of which makes up a process I love, because I learn so much. But there are days when time is just too short (because of a video project or a speaking engagement or my travel schedule) and I can't get to them all. (Sometimes, to be perfectly honest, I just am too tired and make the choice to get extra sleep.) I don't want to outsource the process because I think that would somehow violate the connection we all have. So I store them up and do my best to catch up later. Like today.

    MNB is the best and most rewarding professional experience I've ever had, and I'm lucky to have it…just as I am lucky to have you. So I hope I can persuade you to cut me some slack from time to time, and understand that when MNB runs a little shorter than usual, there's usually a pretty good reason.

    Thanks.

    KC's View:

    Published on: May 19, 2008

    Two games this weekend between the NY Mets and the NY Yankees.

    The Mets won both. On Saturday, 7-4. On Sunday, 11-2.

    The Mets are tied second place with the Philadelphia Phillies in the National League East, just one game behind the Florida Marlins (the Florida Marlins?).

    The Yankees, on the other hand, are in last place in the American League East, six games behind the division-leading Boston Red Sox, and even trailing the Baltimore Orioles and the Tampa Bay Rays.

    KC's View:
    Okay, I know it is only mid-May. I know it is a long season, and that anything can happen. (Trust me. I had to endure something last September that will forever be known as "perhaps the greatest collapse in sports history.")

    But I can dream.