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    Published on: August 11, 2008

    Whole Foods has pulled ground beef that had been supplied to it by Coleman Natural Foods from its stores in 24 states, the District of Columbia and Canada because of concerns about E. coli contamination. Seven people got sick after consuming beef purchased from its stores in Massachusetts, and two fell ill after buying ground beef from Whole Foods in Pennsylvania, but Whole Foods said that it was "broadening the voluntary recall … out of an abundance of caution.”

    The affected states are Massachusetts, Pennsylvania, Connecticut, Maine, Rhode Island, Florida, New Jersey, New York, Kentucky, Maryland, Ohio, Pennsylvania, Virginia, Alabama, Georgia, North Carolina, South Carolina, Tennessee, Illinois, Michigan, Minnesota, Missouri, Nebraska, and Wisconsin.

    The implicated beef had been processed by Coleman at a plant operated by Nebraska Beef, the Omaha meatpacker that was implicated in an E. coli outbreak earlier this summer that forced the recall of more than five million pounds of beef.

    The strain of E. coli identified in the Whole Foods cases is the same as that identified at Ohio’s Dorothy Lane Markets just two weeks ago; Dorothy Lane also bought its beef from Coleman Natural Foods.

    And, as the Boston globe writes, this is just the latest food safety issue that has emerged in a summer that has been anything but reassuring to shoppers: “This is the third time this summer that consumers have had to worry about what's in their refrigerators. First, it was fear of tomatoes tainted with salmonella - though the culprits turned out be jalapeño peppers. Then, worries about contaminated ground beef at the Kroger grocery chain.”

    At the same time, the Seattle Times reports this morning that Kroger-owned Fred Meyer “is recalling some of its ground-beef products because of potential E. coli bacteria contamination.” The company said there is no evidence of infected meat or related illnesses, but that it is doing so “because of the chance it might have been processed at or come into contact with beef from Nebraska Beef.”

    While published reports say that Nebraska Beef is “under close scrutiny” by the US Department of Agriculture (USDA), its facility reportedly continues to operate as internal and government probes of its operations continue.

    However, the Washington Post offers a lengthy report about previous infractions at Nebraska Beef that raise questions about its commitment to food safety:

    “Nebraska Beef has a contentious history with the USDA. Over the past six years, federal meat inspectors have repeatedly written it up for sanitation violations, and the company has fought back in court.

    “From September 2002 to February 2003, USDA shut down the plant three times for problems such as feces on carcasses, water dripping off pipes onto meat, paint peeling onto equipment and plugged-up meat wash sinks, according to agency records.

    “After the third suspension, Nebraska Beef took USDA to court, arguing that another shutdown would put the company out of business. A judge agreed and temporarily blocked the department. The USDA and the company then settled out of court and inspections resumed. However, when federal meat inspectors found more violations, Nebraska Beef sued the department and the inspectors individually, accusing them of bias. The suit was later dismissed.

    “In 2004 and early 2005, Nebraska Beef ran afoul of new regulations aimed at keeping animal parts that may be infected with bovine spongiform encephalopathy, or mad cow disease, out of the meat supply. Meat processors are required to remove certain high-risk parts, such as brains and spinal cords. Between July 2004 and February 2005, federal meat inspectors wrote up Nebraska Beef at least five times for not removing spinal cords and heads, according to USDA records obtained by Food and Water Watch, a Washington advocacy group. The company corrected the problems.

    “In August 2006, federal meat inspectors threatened to suspend operations at the packing house for not following requirements for controlling E. coli. The company corrected the problem a week later, USDA records show.

    “That year, Minnesota health officials blamed Nebraska Beef for sickening 17 people who ate meatballs at a church potluck in rural Minnesota. Several victims filed lawsuits against Nebraska Beef, including the family of a woman who died. The company last fall sued the church, arguing that the volunteer cooks did not cook the meatballs properly.”

    KC's View:
    Forget about eating meat processed by Nebraska Beef. Reading this litany of sins and accusations is enough to make anyone sick.

    The government may be unable or unwilling to shut these guys down, but it seems to me that retailers have to immediately make clear that they will not be buying meat from these guys. Not now, and probably not ever. And they have to make clear to their suppliers that if they do business with Nebraska Beef, they are putting their businesses at risk. (Betcha the people at Coleman are never going to do business with Nebraska Beef again.)

    Country of origin labeling? That doesn’t seem to be nearly enough. As a consumer, I now want to know where my meat was processed and packed…and while retailers can legitimately say that this isn’t their fault, even as they take responsibility with their customers, if they are to do business with Nebraska Beef in the future, then they will have greater culpability. Because they should know better.

    It may be impossible for the authorities to shut down Nebraska Beef, but if the realities of the marketplace don’t catch up with the company and put it out of business, then the food industry has bigger problems than I think it has.

    By the way, you should know that the moment that the folks at Dorothy Lane Market found out they had a problem and pulled the product, they also engaged in a massive outreach effort to their customers. It is my understanding that in addition to sending out emails and being completely available to the local media, staffers at Dorothy Lane made some 10,000 phone calls to customers within about 72 hours. You read that right: 10,000 phone calls.

    It doesn’t surprise me that Dorothy Lane Markets would do that, because that is the kind of operation that CEO Norman Mayne always has run. He puts his customers first, always…and runs about as transparent an operation as I can imagine.

    There probably are people who would have advised him not to make those phone calls, not to talk about the issue, to batten down the hatches and try to ride out the storm with as little communication to the outside world as possible. That would, of course, have been an enormous mistake…for anyone, but especially for Mayne, who never has run that kind of business.

    Good lesson for any other retailer dealing with these kinds of problems.

    Published on: August 11, 2008

    The New York Times reports on how chains are accelerating their efforts to install solar panels on their flat roofs, in part to cope better with increased energy costs, in part to bolster their environmental credibility, and in part to beat an end-of-year deadline that will give them tax advantages.

    “So far, most chains have outfitted fewer than 10 percent of their stores,” the Times writes. “Over the long run, assuming Congress renews a favorable tax provision and more states offer incentives, the chains promise a solar construction program that would ultimately put panels atop almost every big store in the country … Analysts are not sure how much power the rooftop projects could ultimately produce, but they say it could be enough to help shave total electricity demand. In many communities, stores are among the biggest energy users. Depending on location and weather, the solar panels generate 10 to 40 percent of the power a store needs.”

    Among the chains cited by the Times are Safeway, Whole Foods, and , of course, Walmart, which has become a leader in the environmental area. “Wal-Mart, the nation’s largest retailer, has 17 stores and distribution centers with solar panels in operation or in the testing phase. It plans to add them soon to five more stores. People at the chain are considering a far larger program that would put panels and other renewable technologies at hundreds of stores … If Wal-Mart eventually covered the roofs of all its Sam’s Club and Wal-Mart locations with solar panels, figures from the company show that the resulting solar acreage would roughly equal the size of Manhattan, an island of 23 square miles.”

    KC's View:
    What is staggering to me is the Times note that Congress has not renewed the tax credit for such solar power installations, letting it get dragged down by the ongoing debate about offshore oil drilling. This strikes me as absurd – they are two different issues, and the government ought to be increasing the tax benefits of experimenting with solar power – as well as wind power and other alternative energy sources – not playing political games.

    It also is interesting that most of the development is taking place in three states – California, Connecticut and New Jersey – that off tax incentives. This makes sense…an makes me wonder what is wring with the rest of the states.

    Given all the right incentives – businesses do, after all, have to turn a profit and answer to their shareholders – these companies can provide real leadership in this area…leadership that can have an impact on energy consumption in the US, which then has implications for national security and the country’s long-term fiscal health, not to mention reduce the threat of global warming. We have to stop taking baby steps and half-measures, and start encouraging major commitments that can change the world.

    Published on: August 11, 2008

    The Wall Street Journal reports that “when federal prosecutors disclosed last week that computer hackers swiped more than 40 million credit-card numbers from nine retailers in the biggest such heist ever, it was the first time that many shoppers had heard about it. That's because only four of the chains clearly alerted their customers to breaches. Two others -- Boston Market Corp. and Forever 21 Inc. -- say they never told customers because they never confirmed data were stolen from them.”

    The four companies that made the disclosures: TJX Cos., BJ’s Wholesale Club, the DSW shoe store chain, and the Dave & Buster’s restaurant chain, each of which “disclosed to customers they were breached shortly after the intrusions were discovered.

    The chains that apparently did not: OfficeMax, Barnes & Noble, and Sports Authority. The Journal notes that “computer searches of their Securities and Exchange Commission filings, Web sites, press releases and news archives turned up no evidence of such disclosures,” and the companies would not comment on whether they told anybody.
    KC's View:
    This strikes me as sort of an easy test.

    Which one of these groups would you want your company to be in? The group of companies that disclosed that hacking of credit/debit card numbers? Or the group that didn’t?

    If you prefer being in the latter group, it’s time for some sort of intervention. Because that approach to business – and your customers – simply won’t do in this day and age.
    It is a delusional approach to business, because it isn’t right…and because eventually this sort of information always gets out, no matter how hard you try to prevent it from doing so. (Just ask John Edwards about the inevitability of disclosure.)

    Published on: August 11, 2008

    The Washington Post reports that “once primarily the province of Big Gulps and beef jerky, convenience and drug stores are siphoning away sales from traditional supermarkets as the weak economy and high gas prices force consumers to save more by driving less. They are stopping by not only for the quickie quart of milk, but also for pantry items normally bought at the supermarket -- and even for dinner. Some are using the stores to stretch their paychecks, buying what they need when they need it instead of stocking up.”

    In the DC area, for example, grocery sales at 7-Eleven stores during July were 2-3 percent higher than a year ago, while frozen food sales were up seven percent and ready-to-eat meals were up nine percent. The Post says that other areas of the country are seeing similar trends, as well as other stores and formats in the DC region.

    There have been other published reports saying that 7-Eleven in the US plans to increase the number of units in which foods are cooked in-store from 100 at present to about 800, which would represent a rollout of what has been a successful pilot program in Virginia. And company even foresees the day when all of its more than six thousand units in the US could offer in-store cooked foods.

    KC's View:
    This isn’t just a matter of people saving money on gasoline. C-store retailers such as &-Eleven, Sheetz and Wawa have done an excellent job over the past few years of repositioning themselves in many markets. They’ve been gradually shifting away from a dependence on gasoline and cigarette sales to a focus on fresh and prepared foods – the margins are better and it strikes management as a healthier long-term strategy.

    And so, as gas prices have gone through the roof and people have been seeking alternatives to the trip across town to the big box store, c-stores have been better able to offer options that make sense. And, it seems as if most of the have been able to do so without disenfranchising their core customer bases.

    I’ve always thought that the convenience store industry and its trade association, NACS, are worth watching…they seem to have a very strong sense of the market, some of their retailers are exceptionally smart and focused, and there doesn’t seem to be a lot of complacency there. As I said, attention should be paid.

    Published on: August 11, 2008

    The Orlando Business Journal reports that the price tag will be $500 million for Publix to acquire 49 Albertsons stores in north, central and south Florida.

    The acquisition was announced in June, but neither company disclosed the price; it has come to light through a filing by Publix with the US Securities and Exchange Commission (SEC). The deal is expected to close next month, after which, according to the Journal, “all the Albertson's stores will be closed for some period of time, depending on how long it takes to make improvements, the filing said. Publix expects to open substantially all the stores in one month to 18 months after the deal closes.”

    KC's View:

    Published on: August 11, 2008

    • Canada’s Supreme Court reportedly has agreed to hear two cases in which Walmart is accused of union-busting. The cases concern the company’s store in Jonquiere, Quebec, which Walmart decided to close in 2005 after the employees there voted to organize. Walmart maintained that the store had not been profitable anyway, and two lower courts subsequently supported the retailer’s right to make that decision.

    KC's View:

    Published on: August 11, 2008

    In this month’s edition of Facts, Figures & The Future, Todd Hale, senior vice president of consumer and shopper insights at Nielsen Homescan & Spectra, writes that a new survey shows that “about 19% of households claiming to have a gourmet cook in their home. At a time when consumers are dealing with high gas prices and inflation across store shelves, households with a gourmet cook have distinct shopping and buying behaviors, making them an attractive target for food and non-food retailers who are looking to maximize their sales in a soft economy.

    “While gourmet cooks can be found in many household types, they have some unique and attractive demographics: a disproportionate percentage of gourmet cooks have household incomes of $100,000 or more; they have a tendency to live in large cosmopolitan centers or in affluent suburban areas; (and) the household head is employed in a professional or managerial occupation.”

    And here’s the good news for many retailers. Hale writes that “in terms of their retail channel shopping behaviors, gourmet cook households make five additional trips to a grocery store each year than do remaining U.S. households. In terms of annual per household spending across retail channels, gourmet cooks outspend other households by 11% across total outlets and are big spenders in warehouse clubs (+20%), grocery stores (+17%), drug stores (+15%) and even dollar stores (+11%).”

    In addition, Anne-Marie Roerink, director of research at the Food Marketing Institute (FMI), writes about the fact that despite constant media attention, obesity rates in the US remain on the rise. “In fact, of the 94 percent of shoppers who make any effort to eat a healthy diet, just 11 percent say they are successful all the time. These shoppers are a vitally important group to understand for both retailers to develop their programming and for the vast majority of shoppers who do not have as much success.

    So how do these ‘Successful Healthy Eaters’ achieve this healthy eating ideal? They are, first and foremost, people who have a goal, a plan to pursue that goal and ways to stick to the plan. What distinguishes them is the consistency of their attitudes and behavior related to healthy eating. It shows in the way they shop, where they shop, how they feed their families and where they look for information.”

    And the opportunity for retailers, it seems, is to provide them with the information necessary to make intelligent decisions with some staying power.

    And, in this assessment of the retail marketplace during tough economic times, F3 writes that “retailers got the message early from consumers this past year: stay price-relevant to our household needs or we'll shop elsewhere to save. Operators have responded quickly and decisively with catchy price promotions storewide to stimulate traffic and keep categories on shopping lists despite consumers' frugal bent.

    Less than wonderful for the latest quarterly results, deep promotions are the honey attracting many shoppers to come back to stores with savings strategies in mind. Across shopper demographic groups, buying on promotion, and stocking up when prices are favorable, are two of today's primary savings strategies. Meanwhile, retailer loyalty leaders that can effectively appeal to their top shoppers, do target them with exceptional rewards based on their individual purchase histories.”

    And, there’s much more.

    To get your copy of F3, go to:

    http://www.factsfiguresfuture.com/

    F3 is a joint production of the Food Marketing Institute (FMI), ACNielsen, and Phil Lempert.

    KC's View:

    Published on: August 11, 2008

    • The Puget Sound Business Journal reports that Costco has agreed to post Food and Drug Administration advice about mercury, described as “a known neurotoxin most commonly consumed in contaminated fish,” at its at seafood counters in stores around the country. The move that “is a response to member requests and the advocacy efforts of ocean conservation group Oceana,” according to the story.

    • Tyson Foods said that it was voluntarily recalling more than 50,000 pounds of chicken because of a soy-based allergen used in the product that is not listed on the label. No illnesses have been reported in connection with the chicken, which primarily was sold to foodservice operators.

    KC's View:

    Published on: August 11, 2008

    • Starbucks has named Darcy Willson-Rymer, the company’s vice-president for Europe, the Middle East and Africa, to be its new managing director for the United Kingdom and Ireland. He succeeds Phil Broad, who resigned for “personal reasons.”
    KC's View:

    Published on: August 11, 2008

    • Family Dollar Stores said that its July sales rose 7.2 percent to $527.1 million, on same-store sales that were up 4.6 percent.

    • Dollar Tree Inc. said that its second quarter sales were $1.093 billion, up 12.5 percent over the same period a year ago, on same-store sales that were up 6.5 percent.

    KC's View:

    Published on: August 11, 2008

    On Friday, MNB reported that Longs Drug Stores’ July sales were off 1.6 percent to $353 million, on same-store sales that were down 43.5 percent.

    This latter number, of course, was incorrect…and the result of two index fingers moving quickly but inaccurately across the keyboard at about 6 am.

    As someone from Longs pointed out to MNB in an email, “it was a tough month, but not that tough.”

    Same-store sales for July were actually down 3.5 percent.

    MNB apologizes for the goof, and for any resultant heart palpitations suffered by shareholders and analysts when reading the piece here.

    KC's View:

    Published on: August 11, 2008

    Wonderful email from MNB user Steve Panza:

    I'm writing this after enjoying my morning snack (MNB) combined with my newest favorite snack - cheese croissants - purchased from my local Tom Thumb this morning. I'll stop off there to get a bagel (the closest thing to a NY bagel nearby) on the way to my "office," or local coffee shop with wifi. Yesterday when I purchased my sesame-seeded bagel, the cashier was talking to the customers in front of me. As they were departing, she told one of them that she was expecting some cheese croissants. Jokingly, I mentioned that they sounded pretty good. The cashier replies "She’s a baker here, I can have her make you some tomorrow" and then she calls out to the departing customers that I wanted some as well. They laughed and waved as they exited the store.

    This morning as I walked to the baker counter, the baker I saw yesterday in line called out and said the croissants were in the oven and would be ready in a few minutes. Talk about service. Apparently, these things are a special order item as not all the bakers will make them. And as I was paying for my aromatic purchase, the cashier says "Those cheese croissants go great with tomato soup." I guess I know now what I'm having for dinner as well.

    That store has won itself a customer, even if I don't eat another cheese croissant. But I will.


    Great retailing isn’t rocket science. But it does require much work, attention and nurturing.

    Thanks for giving us an example.




    Responding to last week’s story about Publix getting more value oriented, and my comment that this makes sense as long as the company doesn’t dilute its core values and disenfranchise existing customers, MNB user Al Kober wrote:

    Smart thinking. Lower your prices and not quality. Offer more value on the same quality. Many retailers are making the mistake of lowering quality in order to offer lower prices. For a retailer that has a high quality image because customers have learned that their quality is consistently high, consumers will continue to shop there. That retailer must find other way to increase the value they deliver. The retailer that lowers its quality in order to offer better value is in reality doing the exact opposite. Consumers are not dumb. It may look like it is working, because it may take 3-6 months for consumers to realize that their poor eating experience was not just a one-time thing. And when they do, they will go somewhere else. So the message is, during these more difficult times, go home with the one you brought to the dance. If consistent high quality got you to where you are , stay there. Now more than ever, consumers’ needs are the same. They want the best they can get, the same high quality, at the lowest cost. Is your business up or down? The taste of quality remains long after the flavor of low price has faded away.




    On the subject of small store formats and the coming battle between Walmart’s new Marketside store and Tesco’s Fresh & Easy, one MNB user wrote:

    As a critic of Tesco, I to must say that this format will not work for Walmart either. Some of the reasons are the same, other are different. Biggest factor the lack of talent to buy and run these formats. The talk is that they will be hiring from the outside to run these stores (hopefully supermarket folks as they have no experience in this area, maybe Whole Foods people.. ) helps prove my point. Anyone who has been in the business (knows) small stores are tough and they haven't make the Neighborhood Markets work and now they are entering into fresh. Fresh where margins are higher but so is shrink and this company’s biggest weakness in food is fresh…




    Responding to our ongoing discussion about the generational divide that sometimes creates communication problems, especially about technology, MNB user Steve Ritchey wrote:

    I see problems on both sides of the age issue. The young kids need to realize they don’t know everything there is to know about running a business, the older people need to realize they have some new things to learn.

    In my job, I see too many kids who come in fresh out of college and are ready to take over the company, then when the company insists they learn something about the business before they suggest radical changes, they leave. Too often I also see older people who dismiss the younger generation out of hand as having nothing to contribute yet. They have something to contribute, but they also need to realize, they aren’t ready to run the company, and maybe, just maybe there is something to learn from us old guys still.

    The young man who wrote in saying he worked in Finance, yet he was a technology guru and a food expert struck a chord with me. He may be a food expert, but does that mean he knows how to market food, is he a real expert, or a self proclaimed one, how does he try to present his ideas, is he dripping with arrogance and disdain, or with some respect for someone who’s maybe been in the business since before he was born.

    The point I want to make is, we can learn from each other, put aside the arrogance of youth or longevity and communicate with each other, you may be surprised.





    Got an interesting email from MNB user John Montzingo:

    I saw an Interesting article from Harvard Business Publishing about companies pursuing a “middle of the road” strategy. Here’s an excerpt:

    First, high-performing companies understand that it’s not enough to be “pretty good” at everything anymore. As a company, you have to be the most of something—the most exclusive, the most affordable, the most responsive, the most friendly. Companies used to want to be in the middle of the road—that’s where all the customers were. But now, in an age of hyper competition and non-stop innovation, the middle of the road is the road to ruin. What do they say in Texas? “The only thing in the middle of the road are yellow lines and dead armadillos.” To which we might now add: “And once-great companies that are slowly going out of business.”

    Among manufacturers and retailers, how many can really saw they’re not in the middle of the road?


    I don't know…but I do know that I’ve written “the mainstream is where you go to drown and the middle of the road is where you find roadkill” so many times that I actually stopped for fear of boring you.

    And now the same thing is being written by Harvard Business Publishing.

    Go figure.




    Lot of emails last week regarding the signing of Brett Favre by the NY Jets…

    One MNB user wrote:

    I can see the sales of Direct TV’s “NFL League Pass” increasing dramatically in the state of Wisconsin.

    I myself as a Wisconsin-ite will be looking for ways to see Brett play in a Jet’s uniform (does Dish Network have a similar program for the NFL season???). Hmmmm…it will be an interesting season for Packer’s fans for sure!


    Another MNB user wrote:

    As a Packer stock holder, I’ll take Brett, the Jets can have our coach and GM…

    Thanks…but as a Jets fan, I’m pretty happy the way things are.

    And another MNB user wrote:

    Brett Favre gave up too many key interceptions in the last couple of years, as far as I'm concerned. I give coach Mike McCarthy credit for standing behind a decision that
    was made months ago. It shows his level of integrity.


    MNB user Bill Drew chimed in:

    There is an entire generation of Green Bay fans that know nothing of the Pack other than the Brett Favre era, and as a result, his trade to the Jets is a bitter pill to swallow for some. Even some "old-timers" are unhappy that he's leaving for the Big Apple. As a resident of Green Bay since 1990 and a Packer fan since 1967, I'm conflicted - three years ago, I watched a quarterback who had lost a step and was a second or two late in his reads. But last year, Favre treated fans to a dream season but then spoiled it in 10 below zero weather with an interception of an ill-conceived pass in overtime in the NFC championship game.

    The public administration department of St. Norbert College here in Green Bay conducted a scientific survey on Tuesday, and nearly 60% of those polled agreed that the Packers needed to move on and that Favre was a distraction. Perhaps there's some lessons to be learned from this - keep your mouth shut and discussions private, and for heaven's sake, try not to let egos get in the way of business.

    Can he still compete? Yes. Will he made some bad on-the-field decisions and cost the Jets a game or two? Probably. Will Green Bay miss him? That remains to be seen.


    KC's View: