retail news in context, analysis with attitude

Published on: January 5, 2009

Excellent piece in the San Francisco Chronicle entitled “Corporate Wellness, Safeway-Style,” which looks at the newest steps taken by the food retailer as it re-engineers its employee health care programs, described as having the dual goal of cutting costs and creating a healthier workforce through a more prevention-driven approach that emphasizes employee responsibility.

The Chronicle writes, “Beyond routine health matters like flu shots, Pap smears and prostate checks, prevention is not the starting point for most employer-based insurance plans. Unlike setting a broken arm or taking out an inflamed appendix, the health benefits of making lifestyle changes are a lot like the dog that doesn't bark in the night. It's hard to measure the savings from crises that don't happen because people are getting into better physical shape … Safeway's market-based approach for its nonunion administrative employees gives price breaks for practicing what the company preaches. The newest part of the plan, called Healthy Measures, just went into effect on Jan. 1. This program gives employees reductions in their insurance premiums if they are, and stay, within certain limits on four common medical risk factors - smoking, obesity, blood pressure and cholesterol.

“Rebates for making the grade on all four risk factors total nearly $800 a year for an individual employee, plus a similar amount for the employee's spouse or partner. Tests were administered last summer for those employees participating in the rebate plan; tests for significant others will be phased in by 2010.

“People who tested within the limits got lower health premiums at the outset of this year, while those who missed one or more of the four goals can get a retroactive rebate if they improve sufficiently by the end of the year.”

Published on: January 5, 2009

The Wall Street Journal reports that Ahold-owned Stop & Shop and Giant Food are introducing a new “Healthy Ideas” nutritional labeling system that is “designed to help customers find their stores' healthiest foods” and “will distinguish more than 3,000 of the stores' products and fresh produce with a bright green-and-blue symbol signifying they meet U.S. Department of Agriculture and other federal guidelines defining what makes a food healthy. That represents about 10% of the store's total inventory and includes items ranging from dairy products to pancake mix to frozen Brussels sprouts.”

And, the Journal writes, “Products in the chains' 561 stores that carry the Healthy Ideas symbol have less fat or cholesterol than other products in their category and include at least one good nutrient source such as fiber, protein or calcium, Stop & Shop says. The company says Healthy Ideas wasn't created to help consumers lose weight or elevate one product over another, but rather to highlight the items that meet or exceed federal guidelines for healthy food.

The program is the latest nutrition labeling program to be introduced by US supermarkets.

• Delhaize-owned Hannaford Supermarkets, Food Lion and Sweetbay Supermarkets all are using a “Guiding Stars” program that gives qualifying products one, two or three stars depending on whether they are good, better or best for consumers.

• Hy-Vee and Price Chopper have both subscribed to the “NuVal” system, originally called ONQI, which rates every one of their products on a scale of 1-100, with 100 being healthiest

• In addition, as the Journal notes, “Food manufacturers, including Kraft Foods Inc., PepsiCo Inc. and Unilever PLC, are working with nutritionists on another program to add a ‘Smart Choices’ label to certain products in a program scheduled to launch this summer.”

Published on: January 5, 2009

The Minneapolis Star Tribune reports that manufacturers are “downsizing packages, while keeping prices the same, as they passed on higher food costs to consumers.

“According to a recent analysis by Nielsen Co., about 30 percent of all packaged goods have lost content over the past year. This at a time when U.S. grocery bills are rising -- up 7.5 percent in October vs. the same month a year ago -- at the fastest rate in 18 years … What began as a response to rising fuel and ingredient costs has become institutionalized at many companies. At General Mills, for example, cost-cutting is so embedded that the company even has its own intimidating term for it: ‘Holistic Margin Management’.”

Published on: January 5, 2009

The San Antonio Express News reports that the Texas legislature will consider a bill recently introduced that “would require businesses that provide customers with plastic checkout bags to also offer for sale a reusable bag as an alternative.

“The reusable bag would have to be reasonably priced and could be made of cloth or other machine washable fabric, a thick plastic or other material. The bill also would require that a business provide a plastic checkout bag recycling program if it offers plastic bags to customers.”

Texas-based HE Butt Grocery Co. is supporting the legislation, and the Express-News notes that Texas-based Whole Foods already has stopped handing out disposable plastic bags to customers.

Published on: January 5, 2009

The New York Times reports on a growing surplus in the global dairy supply, writing that “as American dairy farmers increased their shipments of powdered milk, cheese and other dairy ingredients to foreign markets, their incomes rose. And the demand surge helped drive up the price of milk for American families. The national average for whole milk peaked at $3.89 a gallon in July, up from an average of $3.20 a gallon in 2006.

“But now, demand for dairy products is stalling amid a global economic slowdown and credit crisis, even as supplies have increased. The result is a glut of milk — and its assorted byproducts, like milk powder, butter and whey proteins — that has led to a precipitous drop in prices.

“The price of powdered skim milk, used in infant formula, dairy products and processed foods, has fallen to roughly 80 cents a pound today from about $2.20 in mid-2007. Other dairy products have declined as well. Whole milk at grocers has not declined as rapidly as wholesale powdered milk, but it has dropped to $3.67 a gallon, down nearly 6 percent from the peak.

“While consumers are undoubtedly pleased by the lower prices, dairy farmers are struggling.”

Ironically, it is just last week that Stew Leonard’s – the fresh food retailer long known as “the world’s largest dairy store” – sued the Dairy Farmers of America, charging that the association “bought large amounts of cheese on the Chicago Mercantile Exchange in an effort to corner the market.” The Associated Press reports that “the price of cheese futures can have an effect on milk prices. The U.S. Department of Agriculture sets a minimum price of milk that is based in part on a survey of cheese prices that includes futures prices.”

Stew Leonard’s reportedly is seeking unspecified damages as well as seeking class action status for the lawsuit.

Published on: January 5, 2009

The Financial Times reports that discounter Aldi is targeting New York City as a likely market for expansion, with a goal of opening its first Big Apple store in 2010.

As FT writes, “Aldi has expanded to a chain of almost 1,000 stores in the central and eastern US since 1976, when it opened its first store outside Chicago. This year the retailer accelerated its expansion, opening more than 100 new stores, up from about 50 a year previously. Aldi has entered Florida, where it opened 23 stores over a matter of weeks, and Rhode Island.

“Aldi plans about 75 stores this year.”

Published on: January 5, 2009

The Associated Press reports that the Nassau County Police Department has released the results of an investigation into the trampling of a temporary Walmart employee that took place early in the morning on “Black Friday,” the traditional beginning of the end-of-year holiday shopping season. The employee, Jdimytai Damour, died of asphyxiation after being trampled by the crowd trying to get into the store.

According to the report, “the responsibility for the security and control of these sales events rests with the store. Store administrators should never market a sales event without having a plan, and the proper resources to manage it."

The AP writes that “the report recommended setting up barricades or rope lines to manage crowds before the sale, handing out wristbands or numbered tickets to arriving customers, positioning store employees in the parking lot and providing them radios to share information.

“Patrons should enter the stores in smaller groups, not all at once; retailers should have maps showing where to find the hottest sales items, and patrons should be kept out once the store reaches maximum occupancy, the report said.

“Stores should call police if crowds become unruly and plan whom to call in a medical emergency, but they should also have defibrillators on hand and staffers trained to use them, the report said.”

Published on: January 5, 2009

Ron Burkle, owner of private equity firm Yucaipa Cos. and a man best known for taking financial positions in a number of supermarket chains, reportedly has acquired an 8.3 percent stake in bookseller Barnes & Noble, making him the company’s fourth largest shareholder.

Bloomberg reports that Yucaipa my seek to enter into talks with Barnes & Noble, which lost 56 percent of its value in 2008 and suffered a self-described “terrible” holiday season. Barnes & Noble is described by Burkle as being “undervalued by the market.”

Published on: January 5, 2009

comScore reports that e-commerce sales dropped three percent during the just-completed end-of-year holiday season, to $25.5 billion, compared to $26.3 billion during the same period a year ago. However, the Internet measurement company notes that there were five fewer shopping days between Thanksgiving and Christmas this year, which almost certainly affected the numbers – though to be sure, the recession and broad economic uncertainty could not have helped.

Meanwhile, Amazon.com is saying that it had its best holiday season ever…though it did not provide precise figures to support the claim.

Traffic was up at sites such as Amazon.com. Walmart.com, Apple.com and Netflix, while they were down considerably at sites for companies that include eBay.com, Target, and Best Buy, according to Internet Retailer.

The Wall Street Journal reports that while online sales may have been down for the holidays, they were not down as much as in the brick-and-mortar arena, where it is estimated that holiday sales were down between five and eight percent in 2008.

Published on: January 5, 2009

• Over the weekend in the UK, the Independent reported on a new survey there that suggests that 25 percent of all British families will have no disposable income in 2009. This is worse than a survey done just two months ago projecting that 21 percent of British families will have no spare cash left after paying basic living expenses.

Published on: January 5, 2009

• Drug chain Walgreen Co. reported that its first quarter profit was off 10 percent to $408 million, from $456 million during the same period a year ago. Q1 sales were up seven percent to $14.95 billion, on same-store sales that were up 1.7 percent.

Published on: January 5, 2009

First of all, thanks to all of you for the holiday notes and good wishes, and for being patient while MNB went on hiatus starting on Christmas Eve. Other than a laptop meltdown that had me spending more time than expected at the Genius Bar of the local Apple Store (and that taught me yet again the value of a good backup system, which I didn’t have), it was a terrific 12 days. More on that this Friday.

(I only got one critical email, from a self-described “tired and cranky retailer,” who questioned how come I got to take so much time off and he didn’t. Fair point.)

However, while I was taking it easy during the past 12 days, that doesn’t mean I wasn't paying attention. Here are some stories that I though worth noting…with commentary, where appropriate, in italics…

• The big news during the break was that Walmart decided to write checks totaling at least $352 million to settle 63 lawsuits in 42 states across the country alleging that it had forced employees to work off the clock.

According to the New York Times story, “The workers and their lawyers will receive at least $352 million, and the payments could reach $640 million, depending on how many claims affected workers submit … The newly settled cases involved hundreds of thousands of current and former hourly employees. It is unclear how much the average employee will receive, but the sum could be several hundred dollars.”

According to the Times, “Union critics of Wal-Mart, the world’s largest retailer, saw the settlement as proof of their view that the company achieves its low prices in part by cheating workers. But the company rejected that characterization, saying it had already corrected wage practices that it has long attributed to local managers acting without authority.”

One conclusion reached by a number of folks that seems logical here is that it made sense for Walmart to get these cases off the books before the Obama administration takes office on January 20. At the very least, an Obama White House will be more sympathetic to organized labor than the Bush administration, and getting these cases settled could be one way of staying off the new administration’s radar.

I continue to believe – or maybe hope is a better word – that the Obama administration won’t be as anti-business as some people expect, if only because of the dreadful economic circumstances in which we all find ourselves. Seems to me that there are a lot of other issues that need to be addressed on January 21…but it probably was a prudent move for Walmart to bite the bullet on this one.

• Curious story in Business Week suggesting that Tesco’s entry into the US has put Walmart on the defensive, that Tesco is “Walmart’s worst nightmare,” and that Walmart has good reason to be nervous because the British retailer has been successful at blunting the competitive efforts of Walmart’s Asda Group in the UK. It also notes that Tesco’s strengths have been operating a multitude of formats, and developing marketing approaches in synch with customer data generated by its stores.

It remains unclear how successful Tesco’s Fresh & Easy stores in the US are going to be in the long term, so I’m not sure I buy the idea that they have put Walmart on the defensive. I just don't think the folks in Bentonville think that way…and nor do the folks at Tesco HQ in Cheshunt in the UK, for that matter. Sure, the competition is heated in the UK. Sure, Walmart launched a small-format Marketside concept after Fresh & Easy began rolling out stores. But that is just smart business, not playing defense.

• The BBC reports that the British government “has launched a healthy living campaign in a bid to stem rising obesity rates in England. It includes television adverts warning too much body fat leads to cancer, type 2 diabetes and heart disease … Tesco, Kellogg's and Unilever are among the companies who will be promoting the ‘eat well, move more, live longer’ message in the ‘Change4Life’ strategy.”

• Advertising Age had an interesting story about McDonald’s McCafe development in Europe, noting that the fast food retailer is doing an excellent job not just in offering beverages on a par with Starbucks, but also is getting close to the iconic coffee retailer in creating a more elegant experience to go with it. The implication is that if McDonald’s can do it in Europe, there may be no reason it can't do the same thing in the US, where Starbucks has been struggling because of too many stores and too little disposable income.

• Other Starbucks news included the report from Forbes that the coffee retailer, looking to expand its menu and give customers new reasons to visit its stores, has introduced a new line of tea lattes and nondairy tea infusions that have fewer than 200 calories. That’s the good news.

The bad news was from USA Today, which reported that Starbucks has informed its employees that it will not guarantee that it will match contributions to their 401 (k) retirement plans this year, and will switch to a “fully discretionary match” dependent on company performance.

I wonder when Ron Burkle will decide to make a play for Starbucks. And when it happens, remember…you read it here first.

• Spartan Stores completed its acquisition of VG’s Food Center (17 stores) and VG’s Pharmacy (15 units), a deal expected to increase Spartan’s annual sales by about $300 million.

• Walmart said that it has joined a Russian retailing trade association, a move seen as a precursor of the company’s expected move into the Russian market.

• And finally, Advertising Age reported that Walmart reportedly has decided to pull out of Nielsen’s PRISM, “a syndicated-data service that tracks the audience and effectiveness of in-store advertising and merchandising, dealing a blow to a widely lauded initiative that aims to put shopper marketing on par with other consumer media by giving it a similar measurement system.” According to the story, Walmart was happy with the pilot test of the program, but decided that remaining as part of the program would be inconsistent with its data-sharing policies.

Fifteen of the 16 original retailers in the pilot program remain on board, according to the story.

All this means, I think, is that Walmart got what it wanted out of the program, and has decided it can do better by going it on its own.

Published on: January 5, 2009

Haven't gotten a lot of email about editorial stories and commentaries during the past 12 days since we’ve been on hiatus (though we did get a number of new subscribers, leading me to wonder how come MNB keeps growing its mailing list even when we’re not saying anything…).

There were, however, a few notes I thought worth passing along.

One had to with my constant mentioning of songs and lyrics on MNB, and came from MNB user Greg Trelease:

I love to read of your love of music. Too many of our generation have abandoned music as a part of their daily life. I am disappointed however in you not recognizing how the quality of recorded music has reversed in recent years. MP3s and the iPod have substituted convenience for quality of sound. The high level of compression used in the mastering process to make CDs as loud as possible has sucked all the dynamics out of the music. The same dynamics that sucked you in as a listener many years ago when you heard Jungle Land for the first time, have all been leveled off to an in-your-face-all the time sound by many major artists. Springsteen’s, Santana’s and McCartney’s last offerings could burn a hole in your head if you listened thru the whole CDs. But no one does that anymore. Not with an iPod. Nope. Soon as listening fatigue kicks in (after a couple of songs), you just skip to something else. How many iPod users sit down to listen to music? The ones that down load loss-less High Rez files, where the dynamics are saved and the sound can be even better than CD. Do yourself and your ears a favor and look into down-loading high resolution music files along with other loss-less music files. They won’t make the over compressed releases of major artists sound much better, but they will blow away the sound of your MP3 files.

Want to hear what I mean about dynamics? Compare anything from Springteen’s Magic to Kitty’s Back on The Wild, The Innocent and The E Street Shuffle. Sure Magic is three times louder, but which one sounds better after you adjust for volume? No question about it- Kitty trounces Radio Nowhere and everything else on the CD. Magic is mostly a cluttered, muddy mess sound wise. Too bad. Great songs.

Remember CD’s? There are still great sounding CDs being released every day – it’s just getting harder to find out which ones SOUND good. The more popular they are the worst they sound. One can search the web for reviews that mention the SOUND of a recording in the CD review, yet they are harder to find. Robert Plant and Alison Krauss’s Raising Sand is a good example of a fine sounding CD.

And there’s resurgence in vinyl? I wonder why? It’s not convenient. It doesn’t even have a remote! Maybe it’s the…….SOUND!

All excellent points.

You’re certainly right that convenience has in many ways trumped quality when it comes to sound quality, though I’m not sure that I have the ear to detect the differences. But I trust what you are saying, and it seems to me that in some ways MP3 files could be described as the fast food of the music business….and we all know how I feel about fast food.

I’m hooked on the convenience, though. And most people under 30 cannot even remember the last CD they bought…

Not that this is necessarily a good thing.




Speaking of music, we got a lot of reaction to the decision by Bruce Springsteen to release exclusively through Walmart a “best of” compilation in advance of a new album that will get broader distribution. I noted that Springsteen and Walmart seemed an unlikely combination, and a number of you agreed with me.

MNB user Rob Johnson wrote:

Kevin, you are right on when you said, "though one would think that the Bentonville Behemoth would represent a bunch of things that he would find antithetical to his image." Is Bruce not paying attention any more, has he forgotten his roots as so many songs he has sung about mentions the small town, the local retailer or manufacturer falling on hard times?

This new trend of popular singers using only Walmart to sell their latest musical releases is killing me. First the Eagles, then AC/DC, now Bruce (I'm sure there are others, but these three CDs are a must have at my house). I refuse to shop at Walmart, thank goodness I can find them online.

Another MNB user wrote:

Real sweet that such a liberal, pro-union activist as Bruce would "sell out" to Walmart...

Still another MNB user chimed in:

I still can’t believe that authentic icons such as Springsteen or AC/DC would even entertain the idea of making an exclusivity agreement with Walmart, a retailer that represents the opposite of what a ‘rebel rocker’ usually stands for. I guess everyone has a price… even rock legends.




Finally, I referred to my children as “finicky eaters” the other day, and one MNB user challenged me on it:

If your children are picky eaters than obviously you did not teach them to eat what was on their plate and that your kitchen is not Burger King and they can not have it their way. Who is the parent anyway?

I am…but I disagree with your contention that a parent’s job is to force kids to eat stuff they don't like. That strikes me as an exercise in power, not parenting…and I think there is a difference.

I have no desire to be the family’s short-order cook, but if sometimes I make a few extra things so that everybody has something that they like, that strikes me as a fair compromise…especially if the result is that we all sit around the dinner table together. I believe you have to fight your battles…and forcing my kids to eat fish if they don't like it doesn’t strike me as fair.

Now, if I make a spicy fish dish for myself and a bland meat dish for them, I always encourage them to try what I’m eating. And as they get older, they get a little more adventurous, and suddenly start asking for Cajun spices to be used on their steak. Which makes me smile.

There are limits, of course, and sometimes lines have to be drawn. But my feeling is that I have great kids who just happened to inherit their mother’s palate.

I don't mind doing a little extra to make it work.

Published on: January 5, 2009

In National Football League Wild Card weekend action…

Atlanta 24
Arizona 30

Indianapolis 17
San Diego 23

Baltimore 27
Miami 9

Philadelphia 26
Minnesota 14