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    Published on: February 25, 2009

    The Wall Street Journal reports that “Target plans to place greater emphasis on food, health-care products, personal items and other necessities, while offering fewer discretionary items to avoid big markdowns that have hobbled its earnings.” The company also is “investing in technology to improve different areas of its operations, such as its pharmacy program, and plans an aggressive drive to emphasize low prices. The retailer plans to design the majority of its new and remodeled stores in a way that draws attention to fresh foods and other consumables.”

    The story also says that “in its new and remodeled stores, Target will allocate more shelf space to non- discretionary categories and try to leverage its advertising and promotions to drive awareness of this merchandise,” and plans an “aggressive assault” on Wal-Mart through various marketing venues.

    KC's View:
    This probably makes sense at some level for Target, but it seemed noteworthy that some of the analysts in the papers are saying that Target is a company that has seem oriented for an up-economy, which is why it is suffering right now.

    It is unclear to me how fast Target will be able to re-orient its business for a recessionary economy, and whether it will be able to do effectively enough to appeal to customers without undermining the core “cheap chic” message that it has been pounding home for years.

    Target has been aiming at one bull’s eye for years…and it isn’t always easy to adjust one’s sights and persuade the customer that you have a legitimate case. It’s possible, but not easy…especially when the competition is Walmart, which has been making a more consistent argument along these lines.

    Published on: February 25, 2009

    Market research firm Decision Analyst is out with a new study reinforcing something that has been widely reported – that economically challenged consumers increasingly are using coupons and buying less expensive private label brands from supermarkets.

    The firm says that 40.2 percent of those surveyed during the fourth quarter of 2008 are buying the least expensive product, regardless of the brand, compared to under 34 percent who said the same thing a year earlier. In addition, 52.1 percent of those surveyed said they regularly cut out coupons, compared to 48 percent who said so a year earlier.

    “Retailers seldom invest enough money in consumer product testing to optimize their private label brands, and few retailers have adequate private-label, quality control monitoring systems,’’ said Diane Brewton, senior vice president of Decision Analyst. “But if retailers can get their act together, they could achieve major private label gains during 2009, and hold those gains even after the economy improves.”

    In a related story, the Wall Street Journal reports this morning that “more shoppers are using coupons to stretch their grocery budgets. In the past four months, coupon usage has surged about 10%, according to Inmar Inc., a coupon-processing agent. And increasingly, shoppers are skipping the scissors and getting coupons online or having discounts sent to their smart phones and rewards cards.

    “Currently, online coupons account for 1% of all coupons offered nationwide – but their use is growing quickly, with redemptions jumping 140% last year, according to Inmar. Manufacturers are attracted to digital-coupon delivery in part because of its 13% redemption rate -- far above the 1% redemption rate for coupons found mostly in newspaper inserts, on the back of sales receipts and on product packaging.”

    KC's View:

    Published on: February 25, 2009

    Published reports say that Walmart-owned Asda Group in the UK is working to eliminate as many as one-third of the SKUs in 10 grocery categories, a move that the company says will save it significant money. Chief Merchandising Officer Darren Blackhurst says that this is a “less is more” approach that will remove clutter and give better performing brands more space.

    KC's View:
    As long as Asda keeps the right two-thirds, this is a smart decision…though inevitably there will be customers and manufacturers that will be disenfranchised by this move.

    It also will give some competitors an opening, as they will argue that they have a better selection more in tune with customer needs.

    But if Asda sticks to its guns and makes a persuasive argument for why it has made this move, the result should be mostly on the upside…especially in a recessionary economy during which shoppers want retailers to advocate for them. (And that’s the key to the argument…that this is being done to help consumers shop more efficiently and effectively.)

    Published on: February 25, 2009

    USA Today reports that “from food to fashion, potions to pets, entertainment to e-commerce, Americans are finding modest ways to both buoy their spirits and maintain, even in cut-rate form, a version of those old free-spending days.” The winning companies, according to the story, are those that “cater to our growing desire to stay home. Call it nesting, cocooning, fall-out sheltering, home is once again where the wallet is.”

    Interestingly, Bloomberg reports this morning that Nestle SA “will sell more products in smaller quantities in the United States and Europe as customers seek to cut their shopping bills” – a story that seems to reinforce the premise of the USA Today piece.
    KC's View:
    The idea is to focus on small indulgences that cater to aspirational impulses that people have but perhaps cannot afford anymore. It has been the argument here for sometime that companies figuring out how to cater to aspirational shoppers even in a time of economic decline will be real winners in the long term.

    Published on: February 25, 2009

    CBS News reports that Snapple is eliminating high fructose corn syrup (HFCS) from its drinks, replacing it with real sugar, which the company says will actually cut 40 calories from many drinks and give it a "fuller bodied taste."

    HFCS is roundly blamed by many nutritionists for having at least some responsibility for the nation’s obesity crisis – it is an ingredient in many products that one might not expect it to be, and is often used because it is less expensive than sugar.

    The same decision has been reached by PepsiCo, which for a limited time will replace the HFCS in its Pepsi and Mountain Dew brands with real sugar. The company says that the move will give consumers “a taste of the original formula.”

    The prices of the reformulated drinks reportedly will stay the same.

    KC's View:
    Good. This isn’t to suggest that people should consume a lot of sugar without worrying about it…in fact, people need to read nutrition labels so they know what they’re eating.

    (This would, of course, make them smarter than a certain $25 million/year baseball player who claims that he really didn’t pay much attention to what was in those needles that he allowed his “cousin” to plunge into his butt. But I digress….)

    The evidence strikes me as compelling that HFCS just isn’t good for us. I know this bothers manufacturers that are inn the HFCS business, but they may have to figure out how to deal with changing sensibilities rather than continuing with e debate they may already have lost.

    Published on: February 25, 2009

    Yesterday, MNB reported that Whole Foods is circulating an email to its New York customers, asking them to lobby elected representatives to change state law to allow wine sales by supermarkets. Well, the Syracuse Post-Standard reports that Wegmans also “is enlisting the aid of its customers in a campaign to persuade the state to allow the sale of wine in supermarkets, setting up informational tables in its New York stores and handing out postcards that can be send to legislators supporting a change in state law.

    The paper notes that “opposing the change in the state alcoholic beverage laws are many of the state's liquor stores and wineries. They've formed the Last Store on Main Street Coalition, a collective lobbying against the proposal. They contend that changing the law would directly harm their business and force some mom-and-pop liquor stores to close.”

    KC's View:

    Published on: February 25, 2009

    • In Arkansas, the Morning News reports that Walmart is making some logistical changes, altering “how it distributes merchandise as customers change shopping habits and frequent different channels.”

    Johnnie Dobbs, executive vice president of logistics and supply chain for the retailer, said that A customer may buy everyday groceries at Wal-Mart, make occasional purchases at Sam's Club and go online to the retailer’s website order gifts, and that the company’s logistical strategies have to reflect these various consumer options.

    "We needed to adapt our process. That (Web) site to store channel did not exist two years ago," Dobbs said. "If you don't adapt, then you lose those growth opportunities."

    And, he said, built into new processes have to be the ability to adapt to changing circumstances, since no one knows that is going to happen next month or next year.

    Dobbs also said that “the company also is trying to save diesel and increase distribution center employees' productivity with technology that increases order-filling accuracy.

    KC's View:

    Published on: February 25, 2009

    The New York Times reports this morning that PepsiCo-owned Frito-Lay “is overhauling all of its calorie-conscious snacks to make them appeal to women, including the baked versions of Lay’s, Fritos, Ruffles, Doritos, Cheetos and Tostitos; Smartfood; Flat Earth; and its 100-calorie packages of snacks.

    “It has researched women’s feelings about snacking and guilt to produce new packaging, new flavors and a new ad campaign, all in an effort to get women to eat Frito-Lay snacks.”

    Frito-Lay’s model is its SunChips brand, which is one of the company’s fastest growing lines. Still, to this point women tend to think of products other than salty snacks when choosing something to nibble on. The Times writes that Frito-Lay research shows that “women snack only 14 percent of the time on salty foods. Women snack 25 percent of the time on sweet foods; the other 61 percent of snacking includes drinks, fruits and vegetables.”

    One of the company’s goals is to bring all these various products together on grocery store endcaps, which can deliver a cohesive message to female shoppers.

    KC's View:
    I trust that this will work better for PepsiCo’s Frito-Lay brand than the recent packaging change employed then aborted by PepsiCo’s Tropicana brand.

    Though I suppose that there is a challenge here…because it won’t necessarily be helpful if men are somehow alienated from the brand. Which probably won’t happen…I think most of us are comfortable enough with our gender identities to eat Doritos that come in beige packaging.


    Published on: February 25, 2009

    Advertising Age reports that as part of an integrated promotion plan, two Campbell Soup executives - Denise Morrison, president-soups, sauces and beverages, and Lisa Walker, VP-soup innovation – are playing cameo roles as themselves on ABC’s “All My Children.” The episode has Campbell donating a hospital wing and the executives attend the ribbon cutting; the broader theme is heart health, which Campbell Soup has been focusing on as it reformulates its soup lines.

    According to the story, “Campbell will also be worked into ‘One Life to Live’ as sponsor of a Valentine's Day ball, and on ‘General Hospital,’ which will have a heart-transplant plotline.

    • Philadelphia Mayor Michael Nutter has signed legislation requiring the city’s chain restaurants – those with 15 or more stores in the city - to post calorie, fat and other nutritional information. The law, similar to one passed in New York City, takes effect on January 1, 2010.

    KC's View:

    Published on: February 25, 2009

    • Target Corp. said that its Q4 profit was down more than 40 percent to $609 million, from $1.03 billion during the same period a year ago. Q4 sales declined 1.6 percent to $19 billion from $19.3 billion a year ago. Same-store sales dropped 5.9 percent.

    The company has said that it is cutting jobs, eliminating bonuses and trimming inventories as ways to be more efficient.

    • United Natural Foods reports that its Q2 profit was up 50 percent to $13.6 million, from $9.1 million during the same period a year ago. Revenue rose 2 percent to $847.6 million.

    • HJ Heinz reports that its third fiscal quarter profit was up 11 percent to $242.3 million, from $218.5 million a year earlier. Q3 revenue fell 7.5 percent to $2.41 billion, from $2.61 billion a year earlier.

    KC's View:

    Published on: February 25, 2009

    …will return.
    KC's View: