retail news in context, analysis with attitude

Published on: March 17, 2009

by Michael Sansolo

This week, 60 Minutes took cameras someplace they had never gone before. Don’t use your imagination on that for too long—the destination wasn’t all that exotic. It was the office building in Washington, DC, that houses the Federal Reserve Board.

As 60 Minutes explained, the chairman of the board never, ever gives interviews. (Well, actually not in more than 20 years and that was very brief.) On Sunday night, Chairman Ben Bernanke broke that tradition. The interview was extremely interesting to watch and not because Bernanke disclosed financial secrets or explained the intricacies of the US economy. It was simpler than that.

If you followed the Fed under previous chairman Alan Greenspan, you might remember the incredibly cryptic statements that came out about the economy. I remember hearing an economist joke that the reason Greenspan dated NBC reporter Andrea Mitchell for so long prior to marriage was very simple: It took Mitchell all those years to figure out that Greenspan had actually proposed. Greenspan had a way of hedging his meaning.

Against that backdrop, Bernanke was stunningly clear and easy to understand. His answers were straightforward, even to a prediction that the economy would begin to recover later in 2009. (You saw the headlines Monday morning.) No subtleties, no metaphors…just straightforward talk. As Bernanke explained, he decided to do the interview because the troubled times called for candor and explanation.

“It’s an extraordinary time. This is a chance for me, I think, to talk to America directly,” Bernanke said during the interview. It’s a lesson we could all learn. Straightforward talk and transparency have a place; now more than ever.

Obviously, Bernanke took a chance. His clear answers on the causes of the financial meltdown or the key early signs of the turnaround might lead to misinterpretation, false hopes or worse. However, it struck me that he was making a statement to a country (and world) spooked about finances. In short, he was reassuring and putting himself out front to address the issues head on.

What does it mean to you? Think about the times and think about the rules that govern business and ask what needs to change at this very moment.

Jeff Noddle, Supervalu’s ever-insightful CEO, give a speech recently on how the world of retail has changed. He talked about the events of September 2008 - the time the economic meltdown occurred - and especially how September 15, the date Lehman Bros. failed, seemed to mark the beginning of the change.

Noddle’s point is well taken. Far too many companies are living in - if you pardon the terminology - a pre-Sept. 15 world. Too many business plans remain unchanged; too many rules remain sacrosanct; too many behaviors remain locked in the past.

Somehow we need a new embrace for this period. The post-Sept. 15 world is scary, especially to our shoppers. They are inundated with bad news and massive concerns. Yet that also means uncommon opportunity to reach out and fill those concerns. The central role food plays in people’s lives means this period provides retailers (and the entire industry) a rare chance to build a new relationship with shoppers by demonstrating clearly to them that we care and understand their concerns.

But mostly it means breaking the old rules of the pre-Sept. 15 world. That certainly comes with risk, but that’s table stakes today. We live in a world of risk.

In short, it’s time to learn a lesson from Ben Bernanke. Break the rules.

Michael Sansolo can be reached via email at msansolo@morningnewsbeat.com .

Published on: March 17, 2009

Walmart yesterday unveiled new details about its revamped Great Value private label line of products, scheduled to begin appearing on store shelves later this month. The company said that the new and improved Great Value products “provide families with affordable, high quality grocery and household consumable options comparable to national brands. The retailer's Great Value brand, first introduced in 1993, spans more than 100 categories and is the country's largest food brand in both sales and volume.”

According to Walmart, the company worked with hundreds of suppliers to “test more than 5,250 products against leading national brands to ensure Great Value quality is equal to or better; conduct more than 2,700 consumer tests to compare the flavor, aroma, texture, color, and appearance of Great Value products against leading national brands; change the formulas for 750 items including: breakfast cereal, cookies, yogurt, laundry detergent, and paper towels; and introduce more than 80 new products, such as: thin crust pizza, fat free caramel swirl ice cream, strawberry yogurt, organic cage free eggs, double stuffed sandwich cookies, teriyaki beef jerky and more.”

The company said that “in addition to product testing, Walmart redesigned Great Value packaging graphics to create a consistent, recognizable look throughout the store, making it easier for customers to find their favorite products.” The new Great Value packaging is blue and white, with “easy-to-read nutrition labels and more appetizing food photography. Walmart also reduced packaging when possible as part of the company's sustainability goals.”

In its story about Great Value, the Wall Street Journal reports that “Wal-Mart's move comes as sales of grocery-store house brands have grown briskly in the U.S. Last year, sales of private-label food and other consumer products jumped 10% to $82.9 billion, from $75 billion in 2007, according to the Private Label Manufacturers Association, citing data from Nielsen Co. Sales of branded products increased just 2.8%.

But Wal-Mart's sales of house brands, as a percentage of total revenue, have lagged its rivals'. Last week, U.S. grocer Kroger Co. said 27% of its fourth-quarter revenues came from private brands; analysts estimate that Wal-Mart's private-label products account for about 16% of its overall food sales.”

Walmart said that it “is asking customers to share their favorite Great Value items by encouraging them to rate the products and offer reviews on walmart.com.”

Published on: March 17, 2009

There is an interesting column in the Seattle Post-Intelligencer this morning by David Reilly in which he notes that it was two years ago that “Wal-Mart withdrew its application to create an industrial loan company, a kind of banking operation, in the face of opposition from the Federal Deposit Insurance Corp., rival banks and the wider anti Wal-Mart lobby.

“Much of the protest was rooted in fears that Wal-Mart's application was a first step toward creating a real bank, as opposed to an entity meant to process payments from customers and suppliers. From there, opponents argued, Wal-Mart would soon crush competitors, especially community banks.”

But now, Reilly writes, times have changed…and perhaps it is time it not just allow Walmart to start a bank, but encourage it.

“A Wal-Mart bank would surely add to the sum of lending in the U.S.,” Reilly writes. “As a competitor of the big, established banks such as Bank of America Corp. or Wells Fargo & Co., it might also spur them to lend more and be the kind of private initiative that helps ease the smothering influence of government in the industry.

“Wal-Mart has a ready base for bank branches, with more than 4,200 stores in the U.S. The retailer's technology probably could be adapted to banking since it already offers some limited financial services … Not to mention that Wal-Mart, unlike most banks, is financially healthy and has a strong balance sheet.” Reilly adds that “Wal-Mart's reams of transaction data might also help it make safer loans.”

Published on: March 17, 2009

The Wall Street Journal reports that when Starbucks hosts its annual meeting in Seattle tomorrow, management plans to outline the tactics it is using to grapple with the impact that the recession is having on its sales and profits.

In addition to identifying 900 stores that will be closed and some 20,000 jobs that will be eliminated, Starbucks also has begun rolling out a new instant coffee product – Via – and now is selling breakfast “pairings” that are sort of like upscale value meals.

Starbucks also seems to have some design ideas up its corporate sleeve. The Journal reports that “on Friday, Starbucks opened a store in downtown Seattle featuring wood décor that is reminiscent of the company's first location, at Seattle's Pike Place Market. It is an environmental design that features recycled materials, including a large wood table that once was used at a local restaurant and inside a Seattle home.

“Two things are notably absent from the new store's menu board. Prices aren't listed alongside the beverages, except for a small selection of high-end coffees made in a Clover brewing machine. The board also doesn't list Frappuccinos. Instead, baristas direct patrons to disposable paper menus if they want to buy one of the sweet blended drinks or learn the price of the other beverages. A Starbucks spokeswoman said the changes were aimed at making the store feel more like a coffeehouse.”

It is worth noting that the Wall Street Journal also has another coffee-related story, reporting that companies such as McDonald’s, 7-Eleven and Dunkin Donuts are expanding and growing as they sell “a decent cup of coffee at affordable prices,” while the likes of Starbucks and Caribou Coffee are struggling because they are perceived as being high-priced.

Published on: March 17, 2009

USA Today reports that many manufacturers and retailers – including general Mills, Dannon, Walmart, and Fresh & Easy – are deciding not to sell dairy products containing the synthetic hormone recombinant bovine somatotropin (rbST), which while it is seen as a way to get cows to generate more milk, also is perceived by consumers as worrisome.

The US Food and Drug Administration (FDA) says that rbST is safe to consume, but as USA Today notes, synthetic hormones in dairy cows have been banned by Canada, Japan, Australia, New Zealand and a number of European countries.

Published on: March 17, 2009

Numerous stories point to the fact that this week marks full implementation of Country of Origin Labeling (COOL) legislation. “Starting today,” MSNBC.com writes, “labels on fresh meat, raw nuts such as peanuts, pecans and macadamia nuts, also fresh and frozen produce must now list where the food originated. Some meat labels must also list where the animal was born, raised and slaughtered.”

"I strongly support country of origin labeling -- it's a critical step toward providing consumers with additional information about the origin of their food," Agriculture Secretary Tom Vilsack said in a statement.

Retailers and suppliers not complying with the law will be hit with a $1,000 fine per violation.

Published on: March 17, 2009

Walmart sees the demise of electronics retailer Circuit City as a golden opportunity, according to a Wall Street Journal story, and it plans to take advantage of the moment by continuing to ramp up its presence in this category and bring the fight to Best Buy, the surviving national electronics retailer.

Best Buy CEO Brian Dunn, however, isn’t conceding anything. The Journal writes that he “hopes to leapfrog growing competition from Wal-Mart by transforming the retailer's stores into lively showrooms for the latest gadgets. A onetime Best Buy stereo salesman who has spent 24 years climbing the company's ranks, Mr. Dunn said he still believes that the best retail innovations come from front-line workers … Focusing on showmanship and service to combat Wal-Mart's low-price draw is risky in a recession where consumers are clamoring for no-frills bargains. But Mr. Dunn said he intends to win customers by matching Wal-Mart on prices, and then offering something more, building on Best Buy's existing strategy of helping customers navigate increasingly complicated technology. The key will be making the most of Best Buy's tech-savvy sales force, he said.”

Published on: March 17, 2009

• The Orlando Sentinel reports that discount retailer Aldi, which has nine stores in central Florida, plans to open at least five more than during the coming year.

• The Boston Globe reports that Ahold-owned Stop & Shop will hold an “affordable food summit” for customers next week at its Quincy, Massachusetts, store, providing customers with “advice for creating healthful meals on a budget.”

• The Washington Post reports on the continuing debate over the Employee Free Choice Act, which would make it easier for employees to form a union” and that “is turning into a debate over fundamental questions of American capitalism.” Opponents say that “it would be a disaster for businesses reeling from the recession,” while “supporters are pointing to the downturn as the ultimate proof of their arguments that labor's decline has helped put the economy out of balance and that only by restoring workers' purchasing power can the nation return to broadly shared prosperity.”

Published on: March 17, 2009

The Los Angeles Times reported that California legislators are considering the creation of a program that would mandate the use of supermarket scanner technology to flag recalled food products before people are able to buy them, bring them home and eat them … The story noted that Kroger already has programmed such functionality into its checkout systems, but that it has not been embraced on an industry-wide basis.

MNB user Bob Mullen responded:

The basic premise is a good idea although most recalls are done based on either a production date, batch number or sell by date. Knowing these factors there could be items on the shelves that are not part of the recall. Do this not make this unmanageable?

Another MNB user wrote:

Maybe you are being a little cynical. Hy-Vee Food Stores is already using scanners to block the sale of recalled food.

MNB user Carlos Aguila wrote:

I was at a Target in Cumming, GA this weekend with relatives from Latin America that were looking to purchase some clothes. When they scanned a belt, the person at the register said she could not sell it to them because it was a recalled item. This is the first time I have ever seen this, but it was obvious that this was standard procedure at Target. She said she was not allowed to sell the item, had to call her manager to make her aware, and the manager personally took the item to make sure it was handled correctly.

MNB user Ron Pizur wrote:

My first thought was 'why wouldn't retailers be using this already?', but then I wondered about why the produce even got to the checkout in the first place. I would think a grocer would have ran out onto the floor and pulled the product as soon as the recall was received. Although I can see this as being useful for larger supermarkets where it may be quicker to program the recall into its POS system than notifying each of its store managers to pull the product (provided the checkout person is sufficiently alerted by flashing lights and loud whistles when the product is scanned).




On the subject of President Obama’s food safety initiatives, MNB user Kevin Herglotz wrote:

Not a surprise to me that President Obama will make updating the food safety laws a top priority in his new Administration. USDA Secretary Vilsack and HHS nominee Sebelius have been hinting a more “consumer focused approach at those agencies. Also, keep in mind that President with two young kids and the peanut butter mess only reinforced his passion for protecting kids in general, hence the need for a top to bottom review and potential overhaul. The grocery/retail industry would be smart to proactively and publicly announce a series of detailed food safety policy objectives they are “FOR” and position themselves to mainly align with some of the Administration’s anticipated goals. While some of this was done last year it’s time for a repackaging (given the new political landscape) so the industry is seen as positive agents of change and working to protect consumers. Doing so will gain the industry a stronger seat at the table in negotiations that will undoubtedly be tough. Congress (as usual) will want to go too far and strong industry involvement can help move the most burdensome policy solutions back toward the center. The industry should start by praising the appointments to FDA as a good step in reaching across the table.

On the same subject, MNB user Al Kober wrote:

I too am in favor of a well thought out plan to improve the nation’s food safety supply. It must be science based and not just feel good results based.

One big concern is the direction they are currently going linking COOL as a Food Safety initiative. I hope the administration does prudent homework with their COOL plans so they do not add to the confusion instead of helping.




MNB took note yesterday of Wegmans’ new centralized kitchen facilities, and its (to some) surprisingly sharp pricing, prompting MNB user Mark Boyer to write:

Years ago I was meeting with a senior executive of Wegmans and we got to talking about their price image. The Wegmans executive challenged me to go find a comparable item in one of their stores that was higher priced than a local competitor. You could tell it made him borderline angry that people felt they were higher priced. What he did offer up was that people who shopped Wegmans "spent more" because Wegmans made shopping for food easier and created impulse purchasing that resulted in the shopper spending more than they might have intended.

MNB user Dan Onishuk had another thought:

I believe this shift to centralized cooking was long overdue at Wegman's. The cost of operating a full kitchen and staffing it at every store is expensive. It may be Wegman's signature, but eventually you expect payroll and operating costs to cut into margins and there is only so much a customer will be willing to pay for that convenience.

Centralizing will give Wegmans a better advantage in controlling costs and maintaining consistency with their menu throughout the company without sacrificing quality, service and most important today-"food sanitation".




MNB reported yesterday on a New York Times piece about the need to keep hiring and investing in innovation, even in an economic downturn. One MNB user responded:

Thanks for including the piece on hiring, innovation, and passion. More and more of the people I am talking to here in the Midwest are beginning to realize that “Hunker Down” is not a viable strategy. The smartest companies are increasing their visibility and redoubling their activity. This is a terrific time to make investments. Purchasing power in most fields is almost twice what it was a year ago, and even the best people are available in numbers not seen in some time. This economy will turn around, and with $1 trillion in liquidity heading towards it, it may happen faster than anyone expects. The companies and people who will benefit the most will be those who increase their visibility and increase their activity by making wise investments right now!!!




On the subject of Walmart’s ongoing battle with Target, one MNB user wrote:

An important part that this article failed to mention is that Walmart food business alone is more that Target total business. Good ?? The supercenter model was not built on food being the large driving part of sales. In fact today Walmart is getting to be know as a food store not a store that sells food.

All a person needs to do is look at grocery and consumables at Walmart and Target and see that the retails are just pennies off of each other … Where Walmart is getting in a mess is that they continue to raise retails and profits through their food and consumables businesses. In fact, just look at their OTC business and you can see they raised retails to help offset losses in the $ 4.00 drug business.

I wouldn't be too quick to count Target out. If Mr. Bernanke is right, we’re only months away from Target getting back in the game.

MNB user Craig Espelien wrote:

If you watch both companies and how they have chosen to relate to the consumer, Walmart launched a new, friendlier logo and message (Save Money. Live Better.) at the same time Target was still focused on enhancing their upscale consumer image with “cool” commercials that were focused on experience over value. This inflection point (whether lucky on Walmart’s part of planned) caused the two companies to begin diverging – Walmart to growing same store sales and Target to declining same store sales.

While the focus on food is part of the overall difference, Walmart clearly hit a “value” message button that Target completely missed – and was unable to react to quickly enough to salvage the holiday season.




I wrote in “OffBeat” last Friday:

There was a story the other day from HealthDay News saying that 98 percent of people training to be dietitians have negative biases against people who are obese and overweight … with some concerned that this could actually impact the quality of care that they offer the people who need their help the most.

Isn’t this sort of like Mother Theresa having a bias against poor people?

I thought I was making an offhand joke…but others thought I missed the point.

MNB user Ellie Wilson wrote:

I would like to offer a comment on this statement, and perhaps a clarification. First, I’d like to point out that the study was done on dietetic students, not registered dietitians. At the two-year mark in their undergraduate education, they have had little or no contact with patients or individuals, and in fact, may only just have completed their basic sciences like anatomy and physiology. Without the science elements like metabolism under their belts, they are really still unable to appreciate any of the aspects of care and treatment of individuals struggling with overweight and obesity. I also have to agree with Dr. Mezitis of Columbia University, quoted in that Health Day article, that the lack of diversity in the study group highlights the lack of cultural perspective, something also gained over time, both in training and clinical experience. A 2006 study demonstrated that 60% of American medical colleges are not meeting minimum standards for nutrition education as part of their curriculum.

If health care practitioners responsible for assisting with prevention accessed appropriate nutrition care for patients before they become diabetic and hypertensive secondary to weight issues, our health care system might not be crumbling underneath the enormous burden of preventable chronic illness. If we (registered dietitians) could help people needing to lose 10 pounds before they need to lose 40, it would be much less challenging and frustrating for everyone involved. At the recent White House forum on reforming health care, Dean Ornish, MD, a well-known advocate for preventive care who proved that artery disease could be reversed with appropriate nutrition care, recommended that registered dietitians be given primary care practitioner status. I understand that you were just quoting the article, but the Mother Teresa swipe was not your best moment – you usually work hard, I think, to provide context to your discussions.

Missed it by that much.

Sorry about that.