retail news in context, analysis with attitude

Published on: April 2, 2009

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Hi, I’m Kevin Coupe and this is MorningNewsBeat Radio, available on iTunes and sponsored this week by Webstop, experts in the art of retail website design.

I’ve been thinking a lot about a figure that was mentioned last week at the IRI Summit in Las Vegas, a number that on the one hand seems easy to understand, but on the other has all sorts of implications.

The number, which came out of IRI research, was quoted by Mike Salzberg, president of the Campbell Sales Company, and he said that “10.4 million shoppers started using the supercenter channel last year even as 8.2 million shoppers were leaving the supercenter channel.”

Now, what that means is that the supercenter channel saw its overall shopper base increase by 2.2 million people last year. Which is pretty good, I suppose.

But I keep thinking about the 8.2 million people who stopped shopping the format, and I keep wondering why.

The conventional wisdom is that the supercenter channel, especially but not limited to those stores operated by Walmart, is doing well in this down economy because it is effectively making the case that it has the right prices on the right products in a one-stop shopping experience.

Clearly, for 8.2 million, the case was not made. Now, I’m guessing that there could be a variety of practical reasons why some of them stopped, such as the price of gas or perhaps the distance.

Ultimately, though, I think it is fair to say that at least part of the reason that those 8.2 million stopped shopping in supercenters is that they were not persuaded that those stores offered a value equation that made it worth driving a little farther, spending a little bit more on gas, or ignoring whatever other factors led them to make a change.

And I’m wondering if this actually illustrates a bigger problem for many stores in the supermarket industry – that they are not engaged in making a persuasive argument to their customers every single day – and I am talking about an argument that is so persuasive that it trumps issues like distance and convenience. I am talking about offering a store experience so compelling that I simply won’t shop anywhere else.

I say this as someone who has been spoiled - every week for the past 25 years, I have driven past between four and six supermarkets to get to a store – Stew Leonard’s - about six miles from my house to do my primary food shopping. Nobody else has persuaded me…or even tried to persuade me, to be honest…to change my shopping habits.

Though, as I noted in one of my commentaries last week, it will be interesting to see what happens when the fabulous Fairway Market opens a new location right across from my gym sometime in the next 18 months. I have a feeling that they’ll be actively soliciting my business. If Stew Leonard’s is smart – and I think they are – they’ll start competing with Fairway now, and not wait until weeks before it opens.

Around here, we’re fond of talking about the cutthroat nature of competition. I’ve been saying for years that retailers need to be competing with Walmart even if there is no Walmart in their market; the fact is that through its ad campaigns and online presence, Walmart helps to shape the competitive scenario throughout this country, and retailers need to compete with that perception and reality every day. I’ve been saying for years that all food retailers need to have some sort of online presence, even if nobody else in their market does…because the simple fact is that Amazon can sell groceries online to everyone who lives in America, and so competes with every food retailer in America. And I’ve been saying for years that food retailers need to compete more actively with the restaurant and fast food brands that are seeking share of stomach and use supermarket aisles to give their brand names credibility and sales volume.

There were, according to IRI, 8.2 million people last year who the supercenter format was unable to keep as customers. They’re in play, as are most food shoppers.

My question is this. Are you seeking out those customers, with active, laser-like precision, with comprehensive knowledge of trends and demographics, with in-store staff that is engaged and challenged, and with marketing plans that stress a unique and engaging shopper experience? Because just convenience, or just a better price on bananas, just ain't gonna cut it.

For MorningNewsBeat Radio, I’m Kevin Coupe.

Published on: April 2, 2009

The Chicago Tribune reports that Marsh Supermarkets is suing its founder, Don E. Marsh, for his use of company funds and property while he served as CEO of the company.

According to the story, the move was prompted by an IRS audit of the company, and it contends that Marsh’s misbehavior “included bankrolling vacation homes and lavish travel for himself, family members and female employees with whom he had personal relationships” and accuses “Marsh of spending tens of thousands of dollars for personal use and allowing vendors to provide him and his family with perks including trips to the Olympics, Wimbledon and the Grammy Awards. It says he tried to hide his use of the money by giving assistants lavish gifts and severance packages.”

The Tribune reports that the “ lawsuit seeks unspecified damages from Don Marsh, as well as the return of more than $1 million it has been paying him in salary continuation, medical insurance and other benefits. ”

Marsh left the company in 2006 after it was sold for $88 million to an affiliate of investment fund Sun Capital Partners.

The Indianapolis Star has some interesting analysis of the story, saying that “money was at the center of the negotiations between Marsh and his eponymous former company, but when that failed, both sides went nuclear. Hence the embarrassing accounts of Marsh's many trips (you do have to wonder why a chain with supermarkets in Central Indiana and western Ohio even needed a jet). The dispute reportedly has gotten incredibly personal, with no settlement in sight.

Published on: April 2, 2009

Interesting piece in the Wall Street Journal this morning about the proliferation of services professing to provide environmental ratings – and the confusion they are creating.

According to the story, “As green marketing has proliferated, so has the number of ‘eco-labels’ competing to be the environmental equivalent of a Good Housekeeping seal of approval. According to the Web site ecolabelling.org, there are more than 300 such labels putting a green stamp on everything from cosmetics and seafood to bird-friendly coffee.”

In addition to creating confusion by dint of the sheer volume, there is the additional problem that not all of the labeling services are reliable; some do not provide independent verification, and others will give a label for money with no questions asked.

And some people say that what is needed is a federal standard that will regulate what people can say about being environmentally friendly and how they can say it – along the lines of the federal organic standards now in effect.

"A growing number of consumers are interested in making informed choices about the environmental impacts of their purchases -- and I believe the federal government can help," Sen. Diane Feinstein (D-California) tells the Journal. "So, I am working with consumer advocates, manufacturers, distributors, and existing labeling and certification project leaders ... to create an accredited national eco-label program."

Published on: April 2, 2009

Marketing Daily reports on new surveys saying that 81 percent of US adults are cutting back on their spending for groceries, and 40 percent say that they are eating less nutritious foods as part of their efforts at economy.

The biggest cutbacks, according to the story, are being made by people who define themselves as being “down and out” or “on the edge.”

However, Marketing Daily also says that “even among the two best-off groups, ‘cautious optimists’ and ‘secure spenders’ (both older than the average population), 18% and 21%, respectively, said the food they are eating is less healthy.”

The survey respondents say that to save money they are buying more pasta, soup, sandwiches, cold cereal, tuna fish and even peanut butter (which hasn’t been getting the best press in recent weeks); they are buying less alcohol and dessert.

Published on: April 2, 2009

The Chicago Tribune reports on a collision between commerce and religion, writing about a case in which a Dunkin’ Donuts franchisee was forced to give up the business he’d owned since 1979.

The reason? Walid Elkhatib is a Muslim, and is forbidden by his faith from handling any pork products. When he invested in a Dunkin’ Donuts franchise in 1979, it did not sell breakfast sandwiches. When the company did introduce them in 1984, it allowed him to not carry them, and to post signs that said “no meat products available.”

But that changed in 2002, when Dunkin’ Donuts said that he had to either start selling the sandwiches or give up the franchise. A court battle ensued, Dunkin’ Donuts won, and now Elkhatib is taking down the franchise signs; he is, however, keeping the location and equipment, to which he owns the rights.

Published on: April 2, 2009

Campbell Soup announced that it has created a website called “Campbell’s Ideas for Innovation,” designed to get scientists, inventors and entrepreneurs to submit ideas for new products, packaging and processes, especially related to nutrition and sustainability. The company said that the site has been engineered to give it access to unconventional sources of innovation that can be gauged for practicality and feasibility.

Published on: April 2, 2009

The San Antonio Business Journal reports that HE Butt has partnered with “Desperate Housewives” actress Eva Longoria Parker to produce a 30-second television commercial promoting environmental awareness for Earth Day.

The commercial features Longoria Parker talking about why it is important to recycle, which plays into HEB’s recycling efforts and promotion of non-disposable grocery bags.

“We believe that H-E-B’s continuous work to care for the environment not only makes us better neighbors — it makes us a stronger business,” said Cory Basso, HEB’s Group Vice President of Marketing and Advertising. “Promoting the reusable ‘green’ bags is just one small part of what H-E-B does for the environment, from minimizing our use of natural resources and minimizing wastes, to recycling, conserving energy and protecting the air quality.”

“The environment is very important to me and through various initiatives of my own and with partners like H-E-B, I work to educate people about what they can do to save the planet by using less energy, recycling and implementing ‘green’ business and personal practices,” said Longoria Parker.

Published on: April 2, 2009

The Birmingham Business Journal reports that bankrupt Bruno’s Supermarkets has informed the state of Alabama that it may close 38 of its 60 stores there by mid-May, including 12 Bruno’s, 24 Food World units and two FoodMax stores, and not just the 10 stores that it originally said it would close when it began the reorganization process last February.

A spokesman for the chain said that it supplied the list to the state to comply with legal requirements, but has no immediate plans to actually close the units because it is hoping to sell the chain. However, if Bruno’s is not sold, it appears that the closings are a real possibility.

Published on: April 2, 2009

USA Today reports that Americans’ love for nuts is being tested by yet another salmonella crisis, as pistachios join peanuts on the list of products that people have to be worried about consuming for fear that they might get sick. And the story notes that a likely result will be expanded and heightened oversight of the nation’s nut industry, where resistance to federal interference seems to be crumbling as sales drop.

Published on: April 2, 2009

Unilever-owned Ben & Jerry’s said yesterday that it had created a fictitious dairy company, Cyclone Dairy, that supposedly was only going to sell products made from 100 percent cloned cows – a ruse that it perpetrated through a website and supposed street sampling.

Ben & Jerry’s said it lifted the veil on the hoax to make its true point – that people have a right to know whether the foods and beverages they are consuming come from cloned animals or the progeny of cloned animals. The US Food and Drug Administration (FDA) has declared such products safe to eat and said that labeling is not required because there is virtually no difference between so-called “cloned foods” and more traditional products.

"Ben & Jerry's believes that we need a national clone tracking system so companies and consumers can avoid eating cloned foods if they so choose," said Walt Freese, Ben & Jerry’s CEO (chief euphoria officer), noting that the company “staged this event in the spirit of raising public awareness, defending consumer choice, working toward better policies on cloned animals and highlighting that the awful truth is that this kind of dairy company could open for business today."

Published on: April 2, 2009

• The Seattle Times reports that Starbucks has begin selling its Via instant coffee product through Seattle and Chicago-area Costco stores in addition to its cafés in those markets.

• Costco announced that it will close its two home furnishings stores, called CostcoHome, this July, saying that the recession made their operation untenable and that they did not play into its long-term expansion plans. The stores are located in Kirkland, Washington, and Tempe, Arizona.

Published on: April 2, 2009

Responding to last week’s piece about the new Fairway Market in New Jersey, MNB user Mehgan A. Belanger wrote:

I'm always up for visiting a new retail food experience, so upon reading your positive notes from your recent visit to Fairway in nearby Paramus, N.J., I figured it would be a good way to spend some of my time Saturday (it sounds kind of sad, but I do have a life outside of this business, really I swear!)

Here's some of my observations, taken from a shopper's point-of-view:

-- While the signage was beautiful, the produce itself was even more so. All of the produce, whether it was organic or traditional, looked like it had been picked only hours before, and you can really taste the freshness. My only concern is that the high aisles in this section make customers traverse the whole area to find the fruits and veggies they want, making it slightly less convenient. But in the end, I had put more items in my cart than I planned to, so this approach can't be that bad.

-- The coffee section! Entering this area, there's a smell of freshly roasted beans that Starbucks could only hope for. The available flavors and countries of origin were impressive. I picked up a prepackaged bag of Fairway's Supreme blend, and after trying it this morning, it's perfect -- not too bold and not too wimpy, with some real flavor. I'm looking forward to going back and creating my own Caramel/Cinammon/Crème Brulee blend. Yum!

-- While I don't know if it was just grand-opening specials, the pricing in some areas seemed to be a steal! A gallon of regular 2 percent milk for $1.75, extra virgin olive oil for $4.99, filet mignon for $4.99, a dozen eggs for 89 cents -- how can you pass this up?! I'd make the half-hour trip for these items alone if those prices stay.

-- The quick-service Blimpie that is placed right inside the produce section has me puzzled. It doesn't seem to work with the gourmet/upscale image of Fairway, and since Fairway has its own section of prepared food to-go, I imagine Blimpie might take away some of that business.

-- The diversity (and volume) of customers. I enjoyed my experience at Fairway overall, but I really hope there's less customers the next time I visit. It made the shopping experience a bit of a hassle, but being opening weekend, it's understandable.

What was remarkable was the variety of customers -- you have the well-to-do shoppers picking out organic milk and value shoppers picking up the regular milk with the special pricing. You have label-reading health nuts and foodies picking out gourmet veggie chips next to regular Joes with their pretzels in the snack aisle. College-age kids are lined up next to baby boomers and senior citizens at the deli.

It's kind of surprising when you look at your neighboring shoppers, but it's cool to see a brand transcend income levels and demographics, and connect with all types of shoppers.

Best of luck to this new store! I know I'll be back in its aisles soon.

As will I. Thanks for the detailed report.




Regarding my continued calls for greater emphasis on e-grocery, MNB user Mike Spindler wrote:

In the interest of full disclosure, I remain a shareholder and board member of MyWebGrocer.

That said….. Online continues to grow in consumer influence for the CPG space inside and outside the actual online ordering and fulfillment components. The increase in the switch-out from paper-based circulars to those that are interactive (particularly if personalized based on their loyalty purchase records), the increases in coupon usage …almost all of it coming through either regular online or mobile online, the enthusiasm of consumers for CPG ads and offers when combined in online food environments and yes the continued growth of online shopping for CPG, at least for savvy operators, speaks volumes about both the potential and the necessity of getting in the game…and if in…of improving the state of your game.

Grocers could be caught in the crossfire between Amazon and Walmart. Or they could compete and take advantage of their banner and position in the marketplace. Online Grocery remains a very specialized application set due to the unique manner in which consumers engage. Their interest is in speed, convenience of interaction between the different tools and a predictable result. The applications built by companies such as MyWebGrocer, specifically aimed at the grocery shopper are much more effective at converting those consumers into action than the use of generalized or even customized packages of online applications which might well be effective in areas such as books, music and even apparel. This is also true of the applications used by Walmart and Amazon at least with regard to regular grocery type shopping.

Also in the interest of full disclosure, MyWebGrocer is a valued and longtime sponsor of MNB.




Got a lot of emails yesterday about our April Fool’s story, but this one, from MNB user Matt Flax, came the farthest (and is one of my favorites):

I read your column every day, currently from Shanghai, China. It's a must read no matter where in the world I am.

I am an American, originally from the Washington DC area who now works and lives in Shanghai. Your April Fool's story caught me for three reasons. The China angle, Giant Supermarket angle, and that I am reading it on April 2nd in Shanghai. I read China news every day as well and couldn't believe there was no report on a China company buying Borders & Rite Aid let alone Target & Starbucks. I totally believed Stop & Shop would do more damage to a once good supermarket brand. Giant was a great supermarket and dominant player in the DC area before Ahold took over and ruined it.

Well done!!! Keep up the great work!

I’m blushing.

And thanks.

More on the April Fool’s story below…

Published on: April 2, 2009

To answer the question that so many of you asked yesterday…

Yes, the first piece on MNB yesterday, which detailed the decision by a China-funded venture capital firm called Marco Polo Finance to buy up troubled US retailers including Starbucks, Rite Aid, Target and Borders, and which also announced the intention of Ahold USA to move the headquarters of its Stop & Shop and Giant of Landover chains (henceforth to be combined and known as Super Giant Stop & Shop), was indeed an April Fool’s joke.

I thought that was clear in the “KC’s View,” where I pointed out that these weird stories keep cropping up on the first of April each year. But this apparently was not enough. About an hour after MNB first got posted, I got a phone call from Stop & Shop headquarters, where I assumed they would not think I was as funny as I thought I was. It ended up that they were amused…but not when the phone started to ring, and more than 50 phone calls came in from other retailers, manufacturers and members of the local media, none of whom consulted their calendars nor picked up on my brief and apparently too subtle note.

Stop & Shop at first asked me to take down the story, but agreed that it would be enough if I made the joke a little more obvious in the “KC’s View.” Which I did, admittedly gleeful that I’d had my own little Orson Welles/“War of the Worlds” moment. (If you are in my business, does it get any better than this?)

I did not get any calls from Starbucks, Rite Aid, Target or Borders, though there were at least a few people with stock in those companies who confided that they’d spent a few anxious moments wondering what would happen to their holdings when the deal closed, only to realize that I was joking.

One other question I got a lot: Who is Raymond Shaw, identified in the piece as the CEO of Marco Polo Finance?

This may have been the subtlest reference in the piece: Raymond Shaw is the main character in “The Manchurian Candidate,” played by Lawrence Harvey in the original 1962 movie that co-starred Frank Sinatra. (We won’t mention the awful remake a few years ago that starred Denzel Washington, except to say that if you’ve never seen the John Frankenheimer-directed original, you’ve never seen the movie.) The other “Manchurian Candidate” reference was the name of the Senator holding hearings into the takeover - Sen. John Yerkes Iselin, who was played by James Gregory in the movie and was the character married to Shaw’s mother, memorably played by Angela Lansbury.

Among the other emails I got yesterday, “sick puppy” was a description I got more than any other. (Actually, a few used a noun other than “puppy,” but I’m lumping them together.)

To which I cheerfully respond: Yes. I am. Thank you.

…If we didn’t laugh we’d all go insane!