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    Published on: May 11, 2009

    The Denver Post reports that Safeway and Kroger-owned King Soopers have agreed to extend the labor contract with the United Food and Commercial Workers (UFCW) that expired over the weekend until May 30, hoping that an accord can be reached before the new deadline passes.

    The decision comes after the two chains agreed that if one of them were hit by a work stoppage the other could lock out its unionized employees.

    The Post writes that “contract negotiations are also continuing at Albertsons, although a deadline for a labor agreement has not been set.”

    According to the Post, “Wages, health care and pensions are at issue between the workers and the companies. The union wants increased wages and a one-year hold on adjusting how pension benefits are given to workers … The companies have proposed freezing wages at current rates, adjusting how pension benefits are accrued and changing the retirement age from 50 to 55 to receive full benefits.”

    Employees at Safeway and King Soopers represented by the United Food and Commercial Workers (UFCW) rejected the latest contract offer from management. Tentative agreements have been reached between management and labor for health care provisions in a new contract, but other issues remain a wedge between the two sides.

    The UFCW represents about 17,000 employees at the three chains.

    KC's View:
    I simply cannot believe that in this economy it makes sense for any of the parties to put the Denver market through a labor action or lockout. Hopefully, sane heads will prevail.

    Published on: May 11, 2009

    The New York Times reports this morning on how the general consensus among public health experts is that the nation’s food supply is “markedly safer” than it was 100 years ago or even a decade ago…but that “even if fewer people over all are getting sick, the big recalls and outbreaks of recent years, like the discoveries of the industrial chemical melamine in infant formula and salmonella in peanut butter, are still worrisome to many health experts and safety advocates.”

    However, “while there are more recalls and known outbreaks as a result of more sophisticated techniques for tracking illness to its source, some incidents have revealed new problems developing in the food supply. New products like bagged salads require extra handling, increasing the risk of contamination. Foods once considered safe, like spinach and peanuts, are now seen as risky. And more food is coming from abroad, posing unique problems.”

    The story suggests that new problems point to the inadequacy of the nation’s food safety system, which has not kept up with the realities of the supply chain; in addition, the complexity of the food supply system means that the bar has been raised for every company, and not all companies have lived up to expectations.

    BTW…is this weren’t all bad enough, the Wall Street Journal has a story that will curl your hair:

    “The recent emergence of A/H1N1 flu highlights a wider concern among scientists: Pig and other animal populations are growing too rapidly, raising the odds of disease outbreaks and other environmental problems.

    “The world's pig population has surged in recent years, to about one billion animals from less than 750 million 30 years ago, according to the Food and Agriculture Organization of the United Nations. Agricultural economists believe the number of hogs and other livestock will keep rocketing higher in the long term, as developing-world incomes rise and meat demand booms.

    “Pigs provide a relatively cheap source of protein. But like chickens and cows, they also present enormous health and environmental challenges, especially in places where they aren't monitored carefully, including parts of Asia. As with other livestock, they are increasingly linked by scientists to water pollution and land degradation, and more recently, to diseases that sometimes spread to humans.

    “What potentially makes pigs more problematic, scientists say, is that they often live in close proximity to people and they are more likely than some animals to share viruses with humans.”

    KC's View:
    Just keeps getting worse and worse, doesn’t it? The thing is, there is almost no problem that isn’t solved – or at least addressed – by complete transparency and sophisticated traceability systems. In this case, light might actually be the best disinfectant…and not just figuratively.

    Published on: May 11, 2009

    There are several stories about the corporate intrigue at Target Corp., where a debate over the makeup of the board of directors has grown more strident as the calendar moves inexorably toward a May 28 vote by shareholders.

    The Wall Street Journal reports on how discontent with Target’s poor performance – both in the stores and on Wall Street – seems to have played into the efforts by “hedge fund mogul” Bill Ackman, who owns almost 10 percent of the company’s stock and options and has recruited a slate of board candidates that he feels “will bring new ideas to the discount retailer and relevant expertise to a board he describes as slow to make critical decisions,” according to the Journal story. “One weapon Mr. Ackman is deploying in the proxy battle is Wal-Mart, which has managed to post relatively robust growth despite the recession. In past downturns, Target's sales gains have trailed Wal-Mart by a percentage point or two, but since autumn that spread has widened to up to six percentage points. Some retail analysts have pointed out that Target's business began to slow before the recession, evidence that, among other things, some competitors that copied its low-priced designer strategy might be stealing its thunder.”

    Target Chief Executive Gregg Steinhafel has been fighting back, saying that the company is making needed changes and that Ackman really is only looking for short-term profits, not a long-term and sustainable business strategy.

    Target, the Journal writes, has slammed Ackman “in a flurry of news releases and letters to shareholders, and defended its board, which includes former executives of General Mills Inc., Quaker Oats Co. and the current chair of Wells Fargo & Co., as having all the right experience to guide the company.”

    Ackman’s proposed slate of directors, other than himself, includes include Jim Donald, former chief executive of Starbucks Corp.; Richard Vargas, who has run major credit-card firms; Michael Ashner, chairman of Winthrop Realty Trust, and Ronald Gilson, an expert in corporate governance who teaches at the law schools of Stanford University and Columbia University.

    The Fortune magazine article on the contretemps notes that “though chosen by Ackman, the would-be directors are hardly your classic slate of yes-men. Interviews with each of them reveal not a unified bloc typical of proxy fights, but a collection of individuals, each with different reasons for wanting to serve. None but Ashner knew Ackman before last month, none is an investor in his funds, and each swears that he hasn't been asked for any kind of quid pro quo.”

    Furthermore, Fortune writes that “the stakes are high, and not only because Target is one of the largest companies ever to be involved in a proxy fight. Regardless of who wins the vote at the annual meeting on May 28, Ackman's move against a widely respected company with no record of poor governance represents a new front in the world of shareholder activism, and one that any company should pay attention to. Although directors of companies with worse records -- Citigroup, anyone? -- have been reelected, the fight at Target suggests that the days of the ‘trust me’ boardroom are waning, and that costly struggles for control may become commonplace.”

    KC's View:
    I have a bit of a bias on this story because of a friendship with Jim Donald…but I simply cannot imagine a board of directors for a retail company that would not be better off with him on it. (I have not interviewed him about the Target story, by the way…I’m careful about not crossing the line.)

    I have no idea how this will turn out, but if you are to compare Target to Walmart, you have to conclude that the latter has done a far better job of judging the marketplace and creating a level of format diversification/experimentation that seems to make it far better positioned to grow market share. Target stores are okay…but okay doesn’t cut it; “nimble” isn’t a word that comes to mind when you think about Target.

    I have the sense from my reading that Target got complacent…and it needs some shaking up.

    Published on: May 11, 2009

    Just a week after it signed a letter of agreement to acquire 75 percent of the Russian supermarket chain Sedmoi Kontinent (Seventh Continent), French retailer Carrefour reportedly is looking to acquire the Brazilian supermarket chain Gimenes.

    According to Dow Jones, Carrefour has offered the equivalent of $26 million (US) to buy 22 Gimenes units, and also has offered $22million (US) to buy just 12 units of the company. A local company, Associacao Ricoy, has made a competing bid, according to the report.

    Carrefour bought the Brazilian Atacadao chain in 2007.

    KC's View:
    So if you want to work for Carrefour, language fluency in Russian and Portuguese is a good idea….

    Published on: May 11, 2009

    The New York Times this morning reports on how major manufacturers – including Kraft, Nestle and Reckitt Benckiser – are working overtime to make “persuasive arguments” to shoppers about why they should buy their products, ranging from cookies to deli meats to condiments…an argument that remains a tough one during recessionary times.

    On the one hand, manufacturers have the advantage of knowing that shoppers are eating home more and eating out less; however, these same shoppers seem more open than ever to the idea of retailer labels that are less expensive that their national brand counterparts. And so, manufacturers and their marketing agencies have to craft messages that impart the core message of “value,” but do so in a way that does not diminish brand equity in the long term. They are banking, in the words of one marketer, that “value is not just cost; it’s also taste, nutrition and quality.”

    KC's View:

    Published on: May 11, 2009

    The new edition of Facts, Figures & The Future looks at how the recession is having an impact on consumer shopping habits.

    For one thing, it has an interesting piece about the growth of dollar stores, noting that “supermarkets that once hoped the dollar stores would continue to stay as irritants rather than threats may find themselves in a long-term squeeze between these small-format stores and mammoth supercenters, even after the economy recovers. That will depend on how much dollar stores do to leverage this opportunity.

    “Meanwhile, the one-dollar price point range seems to hold more magic today than at anytime in recent memory. Traditional wintertime dollar day sales at supermarkets continue to attract pantry loaders who stock up on canned goods—perhaps with more vigor since everyday prices have shot up over the past year. Some retailers succeed with a dollar wall of general merchandise such as small toys and other impulse grabs—a tiny high-margin oasis that rewards kids for behaving while moms shop … Prices may not literally be one dollar per package—they might be closer to $2—but they could be significantly less than that per serving on many healthful foods in the store. Think pasta, canned seafood, frozen drinks, yogurt, produce, chicken, pork, ground turkey, beans, canned prepared foods and soup, for example.

    “Nielsen Scantrack data suggest that shoppers are finding ways to scout out these items on their own, and figure out cheap ways to create meals or, say, bake tempting cupcakes for a young girl's birthday party. Stores may prefer to sell the $15 cake from the fresh bakery showcase, but the mom who buys cupcake mix, icing, sprinkles and candles has saved money and had a more involved shop-and-prep experience.”

    In another F3 story, Anne-Marie Roerink, director of research at the Food Marketing Institute (FMI), writes about how the “recession is making its impact felt throughout the grocery channel. Shoppers of all regions, ages and incomes are adapting their spending and gastronomic choices. The dire economic conditions are influencing shoppers' decisions over dining out, cooking frequency, store selection, brand preference, reaction to marketing and sales promotions, willingness to try new products, nutrition and the list goes on.

    “According to FMI's U.S. Grocery Shopper Trends 2009, the effect on food consumption and shopping is tremendous — presenting both difficulties and opportunities for the industry. Up significantly from 48 percent in 2008, no less than 69 percent of shoppers say that the recession is affecting their grocery shopping.”

    This means, Roerink writes, that shoppers are using a number of strategies, including saving money by eating out less, seeking out money-saving measures at the supermarkets they patronize, and are switching their primary grocery stores to find a location more in synch with their current needs.

    Furthermore, “This increased focus on price and value is playing out in channel selection and causing further erosion of the supermarket share. Down from 60 percent in 2009, 56 percent of shoppers identified a full-service supermarket as the store where they spent the majority of their grocery budget. Supercenters, while trailing far behind, gained ground again and captured 27 percent of the market. The same pattern holds true for the secondary store. The recession is causing more consumers to shop at discount stores, limited assortment stores and warehouse clubs to stretch their food dollar. Shoppers say lower prices, especially meat prices, would prompt them to shop their primary store more frequently … So what does this all mean for the balance of 2009? Clearly shoppers are making major changes in their attitudes and purchase patterns as outlined in this report. Many of these changes appear to be quite durable and not likely to be abandoned quickly even after the economy improves. This offers important new opportunities for those able to respond quickly and connect with their own shoppers in innovative new ways. Retailers who accomplish this will build a sustainable competitive advantage that will serve them well for years to come.”

    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: May 11, 2009

    The Independent reports that champagne bottles could be getting a new top, as an aluminum lever-operated version is tested by some vintners as a possible replacement for the traditional champagne cork and wire fastener, which has been around since the 1860s.

    More than a million bucks worth of research reportedly has gone into the new champagne top, with the creators saying that they have been working to find a solution that will satisfy traditionalists – the level apparently makes the same popping sound as the old fashioned cork.

    KC's View:
    As a longtime critic of the of the screw top…albeit one who is coming around now that more and more better wines seem to be coming sans cork…I have to admit that I heaved a heavy sigh when I saw this story.

    Alas, the shift probably is inevitable. But that doesn’t mean I have to be happy about it.

    Published on: May 11, 2009

    • In an interview with the Wall Street Journal, Walgreen CEO Gregory Wasson says that he believes that the worst of the recession may be history, that sales appear to have bottomed out in January and began rebounding in March and April. “Most of us think the worst case scenario we did in our planning is probably off the table," Wasson says.

    However, Wasson also says that it remains unclear what the long-term impact of the recession will be on consumer spending habits, and says that it already is evident that credit card usage is in “dramatic decline.”

    • Walgreen announced that it completed the acquisition of 31 Drug Fair stores in New Jersey, the purchase of which had originally been announced when Drug fair declared bankruptcy last March. Terms of the deal have not been disclosed.

    KC's View:

    Published on: May 11, 2009

    • PriceSmart, which operates warehouse club stores in the Caribbean and Central America, reports that its April sales were up 8.8 percent to $96.8 million, on same-store sales that were up 6.9 percent.
    KC's View:

    Published on: May 11, 2009

    MNB continues to get email responding to last week’s story, commentary and follow up letters about how Walmart CEO Mike Duke finds himself at the center of a cultural storm - accused of being “bigoted and discriminatory” for his support last year of a state initiative preventing same-sex couples from being adoptive or foster parents – generated lots of reaction, most of it negative about what I wrote.

    As I noted last week, the story noted that Duke’s support of the initiative became public knowledge when opponents found his signature on a petition calling for a statewide referendum on the issue; it passed in November with 57 percent of the vote.

    MNB noted that there seem to be a couple of problems for Duke, who has a reputation within the organization for religious and cultural conservatism. Walmart has been working overtime in recent years to present itself to the world as a more open and accepting employer and corporate citizen, and in some circles, this position appears to run counter to that public relations effort … and creates at least the perception that it is only a public relations effort.

    This creates the possibility of a schism between Walmart leadership and the company’s employees – not to mention current and potential customers - who happen to be part of the LGBT (lesbian, gay, bisexual and transgender) community. And it also seems to put Walmart firmly on one side of the gay rights issue at a time when five states – Connecticut, Iowa, Vermont, Massachusetts, and, just this week, Maine – allow gay marriage.

    The vast majority of the emails last week criticized me for suggesting that maybe signing the petition wasn’t the best move for Duke…that distancing oneself from customers and employees in such a way might not be the best approach for the CEO of the world’s biggest retailer.

    Another MNB user chimes in:

    Quoting of Scripture and Corinthians as basis for exclusion of homosexuals (and the others listed) into the kingdom of God is a scary thing. Corinthians also lists anyone who drinks too much (drunkard), has stolen from others (thieves), or ever in life had sex with a person not your husband or wife (fornicator- that is the definition) would exclude most of us … If the kingdom of God would deny entry for any/all of the above, it would be a most exclusive club indeed. One should be careful what they ask for.

    Maybe some MNB readers are right. I am going to hell.

    Another MNB user wrote:

    An employee of a company, CEO’s included, certainly have a right to personal opinions and to take part in the public debate on political issues. There is a difference in supporting a cause versus a candidate. One can distance themselves from a candidate because there won’t be full agreement on all issues but no such distance can be made when supporting a single political issue or cause. Those taking the opposite side of those issues have a right to vote with their pocketbook against the company someone works for if they disagree with those thoughts. This is especially true when the employee is the CEO and the issue is as volatile as gay marriage. Mike Duke is free to express his personal beliefs, but he must be cognizant that they will reflect on his company and that there is no distancing himself from the feedback.

    One more point on this issue, if I may. I got a number of emails over the weekend from people who didn’t necessarily want to be quoted, but said they felt sorry for me because I’d found myself in the middle of a contentious debate.

    For the record…I didn’t find myself anywhere. I jumped into this with both feet, eyes wide open.

    We live in a world of almost total transparency, and so the intersection of private and public lives is more evident than ever…and this is something that corporate leaders have to factor into their behavior. And the debate needs to be had…in this case, in the public forum of MNB.

    It isn’t just faith, by the way. Other things become transparent when people do things like sign petitions. For example, when Duke signed that petition, he had to list his home address in Rogers, Arkansas…which is now there for everyone to see on the Internet. Does that leave him personally more vulnerable than his board and shareholders would like him to be? Maybe…or maybe everybody in the area knows where he lives, so it doesn’t matter.




    MNB reported the other day about the fact that actress Kirstie Alley, who famously lost 75 pounds a couple of years ago while working as a spokesperson for Jennie Craig, apparently has gained it all back and then some. The reason seems pretty clear: once she lost her endorsement deal, she stopped exercising and started eating things like pasta drenched with butter. Her relapse offers a cautionary note to anyone on a diet…especially because she’s apparently ready to lose the weight all over again…and I said that “while I hate to be cynical, I suspect she’s hoping that there might be a new endorsement deal in the works.”

    One MNB user responded:

    I do research on food retailing and marketing news. I get your MNB daily and love it. I saw on the news the other day Kirstie Alley’s issues with her weight and I heard them talking about her trying to loose it again during some sort of interview. But instead of getting a sponsorship from a weight loss group she is starting her own. I am not sure if it will consist of meal replacements or exercise or menu ideas or a mix of all they were not specific. But that is why she is all over the news she is garnering publicity for herself, her struggles and then she can promote her new company, one that she owns. She says it will help all. (Thankfully, I wasn't watching it just listening while doing chores so I didn't lose to many brain cells!)

    So that may be the most profitable 80 pounds she ever gained…she gets on magazine covers, garners plenty of free publicity for a new business, and then loses the weight again …. But she’ll lose the weight because she has advantages (money, chefs, personal trainers) that most people don't have, and will sell the illusion to people looking for any hope in their personal weight struggles.

    What a crock.

    I liked her better in “Cheers” and “Star Trek II: The Wrath Of Khan.”




    Got the following inquiry from en MNB user…and I didn’t have an answer:

    Do you know what percentage of moms take their kids with them to the grocery store? I’ve searched for the answer with no success.

    The question goes to the effectiveness of programs designed to market to kids in the produce department.


    Thoughts?




    I made a quick comment about the Manny Ramirez steroid controversy last Friday, which led one MNB user to write:

    To quote you, "I wish that he and A-Rod and all the other steroid users would pack up their needles and get out of my game".

    Your game hasn't been a clean game since you were a little kid Kevin. For example, your 1986 Mets were riddled with Cocaine abusers (among other drugs; and not just Straw or Doc, most of the team). So is that team's World Series championship tainted? Yes. Did you care? Probably not (because you didn't know). And did we care back when McGuire and Sosa were chasing home run history in the late 90's? No, we were captivated by the race. No one commented how much bigger Big Mac looked then, versus his 1989 A's team that won the World Series. No one cared. But now we do.

    Look, this game hasn't been clean for a very long time. At least the book “Ball Four” started the drug exposure in the game many years ago. And that notice didn't really start up again until Canseco blew the whistle years later (funny how he finally has some credibility).

    But it's still a great game, nonetheless! And the point is, we have to take it for what it's worth, pure entertainment. It will get cleaned up, and let's hope that Selig gets even tougher with MLB's drug laws.


    I’m okay with tough drug enforcement. I’m okay with draconian drug testing. And I’m okay with people being tossed out of the game when they violate it.

    MNB user Tom Devlin had some thoughts about the broader issue:

    I was with colleagues this morning and the discussion was on another pathetic example of where we are in society to reach greatness. I could not agree with you more that all steroid users should take their ball and go home. They can take the millions they have made and inject themselves knowingly or unknowingly and get out of our game and let the true athletes entertain us.

    I am sure they really don’t care about getting in the Hall of Fame, they are only sorry they got caught. We are building a great Hall of Shame in sports when the top ten current 500 home run hitters consists of seven players who have used or been accused of using steroids. Many represented by Scott Boras their agent. They are all the Bernie Madoff of sports because they have lied, cheated and did everything for their own benefit and without a care for anyone else. At the same time we should salute and admire the great ones even more such as Cal Ripken, Ken Griffey Jr., Derek Jeter, etc… who constantly give back to the community and play the game the way it was meant to be played.

    Our society and the parents also get blame as we teach our kids about sports. I am confused with the youth baseball as young kids up to the college level are using the most advanced titanium aluminum bats or actually large golf clubs to hit a ball when at the major league level they use wood bats. Every other major league sport uses the same equipment from development level to the pro’s but baseball. Why are we still doing this? It makes no sense but to see if our kid can look like the next super star but it is really the bat not the kid.

    I was at a recent girls U-12 baseball game in Connecticut and this kid hit a soft ball 220 feet over the fence !! Or should I say the bat did it. Good for her and the parents and coaches ego but explain to the kid pitcher in New Jersey last week who as hospitalized after she was hit by a line drive... In girls softball the pitchers mound is only thirty-five feet away from home plate, so we the parents can put all the blame we want on the hall of shame players but we are responsible for putting together all the elite, pre Olympic teams, special camps to get our kid “To The Next Level” thinking our kid is going to be the next Derek Jeter, Tiger Woods or God Forbid..... Manny Ramirez or Mark McGwire........ We all part of the cause…


    KC's View: