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    Published on: July 15, 2009

    There are numerous published reports that Ukrop’s has circulated a prospectus and is in negotiations with potential buyers.

    The family-owned company, which began selling groceries in the Central Virginia market in 1937, is not commenting on the reports. Among the companies mentioned as probable suitors for the 28-store company are Harris Teeter, Supervalu and Ahold USA.

    Recent months have not been kind to Ukrop’s, which in the Richmond market slipped into second place with a 17.58 percent market share, with Food Lion emerging as the market leader with a more than 19 percent share. In addition, the company has been reported to be struggling in the Roanoke market, where it operates one store; after a strong opening there, sales dropped as customers utilized it for fresh and prepared foods but largely did the bulk of their main grocery shopping elsewhere. According to the company, it is currently not in a “sustainable position” in Roanoke.

    In addition, Ukrop’s has been criticized in some quarters, even in the face of increased competition and sales decreases, for not adjusting its long time policies of staying closed on Sundays and not selling alcohol … traditions that no doubt would change under new ownership.
    KC's View:
    I’m hearing Harris Teeter is the most likely buyer. That may not play out, but that’s what I’m being told by some pretty good sources. (There also has been one report that Harris Teeter has applied for 28 new liquor licenses in Virginia, which could be a give away.)

    Interestingly, when it was reported several years ago that Ukrop’s was for sale, both chairman James E. Ukrop and president/CEO Robert S. Ukrop went on record as denying the report.

    “We can assure you that we have not spoken or talked to a single company, broker or banker about the possibility of selling our company. End of story," said Jim Ukrop.

    “I echo what he told you,” added Bobby Ukrop.

    This time, according to the Richmond Times-Dispatch, there has been no comment from Ukrop’s. The silence may be telling.

    There will be plenty of opportunity to do a post mortem and assess blame if this sale goes through. But I’ll say this right now. A sale may be inevitable in this market, but the industry will be poorer if it does not have an independent-minded family like the Ukrop's as part of it.

    Published on: July 15, 2009

    by Kate McMahon

    Content Guy’s Note: Kate’s BlogBeat is a new ingredient in the MorningNewsBeat stew – a regular look at what people are talking about on the Internet, and how it impacts the conduct of business by retailers and manufacturers.

    Remember that old television ad that posed the question, “Is it live, or is it Memorex?”

    I’ve been thinking about that commercial lately because I’ve been considering the phenomenon that is Twitter. Here’s my question: “Is it noise, or does it matter?”

    Opinions are varied. Ben Mezrich, author of “The Accidental Billionaires,” the story of Facebook, referred to Twitter the other morning as sort of the Internet’s version of the Macarena. While the media certainly seems to be mad about Twitter, which – in case you need a description - defines itself as a real-time short messaging service that works over multiple networks and devices, and draws 22 million visitors a month, a recent Harvard Business Review study suggested that “twitterstorms” may not be everything they’re cracked up to be since 90 percent of the messages sent on Twitter are being generated by 10 percent of the users. (It is like the old 80/20 rule in retailing, except more so.)

    Yet, there are signs that to be part of Twitter is to be part of a national discourse; Alaska Gov. Sarah Palin was on Twitter explaining her decision to resign from office, and Senator John McCain (R-Arizona), said the other day that he has reached one million followers on Twitter (and this from a man who conceded during the 2008 presidential election campaign that he didn’t know how to email!). The verb “tweet” has been added to our social networking lexicon, and we know that Twitter has played a role in news events ranging from the post-election demonstrations in Iran to the death of Michael Jackson.

    And haven't we all wondered who, exactly, is tweeting on Twitter, anyway? Are they making noise, or are they creating something consequential?

    I can tell you this. You've never known the power of Twitter until you’ve signed up for it on your cell phone for just 24 hours and felt the full fury of real-time micro-blogging in bursts of 140 characters or less.

    It’s too much. For me.

    As MNB’s resident social networking columnist, I signed on to (free and very easy to do) and chose to follow 10 sites of interest (news, social media, retail). I then opted to link them to my cell phone for a 24-hour Twitter trial.

    What was entertaining for the first hour (wow, another alert!) became a distraction by hour three. Five hours into the exercise I was stressing about the number of messages. By hour 10, I was lagging behind and wondered how anyone could keep up with Twitter and, say, hold down a job, read personal and work email, not to mention check a Facebook page or answer a telephone. And I was just a follower, while the real deal twitter types were tweeting and retweeting their people.

    By the 18-hour mark, I had 68 text messages still to be read and a serious case of eyestrain. By hour 24 the next morning, I couldn’t wait to punch “off” into my cell phone and silence the beast.

    I was close to becoming a statistic, a “Twitter Quitter.” A recent study by Nielsen Online found that 60% of the people who sign on for an account abandon the site within a month.

    But since duty calls, I decided to access my Twitter account on my time, online, as opposed to real-time. It works for me. And my new goal was to get a better understanding of what is fueling this phenomenon. Is it a fad? Is it an effective marketing tool?

    If I am a retailer, manufacturer or provider of services, does my company need to be twittering customers to keep up? Or is a strong website and/or Facebook page sufficient?

    Here’s a hint at what the answer may be: While researching this column I tracked Whole Foods on Twitter and followed its promotional sweepstakes to boost its 980,000 follower base to the 1 million mark. Within just three days the one-millionth follower was named, and her prize was one million grains of quinoa and a $50 gift card. Since then, another 10,195 followers have signed on.

    While five pounds of quinoa isn’t a big lure for many of us, the contest highlighted why Whole Foods and other big names such as Zappos, Coca Cola and Starbucks have made commitments to social media marketing and found their following.

    My next column will look at those efforts.

    One other thing. If you have a Twitter/Facebook/MySpace story to share, shoot me an email at . I’d love to hear from you.
    KC's View:

    Published on: July 15, 2009

    Supervalu-owned Cub Foods said yesterday that it will make its “nutrition iQ” labeling program, first announced by the parent company last January, available in its 73 stores in Minnesota, Iowa, Wisconsin and Illinois.

    Supervalu says that the nutrition iQ system uses established U.S. Food and Drug Administration Nutrient Content Claims as a framework to determine the nutritional benefits of items that pass a set of qualifying criteria and are, at a base level, better for consumers. Products meeting the threshold criteria are then further evaluated to identify their top one or two nutritional benefits, which are called out for consumers on color-coded nutrition iQ shelf tags.

    The program covers 11 different nutrient claims in seven categories with the shelf tags color-coded as follows:

    • excellent or good source of fiber are denoted by orange tags,
    • excellent or good source of calcium by blue tags,
    • excellent or good source of protein by yellow tags,
    • low or healthier level of sodium by dark green tags,
    • low calorie by a purple tag,
    • low saturated fat by a red tag and
    • whole grains by a dark orange tag.

    According to the company, “the tags are located in an area where consumers naturally look when making food purchases — on the store shelf right below the product's price, unit price and bar code. The at-a-glance cues are designed to help point consumers toward healthy food options. The information serves as a supplement to the more detailed information already found on the ‘Nutrition Facts’ portion of food labels, should consumers wish to compare products further.”
    KC's View:
    In the interest of being consistent – a standard I don't always achieve – I went back to read the story and commentary that I wrote back in January when the nutrition iQ initiative was first announced. Part of the reason this made sense was because I’ve been conflicted about whether it makes sense for there to be so many different nutritional labeling systems, or if there should be one national system.

    And I think I’m going to stick with what I wrote seven months ago:

    Why shouldn’t chains have proprietary, differentiated systems that actually are part of the process of creating customer connections? Maybe people will begin choosing stores based on the kind of advice and information they provide…which actually makes sense, when you think about it.

    Not to say that customers won’t get confused. And I suspect that manufacturers are going to find all these varying systems annoying, since they’ll be trying to figure out how to qualify and get the best ratings in systems that may have different criteria or biases.

    But listen, here’s the important thing. An information-driven customer base is going to be getting more information. Transparency begins to seep into the system.

    This is good.

    Why should Hannaford and Food Lion be compelled to have the same system as Supervalu or Hy-Vee? And vice-versa? After all, these stores are presenting different images and narratives to consumers, and if they do things right, their individual nutrition labeling systems should be part of that distinct narrative. And since presumably different kinds of chains appeal to different kinds of consumers, it makes sense that they use different nutrition labeling systems.

    Published on: July 15, 2009

    The Arizona Daily Star reports that Bashas’, which filed for bankruptcy protection earlier this week, is looking to make significant changes – but selling or liquidating the company are not options being considered.

    It is a foregone conclusion that the company will have to get smaller, both in terms of stores and number of employees; Burt P. Flickinger III, managing director of Strategic Resource Group, tells the paper that it is important for the chain to get out from under some of its fixed lease costs. The company has announced the closing of 15 stores this year, but company president Mike Proulx says that a tougher standard will have to be applied when deciding which stores to keep opens and which ones to close.

    Proulx tells the paper that the chain has been impacted by the credit crunch and the soft Arizona economy, but he also blames an ongoing dispute with the United Food and Commercial Workers (UFCW), which has been trying to organize the chain’s employees; Proulx says that the union has defamed the chain, which has hurt its position in the marketplace.
    KC's View:
    There’s also another truth that Bashas’ will have to confront – the need to be more competitive and even more distinctive in its marketplace. The company starts with a strong image and a loyal customer base, but the modern reality may be that this isn’t enough in 2009 and beyond.

    Blame isn’t going to do anyone any good.

    IMHO, they need to start thinking like a start-up at headquarters…and begin a process of guerilla marketing that will churn up the marketplace.

    Either way, they’re facing what the great Bob Murphy used to call “nine miles of bad road.” They better come equipped with the right vehicle.

    Published on: July 15, 2009

    The New York Times reports that 7-Eleven “is taking advantage of the weak commercial real estate market to carry out a major expansion plan … Company officials said the two regions where growth would be strongest were California, which had almost 1,300 stores at the end of 2008, and the New York metropolitan area, which had 431 stores at the end of 2008. At least 44 stores will open this year in metropolitan New York, more than twice the number that opened last year.”
    KC's View:
    Add to this the fact that 7-Eleven is getting more expansive in terms of its product mix, offering more fresh and healthy foods.

    What it all adds up to is a company that sees an economic downturn as an opportunity to build market share that will serve it well when prosperity returns. Which puts the competition that may be taking a “batten down the hatches” approach at a disadvantage.

    By the way, there’s another national retailer taking the same approach. It’s called Walmart.

    Published on: July 15, 2009

    The Boston Globe this morning carries a story saying that Delhaize-owned Hannaford Supermarkets is readying a new supermarket in Augusta, Maine, that it believes will be the first supermarket to achieve LEED (Leadership in Energy and Environmental Design) Platinum certification, the highest standard for U.S. Green Building Council’s LEED program.

    Interesting facts about the new store:

    • Ninety-nine percent of the former Cony High School building, which used to stand on the lot, was recycled or reused. More than 96 percent of construction and demolition debris was recycled.

    • The new store is expected to utilize about half as much energy as a typical supermarket.

    • The store has many unique visual features that save energy and/or are environmentally preferred. For instance, natural daylight is utilized in six different ways to light the store; a 7,000 square foot green roof, which is a layered system of soil and drought resistant plants, will reduce water runoff and help insulate the store; and 86 percent of the wood incorporated in the store is Forest Stewardship Council (FSC) certified.

    “We’re always striving to improve our energy efficiency and lighten our environmental impact. Constructing a store to meet the highest LEED standards was a natural next step,” said Ronald Hodge, Hannaford’s president/CEO. “Our goal is to improve the performance of our stores, while maintaining competitive prices and creating a pleasant atmosphere for our associates and customers. Among approximately 85,000 U.S. supermarkets, Hannaford has created a one-of-a-kind learning laboratory for environmental gains.”

    The store is scheduled to open late next week.

    There is an obvious trend here. Food Lion, also owned by Delhaize Group, said yesterday that it has broken ground on the company’s first and South Carolina’s first green grocery store. The store, located in northeast Columbia, will be Leadership in Energy and Environmental Design (LEED) Certified.

    The store reportedly will feature a number of environmentally friendly construction and energy-efficient services, including an on-site recycling center, skylights for natural lighting, educational kiosks and preferred parking for low-emitting vehicles.
    KC's View:

    Published on: July 15, 2009

    According to the National Retail Federation’s 2009 Back to School Consumer Intentions and Actions Survey, conducted by BIGresearch, the average family with students in grades Kindergarten through 12 is expected to spend $548.72 on school merchandise, a decline of 7.7 percent from $594.24 in 2008.

    According to the survey, the economy is having a major impact on back-to-school spending as four out of five Americans (85 percent) have made some changes to back-to-school plans this year as a result. Some of those changes impact spending, with 56.2 percent of back-to-school shoppers hunting for sales more often, 49.6 percent planning to spend less overall, 41.7 percent purchasing more store brand/generic products and 40.0 percent are planning to increase their use of coupons. Others say the economy has impacted lifestyle decisions, with 11.4 percent saying children will cut back on extracurricular activities or sports and 5.7 percent saying that the economy is impacting whether their children will attend a private or public school.

    “Americans will be looking far and wide for the best back-to-school deals, using newspaper ads, online promotion codes, and a lot of comparison shopping before making decisions,” says Phil Rist, executive vice president, Strategic Initiatives, BIGresearch. “This year, many parents hope to begin back-to-school shopping early to spread the spending out over a longer period of time.”

    Many Americans reportedly have already started their back-to-school shopping, even though we’re only in mid-July. According to the survey, the majority of Americans (44.4%) will begin their shopping three weeks to one month before school starts, trying to take advantage of retailers’ early promotions and spend over time. An additional 31.8 percent will shop one to two weeks before school starts and 2.5 percent will shop after school starts, hoping to take advantage of clearance sales and postpone purchases as long as possible.

    Also according to the survey, back-to-college buyers say the economy will cause them to spend less overall (48.0%), shop for sales more often (46.1%), and comparative shop with ad circulars/newspapers (30.8%). The economy will also cause some students to make do with last year’s school items (33.6%), share or borrow textbooks instead of buying new ones (17.4%), and will impact students’ choice of college (15.0%).

    In addition, 12.8 percent of survey respondents say the economy will impact where a student lives, with many choosing to save money by living at home. Nearly three out of five (58.5%) college students will be living at home this year, compared to 54.1 percent last year and 49.1 percent in 2007.
    KC's View:
    Speaking as a parent of a recent college graduate not living at home (he lives in Chicago as an aspiring writer and actor while working almost full-time at Argo Tea), I have to say that I’m glad we’re down to just two tuitions to pay, with all the ancillary expenses.

    There may be a silver lining in all these numbers, by the way. Students hopefully will be getting a crash course in economics as they face financial realities this fall … which should make them more responsible in the long-term.

    Published on: July 15, 2009

    The Wall Street Journal reports that a federally mandated minimum wage boost goes into effect next week, with July 24 the date on which the final hike in a three-step increase takes place.

    According to the Journal, “The minimum wage will rise 70 cents — or about 11% — to $7.25 per hour from $6.55. (Last summer, it went up 70 cents from $5.85.)” And, the paper writes, “The hike will give about 4.5 million workers a raise and boost hourly wages by $1.6 billion a year, according to the Economic Policy Institute, a nonpartisan think tank in Washington, D.C.

    “The final phase of the federal minimum wage hike will impact 31 states whose minimum wage levels are below $7.25, including Florida, Pennsylvania, Nebraska and New York. Firms in these states will have to match the federal minimum. The increase has no bearing on 20 states (including Washington, D.C.), which already mandate an hourly wage of $7.25 or more.”

    As the paper notes, it is impossible to know whether Congress would have approved this wage increase had it known about the recession; at the very least, it is controversial to be raising wages at a time when employers are strapped for cash, unemployment is high, and both workers and businesses are struggling to make ends meet. The concern is that new jobs won’t be created and that existing jobs could be eliminated as employers look to balance their books in a tough environment.
    KC's View:

    Published on: July 15, 2009

    • The Tampa Tribune reports that Publix continues to have a dominant market share in Florida, with 41.4 percent of supermarket sales there. Walmart is in second place, with 24.7 percent, and Winn-Dixie is in third with 13.3 percent.

    However, the paper also reports that Walmart’s market share was up by 0.7 percentage point since March 2009, while Publix was down 0.5 percent and Winn-Dixie was down 0.2 percent.

    The only exception to this trend is the Tampa market, where Walmart’s market share is down a bit while the Publix share is up.

    • The Columbus Dispatch reports that the recession has forced central Ohio supermarkets to adjust their pricing: “Kroger, Giant Eagle, Meijer and Walmart have lowered prices on staple foods such as milk and eggs to keep and attract price-sensitive customers.”

    According to the paper, the chains are absorbing some of the costs because they are cognizant of the tough times that have affected local residents, and they have been aided by dropping commodity costs – which is a marked difference from a year ago when both costs and prices were increasing and some analysts and pundits were predicting that they were unlikely to come down.

    • Interesting piece in the Wall Street Journal this morning, noting that “the deep discounts that restaurant chains have been offering to lure cash-strapped customers out of their kitchens are coming back to bite them” in the form of lower profits and sales and not necessarily increased traffic.

    The question seems to be whether rather than building sales and profits, these discount programs actually may have hurt some chains’ brand equity, though it remains possible that during a recession the eat-at-home trend is simply too strong for customers to resist.

    • The Wall Street Journal reports this morning that Burger King franchisees have voted to reject plans to dell a $1 double cheeseburger, an idea that was hatched after McDonald’s eliminated the double cheeseburger from its Dollar Menu late last year. It is the second time that the franchisees have rejected the proposal.
    KC's View:

    Published on: July 15, 2009

    • Pinnacle Foods announced that its CEO, Jeffrey Ansell, is leaving the company to pursue other interests. He is being replaced by Robert Gamgort, most recently the North American President for Mars.
    KC's View:

    Published on: July 15, 2009

    ...will return.
    KC's View:

    Published on: July 15, 2009

    In the annual Major League Baseball All-Star Game, the American League continued its dominance, defeating the National League 4-3 and extending its record to 12-0-1 since 1997.
    KC's View:
    It is time to end the silliness of allowing the outcome of the All-Star Game to determine which league will have home team advantage in the World Series. This isn’t just me talking as a National League fan (which anyone who appreciates real baseball would be, since the senior circuit doesn’t have that designated hitter nonsense); I’d say the same thing if the National League dominated the game.

    The All-Star Game isn’t populated by the best players, but by the most popular players. Letting this system have any influence over the championships seems patently unfair.

    Go back to the old rotation system. It was fairer.