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    Published on: July 29, 2009

    Supervalu announced yesterday that it will sell 36 Albertsons stores in Utah to Salt Lake City-based Associated Food Stores. According to the Salt Lake City Tribune, “Under the sale, Supervalu would receive $150 million in after-tax proceeds.”

    According to the announcement, Dick King, vice president of Associated and a 36-year veteran of Albertsons where he served for a time as president/COO, will become president of the new 36-store division.

    Associated Food Stores currently services over 500 independent grocery stores throughout seven Intermountain Western States. Companies in Utah such as Harmon’s, Ream’s, Winegar’s and Kent’s are members of the retailer-owned cooperative. The company also owns 22 stores operating under the Macey’s, Dan’s, Lin’s and Dick’s Market banners.

    “We will drop prices on a significant number of items in the store and begin carrying the popular Western Family brand,” said King in the official announcement. “In today’s market, customers want top-quality products at a great price. Our first priority will be to deliver on both fronts.”

    In a memo to Supervalu employees, CEO Craig Herkert wrote that in view of disappointing second quarter numbers reported yesterday, it is critical for the company to “continuously take advantage of opportunities to strengthen our overall business. Unfortunately, this sometimes means selling stores that are not a strategic fit … As you can imagine, the decision to sell any of our stores is not taken lightly. We understand that these transactions can significantly impact our associates and our customers. However, the sale of these stores will ultimately enable us to both pay down debt and drive growth in other areas of our business.”

    And, Herkert wrote, “The numbers clearly indicate that we are not, as a company, where we need to be in terms of sales results. Given that, we need to take immediate steps to reposition ourselves to better compete in today’s marketplace.”
    KC's View:
    It seems pretty clear that Herkert is not done remolding the company in an image that he believes will work both short-term and long-term.

    The question is, what’s next? Which banners fit his vision for Supervalu, and which ones do not? A lot of the speculation I’m hearing has centered on Bristol Farms and Shaws…but this all depends on what Herkert wants Supervalu’s retail tapestry to look like.

    It seems likely, however, that this won’t be a long decision-making process.

    Published on: July 29, 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.


    When this column recently questioned whether businesses should jump on the Twitter bandwagon or write it off as a fad, I certainly didn’t expect Twitter to respond. (As a parent of teenagers, I’ve long since lowered my expectations on prompt responses.) So I wrote a primer explaining how Twitter -- which started as social networking site (emphasis on social) between friends to answer the question “What are you doing?” -- could be used by retailers, marketers and service providers. And I cited examples of businesses that were on that bandwagon in a big way, ranging from A (American Apparel) to Z (Zappos).

    And then wouldn’t you know it, Twitter did respond last Friday, officially launching “Twitter 101 for Business – A Special Guide,” and hijacking my column for today, from A to Z.

    Who knew MorningNewsBeat had such power?

    Twitter 101 for Business (http://business.twitter.com/twitter101 ) is a very user-friendly PR effort, and the signature blue Twitter bird logo now has added a briefcase to its beak. It explains the lingo, the 140-character limit per message and presents case studies extolling Twitter’s effectiveness as a social networking medium for businesses large and small.

    It’s enough to make you want to hijack the bandwagon to get on.

    But before doing so, remember that Twitter is in many ways like a teenager – full of creative energy, immediacy and limitless potential, along with growing pains, inappropriate language, stupid jokes and unpredictability.

    Which probably explains why the Twitter-er with the largest number of followers (a whopping 2,961,880) is overgrown teen Ashton Kutcher, actor and creator of the MTV practical joke show “Punk’d.”

    On the flip side is e-commerce shoe czar Tony Hsieh, the chairman of Zappos.com, a convincing proponent for Twitter. His tweets are a readable blend of business philosophy and personal insights, with 1,042,341 followers. (No wonder Amazon.com was willing to spend more than $800 million to acquire the online shoe retailer.)

    Other major players with full time Twitter departments are the auto makers, Coke and Pepsi, Dell (with more than 80 Twitter accounts) and the airlines Jet Blue and Southwest.

    I track Whole Foods (which broke the 1 million mark with a contest earlier this month and is now at 1,093,538 followers) and Starbucks (262,375). Both combine updates from headquarters, lots of local banter and customer service exchanges. Given my social networking habits, I prefer to get Whole Foods and Starbucks corporate news via Facebook and skip the Twitter chatter. But it seems to me that it is critical for retailers and marketers to be working all sides of this equation, because it will give them the most exposure and allow them to reach out to shoppers who feel differently than I do. There’s too much potential there – too much creative energy – to ignore.

    BTW…MNB user Louie Yan introduced me to GoodGrocer, which is the Twitter presence of Save Mart, Lucky and Food Maxx stores in Northern California and Nevada, and I’ve quickly become a fan – enough so that if I lived there, that’s where I’d shop. It is the perfect mix of nutritional information, local news, and seasonal recipes – a real winner.

    We’ll continue to follow Twitter for MNB and let you know about the ride on the bandwagon.

    As always, if you have a Twitter/Facebook/MySpace story to share, shoot me an email at kate@morningnewsbeat.com . I’d love to hear from you.
    KC's View:

    Published on: July 29, 2009

    Forbes reports that a compelling argument is being made in some Washington corridors for a “fat tax” that would both raise needed revenue for the government and promote greater wellness among US citizens.

    Here’s the pro argument:

    “According to a study released Monday by experts at the Urban Institute and the University of Virginia, a 10% excise or sales tax on fattening foods could raise $522 billion over the next 10 years. A 20% tax could raise $937 billion. Among its other uses (like paying down the deficit), that money could be used to defray the costs of health care reform or to curb the rise in obesity.

    “Unless consumption patterns change, 40% of American adults will be obese by 2015, the study says. Obesity-related issues account for more than $200 billion in health care spending annually, it says.”

    On the other side is a coalition of industry groups and private companies known as Americans Against Food Taxes, which is “waging a multimillion-dollar media campaign in the Washington, D.C., area to stomp out any thoughts of food or drink taxes.”

    One ad, seen on cable television, has the following narration: “This is no time for Congress to be adding taxes on the simple pleasures we all enjoy, like juice drinks and soda, but that's just what some in Congress are talking about … We all want to improve health care, but taxes never made anyone healthy. Education, exercise and balanced diets do that.”
    KC's View:
    The general consensus seems to be that taxes are going to be raised…and that Congress is seeking the most politically palatable way to generate more revenue without its members losing their jobs.

    There are ways in which I think that people who don't take care of themselves can and should be penalized; I do believe, for example, that people who behave irresponsibly in terms of their own health ought to pay more for health insurance…just like people who are lousy drivers pay more for auto insurance.

    But you can't just heap all of these taxes and fees on people ad infinitum… Eventually, the system will break down.

    Published on: July 29, 2009

    Hannaford Supermarkets’ Guiding Stars nutritional guidance program – which gives products that meet specific criteria one, two or three stars based on whether they are good, better or best for you – got a positive review yesterday at the Weight of the Nation conference in Washington, DC.

    Acting Surgeon General, Rear Admiral Steven K. Galson, M.D., M.P.H., described Guiding Stars as an effective way to change consumer behavior, and as an example of a community initiative that can help improve the public’s health through better nutrition choices.
    KC's View:
    Guiding Stars always has been my favorite of all the nutritional guidance programs that I’ve seen. It’d be nice to see more retailers adopting it, which they can do since Hannaford is willing to license it to non-competing companies. It is a smart program, easily understood.

    Published on: July 29, 2009

    The Nielsen Company is out with its annual Back-to-School Forecast, projecting that there will be a dollar sales rise of 0.4 to 1.3 percent to $2.17 billion, a pace below the growth achieved in 2008.

    Unit sales will drop to 1.18 billion, down 5.5 percent from 2008.

    Just for comparison’s sake, Nielsen notes that in 2008, it predicted that dollar sales of back-to-school supplies would rise 2.6 percent; the actual result was 2.4 percent.
    KC's View:
    One interesting note in the forecast is that bottled water will see major gains this season. “Often considered a discretionary item, bottled water is consumed as a staple, and is expected to out-pace juice sales with a dollar growth of 3.57 percent.”

    Which may say something about why there are reports that child obesity rates in this country may be leveling off. The question is, what happens if the anti-bottled water sentiment gains any sort of traction?

    Published on: July 29, 2009

    The New York Times reports that New York= City-based online retailer FreshDirect – which makes two million deliveries a year – is working to cut back on the number of cardboard boxes used in its business.

    The retailer uses five million boxes a year when it packs up orders and drops them off at buildings around the city, which is 1.5 million fewer than it used a year ago.

    Jason Ackerman, co-founder and CFO for FreshDirect, tells the Times that “we were delivering about 3.5 boxes per order.” Now, by improving the way it utilizes the cube within each box, Ackerman says that FreshDirect is “down to 2.7 boxes per order.” That’s something of a challenge since non refrigerated, chilled and frozen items have to be packed separately, and required re-engineering the assembly lines for greater efficiency…something that both customers and drivers have noticed and appreciated.

    Next year, the Times writes, “the company will stop using cardboard boxes altogether … It will pack the orders in paper bags and pack the bags in reusable plastic boxes that will keep the bags from getting crushed on the trucks. At a customer’s apartment … the driver will take the bag out of the plastic box and take the box back to FreshDirect to be cleaned and reused.”
    KC's View:
    It all seems both financially and environmentally smart, as well as good public relations. Sounds like a trifecta to me.

    Published on: July 29, 2009

    About two weeks ago, it was reported here on MNB that Starbucks is testing yet another new marketing approach as it tries to recapture its mojo - it is renovating its store on Seattle’s Capitol Hill and giving it an entirely new name, 15th Avenue Coffee and Tea. The Starbucks name will be nowhere to be seen on the façade, or on the products being sold inside. Starbucks also plans to change the kind of products it sells in the new stores: In the spirit of a traditional coffeehouse, it will serve wine and beer, as well as host live music and poetry readings.

    According to Harvard Business.org, the format is likely to fail because it is essentially dishonest.

    Here’s how the website assesses the new store:

    “…15th Ave Coffee & Tea is an experiment doomed to failure, because there's no way a corporate coffee chain can create an authentic neighborhood coffeehouse experience.

    “Your favorite local coffeehouse is the product of someone's passion, dedication, and probable borderline craziness. 15th Ave is the product of corporate product design and development.

    “Read the introductory copy on the 15th Ave website:

    Fresh roasted coffee. Tea picked from the far reaches of the world with care. Artisan baked breads and treats that are sure to delight. A little flair of Italia with some heavenly gelato or affogato. 15th Avenue Coffee and Tea brings these flavors of the world direct to your local neighborhood everyday.

    “This is so transparently corporate marketing speak. Compare it to the website of my favorite San Francisco coffeehouse, Farley's, which is amateurish (and I mean that by its Latin root: done for the love) and personal:

    Roger Farley Hillyard broke his coffee pot back in 1988 and could not find a store to purchase a replacement part. After scouring the city, Farley's was conceptualized as a coffee and tea store. Through various incarnations, the present day concept of creating a place of community for the community was developed....The character of Farley's mirrors the uniqueness of the people and allows for a genuine and distinctive experience for everyone.

    “Faking it is not a good strategy in bed or in retail.”

    The site goes on:

    “Everyone knows it's run by Starbucks, but the website and the store do all they can to suggest it's a true independent (though the high level of interior design suggests a bankroll out of the reach of most entrepreneurs) … It's pretty clear that there's a high degree of consternation about the associations people have with the Starbucks Experience. I find it foolish that they're trying to re-engage the more sophisticated end of the coffeehouse market through this new, out-of-whole-cloth creation. What Starbucks needs is a series of ‘experience interventions’ within their existing store framework.”
    KC's View:
    At the very least, this is going to be an great and ongoing branding discussion that hopefully will teach us some important lessons, no matter what business we’re in or what kind of venue we operate.

    To be honest, my reaction was pretty much the same as that of HarvardBusiness.org when I first read about the new store, but I’ve softened a bit … mostly because I haven't seen it yet and think that you at least have to give Starbucks the benefit of the doubt. I’m not sure it is fair to criticize Starbucks for being bigger and more corporate than Farley’s; that’s sort of like criticizing an orange for being, well, orange.

    The question is, what’s the best way to innovate and differentiate within the framework of a company like Starbucks? Not sure we know that yet…and my concern that the once and present CEO, Howard Schultz, may not be the best person to lead the company into the future has been expressed here before. But on this one, I want to see it and experience it before I pass judgment.

    Published on: July 29, 2009

    • The Wall Street Journal reports this morning that “MillerCoors LLC has begun testing the sale of $20 draft-beer systems for consumers to drink at home, part of a string of new products and package innovation from beer giants grappling for market share in a crowded, slow-growing industry.” The company “has begun testing the 1.5-gallon ‘Home Draft’ for its biggest brands -- Miller Lite and Coors Light -- in about a half-dozen cities, including Dallas, Phoenix and San Diego. The boxed product … is designed to fit into refrigerators for drinkers to consume periodically, rather than for one-time party use.”

    USA Today reports this morning that “more retailers are accepting food stamps, as a record number of consumers are turning to government aid to pay for groceries. Nearly 39 million people received food stamps — now known as Electronic Benefit Transfers — in April 2009, up about 20% over April 2008. Retailers ranging from some Costco stores (to) 7-Eleven to Target are moving quickly to cater to cash-strapped customers.”
    KC's View:

    Published on: July 29, 2009

    • Spartan Stores reports that its first quarter net earnings were $6.9 million, compared to $9.5 million during the same period a year ago. Consolidated net sales for the quarter increased to $596.0 million from $586.7 million in last year's first quarter.
    KC's View:

    Published on: July 29, 2009

    …will return.
    KC's View: