retail news in context, analysis with attitude

Published on: August 5, 2009

The Wall Street Journal this morning reports that Whole Foods CEO John Mackey plans a corporate makeover that will return the retailer to its healthy living roots, moving away from the gourmet foods that fueled much of its growth over the past decade, only to create problems for the company when the recession hit.

In an interview with the Journal, Mackey said that he had concluded that the company had veered off course. "We sell a bunch of junk … we've decided if Whole Foods doesn't take a leadership role in educating people about a healthy diet, who the heck is going to do it?"

The company isn’t giving up on its recent efforts to improve its price image and move away from the “whole paycheck” label that has plagued it. Mackey tells the Journal that Whole Foods prices itself against Trader Joe’s wherever appropriate; he says it is harder to match Costco on price, so the company is looking to carry some large sizes that will help it compete.

The new healthy living approach will focus on cooking demonstrations and recipes, and the story notes that Mackey “brings a personal fervor to his latest mission. He lost 10 pounds in six months on a diet devoid of refined fats. While full details on the initiative will not be released for a few months, the company has assembled a team of health experts to develop a curriculum. An employee in each store will answer customers' questions about food choices and provide reference materials.”

In addition, Mackey reportedly “is considering launching a program in October that would reward employees who hit targets for weight loss, quitting smoking and improving cholesterol and blood pressure. Employees who meet those targets could see their employee discounts on store merchandise rise to 30% from 20%.”

Published on: August 5, 2009

Harris Teeter said yesterday that it is taking a second look at a planned 500,000 square foot distribution center that was supposed to be built on 100 acres in King George’s County, Virginia, according to a story in the Free Lance-Star.

The warehouse originally was supposed to be completed between 2011 and 2012, but Harris Teeter now says it is both doing due diligence as well as considering other alternatives.

The announcement comes at the same time as the retailer is speculated to be interesting in acquiring Virginia’s Ukrop’s Super Markets, though no movement has been reported on that effort. The company drew no connections between the distribution center plans and any interest in might have in Ukrop’s.

Published on: August 5, 2009

The Denver Business Journal reports that unionized employees at Kroger-owned King Soopers and Safeway have agreed to extend their contracts beyond the August 15 expiration date for at least a month as the two sides continue to negotiate a new five-year deal.

Published on: August 5, 2009

The Wall Street Journal this morning reports that the National Football League (NFL) has struck a deal with Procter & Gamble that will make the consumer packaged goods giant an official league sponsor, with some of its items soon to be labeled as “official locker room products of the NFL.”

Products included in the deal are Old Spice deodorant and Head & Shoulders shampoo. The sponsorship reportedly will cost P&G roughly $10 million a year, though the precise terms of the deal were not disclosed.

The NFL-P&G deal is said to be a reflection of one of the ways in which professional sports leagues are seeking to build new revenue streams during a recession that is likely to crimp their financial growth.

Published on: August 5, 2009

Amazon.com said yesterday that it has a new online shopping application, “Amazon App for Android,” which allows customers to either snap a photo or scan a bar code of virtually any product and make price comparisons across various channels. The application also allows consumers to keep track of favorite products, compile grocery lists, and even make purchases via Amazon.

Published on: August 5, 2009

Loblaw Cos. announced yesterday that it is using a new branding message – “Just Lower Prices” - to communicate its value proposition to customers of its Atlantic Superstore, Atlantic Supervalue and Dominion stores. The symbol and message will be prominent throughout the stores as well as emphasized in a new television ad campaign.

“Shopping for our families and getting the best value has never been more important given today's economy," said Phil McNeill, vice president, Atlantic Market, at Loblaw, adding, "By simplifying our message to ‘Just Lower Prices’, the savings will be clearly marked on shelf and easy to find in-store.”

Published on: August 5, 2009

There have been a number of stories in the media about the decision by Radio Shack to start referring to itself as “The Shack,” and make that phrase a centerpiece of a broad advertising and promotion campaign designed to emphasize both the company’s hipness and renewed focus on customer service.

The company isn’t changing its store signs or official name, but is looking to make itself more accessible to consumers who may find the RadioShack name to be a “quaint artifact” of bygone days, in the words of one analyst.

Published on: August 5, 2009

Slate.com has a story that probably will be replicated in many venues over the coming months – a taste test that compares the coffee products sold by Starbucks, McDonald’s and Dunkin’ donuts. The competition among these three retail giants has grown ever more intense in recent months, with a recessionary environment creating an opportunity for the latter two retailers to challenge Starbucks, which virtually created the gourmet coffee market on a mass scale.

It is a long and complicated piece, unscientific in the sense that the testing was done by six staffers who are addicted to caffeine, but rigorous in the sense that the same criteria and methodology were applied across the board.

The result: Dunkin’ Donuts came in first, McDonald’s came in second, and Starbucks was dead last.

Published on: August 5, 2009

• Reuters reports that the UK Competition Commission has asked the government to name an ombudsman who would be charged on ruling on disputes between retailers and suppliers.

The recommendation came after Tesco, Sainsbury, William Morrison Supermarkets and Walmart’s Asda Group would not agree to a voluntary arrangement.

According to the story, the goal of the ombudsman would be to make sure that retailers did not apply so much price pressure on manufacturers that they are unable to innovate or invest in new product introductions.

Ahold-owned Stop & Shop announced that it is expanding its cooperation with the New England Aquarium, moving forward with efforts to ensure that consumers have increased access to sustainable seafood available from seafood farms, hatcheries and processing plants that follow a program of environmental improvement and social consciousness.

According to the announcement, “members of the Stop & Shop seafood buying team and a New England Aquarium shrimp specialist traveled to Indonesia and Thailand to meet with Stop & Shop's shrimp vendor partners in these areas to further collaborate and work on environmental improvements in those operations. By doing so, this gives Stop & Shop and the New England Aquarium a way to identify ‘best practices’ within individual businesses and work toward applying these practices to all vendors.”

In addition, Stop & Shop said it is educating their sales associates about catching and farming techniques that are less damaging to environmental resources using tools on the company's intranet so they can, in turn, educate customers.

• PepsiCo will acquire the outstanding shares of two of its biggest bottlers – Pepsi Bottling Group and PepsiAmericas – for $7.8 billion, pending government approval of the deal. The company says that this will allow it to control 80 percent of its North America beverage volume and respond faster to market shifts.

Published on: August 5, 2009

• Whole Foods reported that its third quarter net income was $34.9 million, up from $33.9 million during the same period a year ago. Q3 revenue was up two percent to $1.88 billion, on same-store sales that were off 2.5 percent.

CEO John Mackey said in a conference call with analysts that sales seemed to be stabilizing in every one of its regions, and that “it could be the economy is firming up and people are feeling like we are going to avoid a depression.”

• Harris Teeter said that its third quarter sales were up 4.1 percent to $964.2 million, on same-store sales that were off 1.42 percent. Operating profit at Harris Teeter was $42.8 million (4.44% of sales) for the third quarter of fiscal 2009, as compared to $44.5 million (4.81% of sales) in the third quarter of fiscal 2008.

• Kraft Foods said that its second quarter profits were $827 million, up 11 percent over the same period a year ago. Q2 sales were $10.2 billion, down six percent from a year ago.

• CVS Caremark said that its second quarter earnings were $886.5 million, up from $771.2 million during the same period a year ago. Q2 revenue rose 18 percent to $24.87 billion from $21.14 billion a year ago.

• Tyson Foods reports third quarter earnings of $134 million, an enormous increase over the $9 million earned during the same period a year ago. Sales dropped three percent to $6.66 billion.

• Walgreen said that its July sales were $5,256,800,000, an increase of 7.3 percent from $4,898,466,000 for the same month in 2008, on same-store sales that were up two percent.

Published on: August 5, 2009

MNB took note yesterday of an Advertising Age report that Walmart is being attacked for its introduction of a new private label thin-mint cookie – which a blogger says is a direct attack on the Girl Scouts of America and their annual cookie drive.

Got a lot of response to this one…

One MNB user wrote:

Is this Mom serious?

I suppose she doesn't go after the knock off purses or jeans? Has she ever heard of consumer demand? Walmart saw a niche and filled it.

Where does she shop for in-expensive school and craft supplies for her girl scouts. Is she going to boycott Walmart? Let's see..........

Another MNB user wrote:

Oh c’mon!

There are dozens of thin mint cookies on the market, and those haven’t hurt Girl Scout sales! We buy from the Girl Scouts mostly to support them, not just for the cookies… frankly, I give them away to friends or co-workers, I don’t actually eat them…(they aren’t organic!)

I am not a fan or supporter of Walmart per se, but this story is just silly. Everyone wants to see the big guy on top fall. They are doing some things right and we all can learn from them, and your coverage here helps all of us who are in the industry in one form or another…

Yet another MNB user wrote:

That's what any educated person would refer to as competition and if I am not mistaken, is legal here in the U.S. I seriously doubt anyone at Wal-Mart sat down and said "Ooh, let's go after the Girl Scouts." People need to give Wal-Mart a break. They have done a lot more good than people give them credit for. It's funny how people always fixate on the perceived bad.

Still another MNB user wrote:

Wait a minute. Let's for a moment assume that it was anybody BUT Walmart.

They see a need in the marketplace (jonesing Samoas and Thin Mints long after the last boxes are gone).

They set out to produce a cookie that fulfills that need (cookies that taste like Samoas and Thin Mints).

Automatic success and admiration for thinking, right?

I thought the whole idea of capitalism was finding a need and fulfilling it in the marketplace...so WM gets backhanded for it? Really?

(The blogger) needs to get a grip -- people buy Girl Scout cookies because they're good, sure -- but they also buy them because it's the Girl Scouts...just like they buy microwave popcorn from the Boy Scouts. It's not because it's the only place to buy popcorn or cookies, it's because it's one of the few places where you feel like your money is actually going to help the kids who are hawking it (don't get me started on the kids selling magazine subscriptions just to get them off the street.)

I didn't buy 25 boxes of cookies last year because I needed 25 boxes of cookies...I bought 25 boxes of cookies because I have enough nieces and neighbors that buying a couple of boxes from everyone means I DON'T buy cookies at Walmart for a long, long time.

And another MNB user chimed in:

I can't recall the last time I bought a box of Girl Scout cookies. I was a Girl Scout for years, but one year when I went to buy a box of cookies I was shocked at how much more it cost, just for a cookie. Haven't bought one since. I'll bet there will be tons of people that will have no problem buying a cheaper version of the Girl Scout cookies. I understand this woman's plight and anger, but I don't think I would hesitate to buy a box of Great Value Tag Alongs if the craving hit me.

Maybe it's time for the Girl Scouts to differentiate and come up with something new and innovative in addition to the cookies.

Maybe. It probably is more important to teach our kids (sons and daughters) the realities of economics as it is to teach them about door-to-door selling techniques.

And finally, the harshest of the emails on this subject:

Good for Wal-Mart. Girl Scouts have been gouging us for years. It's about time the girls get a lesson in free enterprise.




On the subject of mandated calorie count information on restaurant menu boards, MNB user Scott J. Proch wrote:

This is bad news for several reasons. More government intervention to 'save us' from ourselves is not the answer. As a Retail Consultant, I travel constantly and eat out several times per week. I'm 48 years old and have to be very careful about what I consume with this lifestyle, so I understand the issue pretty well. However, this is the beginning of what the tobacco lobbyists have been warning us about for years. What's next, taxes on any meal over 1500 calories? Maybe the same in the grocery isles? Give consumers some credit. If I ate at fast food chains four times per week it wouldn't take long for me to know this isn't working!! I wouldn't need to know I was consuming 2500 calories each time I stopped in to figure it out.

As for the 20+ store piece of the legislation, it's a) another attack on big business by a liberal administration and b) a problem of policing a law they couldn't solve so they just limit it to something they think they can handle.

And MNB user Richard Heineman wrote:

The article about calorie counts on menus shows how effective a PR campaign can be.

The statistic the “The 20-establishment threshold captures just 25% of roughly 1 million restaurants nationally” shows how statistics can be misleading. The million restaurant number reflects the government definition of “Separate Eating Places” This includes restaurants, in-store feeding at a retailer, the local bar that just serves hamburgers, College & University, Schools, Company Cafeterias, etc. If you look at just commercial restaurants and look at dollar volume instead of location counts the proportion of sales in chains over 20 units is huge. By making local restaurant comply with this requirement many will go out of business. Of course the large chains want to put their competition out of business.

The cost of gathering the required information is out of reach for a small restaurant. If your total revenue is $250,000 and profit is about $25,000 per year you can't afford to spend perhaps $5,000 per year on this project.

The data is simply not available. There are millions of sku’s in foodservice and no common database for the required information. A large chain usually has proprietary items that they can control. What happens to the little guy that complies and then does not know that the suppler changes the product? With distributor label products there might be several suppliers with different formulas that use the same distributor item numbers. This is impossible to control, even for large chains.

The real problem comes from legal liability. If a server puts more mayo on a burger, the restaurant can get sued. Menu labeling is not an easy issue.




Finally, there was an exchange here yesterday about the future of print, and I continue to believe that there is an expiration date on many traditional print publications. I cited the following example: You cannot escape the reality of how the younger generation gathers information … We get “Sports Illustrated” at home, but my son doesn’t read it because by the time it arrives it is old news – he’s already been all over SI’s website, as well as ESPN.com and assorted other sites.

Which led MNB user Gary Loehr to observe:

So, let me see if I have this right. You get your son a subscription to SI, but he doesn’t read it, because it is outdated by the time it arrives. Sounds like a thinly veiled excuse for getting the swimsuit issue into the house without Mrs. Content Guy catching on.

Good plan, you just helped me figure out what to get my son for his birthday.

Alas, I’ve been discovered! Because, as you all know, the swimsuit edition of SI is the only place where you can find pictures of good looking women in bathing suits…