retail news in context, analysis with attitude

MNB Archive Search

Please Note: Some MNB articles contain special formatting characters, and may cause your search to produce fewer results than expected.

    Published on: September 10, 2009

    Now available on iTunes…

    To hear Kevin Coupe’s weekly radio commentary, click on the “MNB Radio” icon on the left hand side of the home page, or just go to:

    http://www.morningnewsbeat.com/Radio/Radio_Listen_S.las



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

    I have a couple of things on my mind this week…mostly on the subject of change.

    I was fascinated to read about the recent goings on in Samoa, where the government and citizens accomplished something historic this week. At 6 am on Monday, the entire country started driving on the other side of the road…except that in this case, rather than switching from the left hand side of the road to the right hand side, they actually went the other way…essentially moving from the American system to the British system.

    There were some very interesting things about the way this change has been accomplished. First of all, the Samoan prime minister – whose name I will not even attempt to pronounce for feat of butchering it – went on the radio just before the deadline to tell everyone in the country to stop driving their cars. Which, apparently, they did. And then, at 6 am, he told them to change sides. Which they did. Apparently without any major incidents.

    I am, to say the least, impressed by the orderliness of the Samoan society. But I’m also impressed by the reasons that Samoa essentially went against the grain in making this adjustment – it is cheaper to import cars from Australia and New Zealand, where people drive on the left hand side of the road, than from the US and most of Europe, where they drive on the right hand side. In other words, they took a cool, calculating look at economic reality, examined the facts and the implications, and did something that almost nobody has done since cars were invented.

    Three other interesting notes. One is that the government reportedly set up practice tracks so that people could get used to driving on what for most of us is the wrong side of the road. Another is that the government declared a national holiday for the two days following the switch, believing that this would take the pressure off both the drivers and the roads, giving them a chance to get used to the whole idea. And finally, the Samoan government also banned the sale of alcohol for a couple of days while the switch was accomplished, figuring that inebriated drivers would only make the scenario fraught with peril.

    This is, I think, a pretty good example of leadership well exercised. The Samoan government went against conventional wisdom, made a practical decision, and then enabled its citizens to work through the implications of the decision by a number of means, raising the likelihood of success.

    It often is said that people are afraid of change, but it may be more accurate that people are afraid of change poorly implemented. If you respect people’s feelings and trepidations, and communicate clearly with them about why changes are being implemented and then do things that make the process go down more easily, then maybe change isn’t so intimidating.

    Good lesson, I think.

    Finally, I want to note that today happens to be the 30th anniversary of my first date with the woman now known to this online community as Mrs. Content Guy. On that first date, I took her to a local Mexican restaurant where I was a regular, which I thought would impress her. It didn’t. In fact, some months later, she told me that she didn’t really like Mexican food…and even today I marvel at the fact that she went out for a second date, and then a third.

    I mention this not to be publicly romantic, but rather because Mrs. Content Guy did something the other night that she’d never done before. (No, no, nothing like that. Boy, do you have a dirty mind.) She suggested that we go out for Indian food on the last night of my vacation.

    Now, this was a big deal. Mrs. Content Guy’s general aversion to spicy food, which dates back to that first date in a Mexican restaurant, has persisted throughout the past three decades. But because I like spicy food and various ethnic cuisines, she’s accommodated me…first by going to these kinds of restaurants and ordering the least spicy options, but gradually, over the years, experimenting more and trying this dish and that one. I’ve sort of helped her along by cooking with spices at home and not telling her; it’s really funny when she sees me making some dish that I’ve been making for years and objects when she sees me throwing in some spices only to find out that this is how I always make it.

    Supermarkets often make the mistake of selling lowest common denominator products – with as little spice as possible – because they think this is what most customers want. And while this may be true, they ignore the opportunity to educate shoppers, to bring them along with new and different tastes, to help them experience new places and cultures through unusual and distinctive cuisines. It can be done through an aggressive and differentiated sampling program, and a foodservice effort that puts a premium on taste, flavor and quality.

    This isn’t just an altruistic effort. It can lead to new and incremental sales, and create more interesting connections with shoppers. It’ll also make the store smell a lot better, and just making the selling experience – not to mention the shopping experience – a lot more fun.

    And clearly, it is never too late to learn. Just ask Mrs. Content Guy, who fell in love the other night with an appetizer called Masala Dosa. It took 30 years, but it was worth it.

    Maybe tonight we’ll go out for Mexican…

    For MorningNewsBeat Radio, I’m Kevin Coupe.
    KC's View:

    Published on: September 10, 2009

    The Wall Street Journal this morning reports that at the Goldman Sachs Global Retail Conference this week, Safeway CEO Steve Burd said that there is a glut of national brands, some of which may fall by the wayside as private brands have gained market share – putting pressure on national brands to lower prices, and on tertiary brands to simply prove their relevance.

    "I do think that there probably are more national brands out there in various categories than there really needs to be," Burd said, adding, “If we can't provide a good consumer value with a national brand, than we'll push hard with our private label.”
    KC's View:
    One of the more interesting things that Burd said was, "As long as your volumes are trending up and positive, you're going to enjoy some very robust [same-store sales] when things return to normal.”

    The question is, even if the recession is bottoming out, what “normal” means…and when it will return. Because double-digit unemployment could persist well into next year and even beyond, and so “normal” could have an entirely different look and feel.

    Published on: September 10, 2009

    USA Today reports that consumer concerns about rising food prices in a recessionary environment, as well as dropping ingredient costs for manufacturers, have allowed for the lowering of food costs in the US – with the Labor Department saying that the price of food eaten at home was down 0.5 percent in July, the seventh time it fell in eight months.

    "The consumer really is very much in charge of the effort," Herb Walter, a partner with PricewaterhouseCoopers, tells the paper. "They're picking the price points they want and when they want it."
    KC's View:
    The broader lesson, it seems to me, come when you take the first part of Herb Walter’s comment and expand on it…because the consumer is pretty much in charge of everything these days. That’s what happens when they can research practically everything on the Internet, and communicate - via Twitter and Facebook and email and whatnot - with each other in real time about almost everything.

    Published on: September 10, 2009

    The Denver Business Journal reports that after five months of labor negotiations and a number of contract extensions that kept supermarket doors open, Safeway has made what it is calling a “final offer” of a five year deal for some 7,000 unionized employees in the Denver market.

    However, the Journal notes that he United Food and Commercial Workers (UFCW) does not seem impressed, saying that the new offer is “virtually identical to the one workers rejected by more than 90 percent statewide.” The paper suggests that both sides seem to be hardening their positions, and that Safeway has a replacement workforce ready to go if a strike or lockout occurs.

    The current contract extension runs out next Monday.

    Albertsons and King Soopers also have been negotiating with the UFCW since last April.
    KC's View:
    A work stoppage won’t be good for anyone. I hope sane heads prevail.

    Published on: September 10, 2009

    Reuters reports that Wal-Mart de Mexico “plans to relaunch its Mexican bank in coming months,” and “plans to offer savings accounts and credit cards to the 3 million customers who visit its stores every day, two-thirds of whom currently have no relationship with any bank.”

    Walmart plans to use the almost 20,000 checkout personnel in its stores to take deposits and offer savings accounts and credit cards.

    Walmart has been stymied in its efforts to buy a bank in the US, though it is offering financial services such as bill payment to its shoppers that have allowed it to get its toes into US banking waters.

    • In California, the Press Democrat reports that “Wal-Mart will settle the lawsuit brought by 116,000 California workers who won a landmark $172 million judgment against the company in 2005 for illegally denying them meal breaks.” According to the story, the retailer has agreed “to pay between $77 million and $152 million, depending on the number of current and former workers who step forward.”

    The paper also notes that Sonoma County attorney Fred Furth, who filed the initial suit in 2001, is looking to get more than $50 million of the settlement in attorney’s fees, which will leave each employee with between a minimum of $75 and a maximum of $950, “depending on the number of violations.”
    KC's View:
    Sure, attorneys have to get paid…but $50 million over nine years? Yikes!

    Published on: September 10, 2009

    The St. Petersburg Times reports that Aldi, which long has had a cash-and-debit-card-only policy as a way of trimming costs and keeping prices low, is testing the acceptance of credit cards at 15 stores in Oklahoma.

    No word on what accommodations Aldi may have reached with the credit card companies involved in the test. The company has long only accepted cash and debit cards because the latter had a fixed transaction fee, as opposed to the credit card interchange fees that are a percentage of the entire transaction.
    KC's View:

    Published on: September 10, 2009

    Lance Inc. announced yesterday that he has made a deal to acquire the Stella D’oro cookie brand, as well as certain physical assets. Terms of the deal were not disclosed, and it is expected that the acquisition will close during the fourth quarter.

    The company has been riven by a nearly year-long strike, with more than 130 workers having walked off the job after ownership demanded reductions in pay and benefits, saying that without such reductions, the company would not turn a profit.

    Lance reportedly was about the buy the company some time ago, but was put off by employee objections on the grounds that it was likely that it would end up with the jobs being moved out of the Bronx, New York, neighborhood, just north of Yankee Stadium, where Stella D’oro has had its headquarters and production facilities.

    However, the deal now looks like it is done, and Lance said it would move the plant to Ashland, Ohio.
    KC's View:
    There is almost certainly enough blame to go around, but in some ways this seems like a classic case where bull-headedness on both sides led to an inevitable loss of jobs in the Bronx, which maybe didn’t have to happen.

    Published on: September 10, 2009

    Starbucks announced yesterday that 30 US stores that were on its list of some 900 to be closed around the world in a cost-cutting initiative have actually improved their performance to the point where they now will be kept open.

    CFO Troy Alstead told the Goldman Sachs Global Retail Conference that the chain has achieved a number of productivity gains – notably through improved employee scheduling, less in-store waste, and renegotiated rents – that it is counting on to help it regain competitive momentum.

    Starbucks has been hit hard both by a recession that negatively impacted consumer spending patterns, as well as heightened competition from the likes of McDonald’s and Dunkin’ Donuts.
    KC's View:

    Published on: September 10, 2009

    • The New York Times reports that Suntory of Japan is close to a deal to acquire French soft drink manufacturer Orangina from The Blackstone Group and Lion Capital, which acquired the company in 2006. Terms of the likely deal have not been disclosed, but it is expected that it could be north of $3.06 billion.

    • The Charlotte Business Journal reports that Harris Teeter is in talks to open a 50,000 square foot store near Nationals Park in Washington, DC, in a waterfront development currently called The Yards. One of the main criticisms of this area of the city is that while it has 2,000 residents and a ballpark, it does not have all the amenities of a vital and functioning neighborhood – and a supermarket is seen as a major step in that direction.
    KC's View:

    Published on: September 10, 2009

    Yesterday, we had a story about how Safeway Canada has gotten injunctive relief to prevent locked-out workers there from blockading a food warehouse and ice cream plant while the retailer hires replacement workers. Some 350 employees have been working without a contract since last December; reportedly objecting the company’s desire to have them work a 40-hour week (rather than the current 37 hours), not to mention the pay and benefits packaged offered by management.

    My comment: It is hard to imagine, in these economic and competitive times, that anyone would have the temerity to object to a 40-hour workweek. Maybe the Edmonton employees haven’t noticed, but pretty much everyone is having to work harder and longer just to maintain their positions. It is time to join the 21st century, where employees in some countries would work a 40-hour work day if they could.

    A couple of different reactions to this…

    MNB user Jeff Folloder wrote:

    I suspect that the topic of unions will ignite another round of spirited discussion that accomplishes little. While I do understand the historic need for union activity, I just don't see the modern relevance. The burden of union negotiated excess has effectively grown to the point where it broke the back of the automobile industry in North America. Is the food industry next? You stated "pretty much everyone is having to work harder and longer just to maintain their positions." Not if you are union. It is fairly apparent that it is time for a change. Perhaps a more meritocratic approach?

    But another MNB user disagreed:

    Why not a 60-hour workweek at minimum wage for everybody but management? Management can work for 80 hours per week at $100 per hour then retire wealthy. By increasing the work week to 40 from 37 Safeway Canada can eliminate one job for every current 11 workers. Won’t that be wonderful for everyone? Before jumping on management’s bandwagon perhaps you could tell us what the rest of the offer to the workers contained as to salary and benefits. What will Safeway’s wage and benefit package be for the new employees? I do not know where the union pay started or what they refused to sign but it would be nice to know before accepting your take on this issue.

    It is wonderful that you have been able to create MNB and live very well off of it, and send your kids to college. I wonder if that is what these terrible union members would like to be able to do. Perhaps workers in warehouses and offices should not be able to earn enough to send their children to school so that Safeway and the stock holders can profit a bit more. I respect your personal achievement. You are not one of those who have to work any harder, and yes I realize that you must have worked hard to get where you are – HOWEVER, it may not a good thing that everyone has to work harder and longer to make less, except for the “corporations”.


    While it is true that we don't know what the executives at Safeway Canada are making, it is my perception that pretty much everybody these days is working harder and longer than ever. Sure, some are better compensated than others…and others clearly are over compensated. But I think it is a mistake to think that many senior executives are working three days a week and playing more golf than ever…because that doesn’t seem to be the case.

    I fervently believe that companies perform better when management and labor function in a kind of partnership, and I believe in profit sharing – it gives everybody more skin in the game. But I also believe that in the 21st century, when people in a lot of countries are willing to work 12-24-16 hours a day just to have jobs, debating about whether a 40-hour work week is appropriate seems a little out of touch. Everybody has to work harder and contribute…and be rewarded appropriately.

    For the record, I live in a union household. Mrs. Content Guy is a tenured third grade teacher, and is a member of a union. So I am not without sympathy for union members…but that does not mean that I would resist discussions about a longer school year, for example. I would argue that she would need to be better paid (but then again, most teachers deserve to be better paid, but also should be rewarded for effort and achievement, not just length of service), but have no problem with talking about the value of a greater number of school days.




    We referenced yesterday a piece in Time about Walmart’s latest efforts to dominate the retail scene…which led MNB user Richard Layman to write:

    The problem with the Walmart business model is for other businesses and for extant commercial districts is unlike the anchor store concept employed by department stores and supermarkets--they advertised a lot, bringing in customers, who in turn shopped at other nearby stores, which justified breaks on rent--Walmart wants 100% of the dollars in the wallets of the consumer. There is no room for any other store in that type of business model.

    It’s only a problem if you’re not Walmart.




    On the subject of nutritional labeling and obesity issues, MNB user Mac Riggan wrote:

    A few years ago I came up with the idea for a tax credit for the purchase of fresh fruits and vegetables (FFV’s)and all canned and frozen FFV’s as long as they do contain added salt or sugars.

    Prevention is less expensive than cure and as the government winds up footing the health care cost eventually why not act preventively by rewarding good eating habits. Sorta the opposite of the sin tax on smokes and liquor.

    The credit would be capped at say $2500 expenditure per year on FFV’s per family. Lots of detail missing here, but the bottom line is we are eating ourselves to death. If you don’t buy it at the supermarket it won’t wind up in your kitchen. And if it’s not in your kitchen, you can’t eat it.





    And, MNB users continue to weigh in on the debate about whether supermarkets ought to be carrying branded products, like a new Burger King french fries line, that build brand equity for companies competing with supermarkets for share of stomach. One email:

    I always have your back on the issue of retailers carrying brands that compete for share of stomach…retailers should not do anything that can help build a competitor’s brand. Take Dunkin’ for example: With no brand presence west of the Mississippi, they decided to launch their coffee at supermarkets before they rolled out 10,000 new locations to help build some brand equity. So retailers didn’t just fail to fight…they paved the way for Dunkin’s success.

    Saying things like “people will always eat out” or “who cares if it’s Ore Ida or BK fries” is a defeatist attitude. People have not ALWAYS eaten out. It is the failure of supermarkets to simplify, provide and educate about other solutions that has led to almost 50% of food dollars going to the likes of Burger King. As supermarkets have allowed themselves to become purveyors of other brands instead of their own brand they have become homogeneous…even commoditized. Restaurants and fast feeders know that many supermarkets can be their own worst enemy. Try the reverse some day…maybe Walmart should approach Burger King and ask them to carry Great Value fries as an alternative on the menu…”after all, who cares if it’s BK or Walmart fries” as long as we sell fries?

    The debate is not about BK fries, the question at hand is when will supermarkets decide that they stand for something instead of falling for everything?


    Exactly.

    Another MNB user wrote:

    I am guessing that the only connection Burger King has to these "Burger King" brand fries is that Burger King has licensed their trademark to the manufacturer for a fee. A backpack with Hannah Montana on it is still just a backpack. Consumers will quickly discover that these frozen fries are more like any other frozen french fries than they are to what they experience at a Burger King restaurant. The impact on people wanting to go to Burger King might even be negative. You don't see McDonald's licensing their name for store bought frozen fries - maybe for that reason. The main reason Burger King brand fries even get space in the supermarket freezer is probably the slotting allowance. Check and see if they are still there next year at this time.

    If you’re right and slotting allowances are the reason these fries are going into supermarkets, then you’ve added to my case. Short-term priorities lead to short-term thinking…and I’m making a long-term, hardball, take-no-prisoners competitive argument here.
    KC's View: