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    Published on: October 6, 2009

    Belgium-based Delhaize Group announced yesterday that it has signed a non-binding letter of intent to acquire “a substantial majority” of the assets owned by bankrupt Bi-Lo LLC, for $425 million.

    However, Bi-Lo’s assets remain up for bid, and another company could move in and top Delhaize’s offer. Bi-Lo is currently owned by Lone Star Funds, a private equity group; it filed for bankruptcy last March.

    If the deal closes, it will give Delhaize and its Food Lion division the 214 stores in North Carolina, South Carolina, Tennessee and Georgia and approximately $2 billion in annual sales that Bi-Lo represents. At present, Food Lion has more than 1,300 stores in 11 U.S. states and has more than 74,000 associates.

    Rick Anicetti, executive vice president of Delhaize Group and president/CEO of Food Lion, said in a prepared statement: "We at Food Lion, LLC have great admiration for the associates and stores at BI-LO. We believe our markets and service philosophy are complementary and we look forward to continuing our discussions with BI-LO."

    According to the announcement, “The non-binding offer is subject to the satisfactory completion of the customary steps for such an acquisition including certain Bankruptcy Court approvals. Delhaize Group and BI-LO intend to close the transaction shortly after obtaining the entry of a final non-appealable sale order of the bankruptcy court pursuant to Section 363 of the U.S. Bankruptcy Code, authorizing the transfer of the purchased assets to Food Lion. It is the intent of Delhaize Group to integrate the included BI-LO assets in the network of its wholly owned subsidiary Food Lion.”
    KC's View:
    It’ll be interesting to see how this affects competition in the various markets where Bi-Lo operates, and how companies like Publix and Winn-Dixie try to capitalize on the change.

    I’ve already gotten some email from Bi-Lo employees who are not thrilled with this deal, and who are hoping that somebody else will step in and top the bid.

    I’m not sure I get this. I’ve spent some time with the folks at Food Lion, as well as visited a number of their stores. I have been consistently impressed with the various formats the company has created, and with what appears to me to be enlightened management and leadership from the likes of Rick Anicetti, Cathy Green and Mike Haaf.

    If anyone can make Bi-Lo work, I have to believe that Food Lion can.

    Published on: October 6, 2009

    The US Federal Trade Commission (FTC) yesterday published new guidelines covering the relationship between bloggers and advertisers/sponsors that may be providing them with product and/or compensation in exchange for endorsements. According to the new rules – the first changes in these regulations since 1980 – bloggers must disclose the relationship in a way that is “clear and conspicuous,” and risk an $11,000 fine per violation.

    According to the FTC announcement, “The revised Guides also add new examples to illustrate the long standing principle that ‘material connections’ (sometimes payments or free products) between advertisers and endorsers – connections that consumers would not expect – must be disclosed. These examples address what constitutes an endorsement when the message is conveyed by bloggers or other ‘word-of-mouth’ marketers. The revised Guides specify that while decisions will be reached on a case-by case basis, the post of a blogger who receives cash or in-kind payment to review a product is considered an endorsement. Thus, bloggers who make an endorsement must disclose the material connections they share with the seller of the product or service.”

    The FTC said that it is more likely to go after advertisers than bloggers, except in cases of egregious violations.
    KC's View:
    Bloggers generally are pretty good at demanding transparency from the rest of the world…so it seems absolutely appropriate that they be required to disclose what their financial relationships are when those relationships result in the endorsement of various products.

    For the record…I am happy to admit that the companies represented in tile ads and DrumBeats here on MNB are paid sponsors of the site. In fact, I’m thrilled to say so…because their support means that they believe in MNB’s approach to information and commentary, and that they think MNB is a great way to reach a highly engaged user base. (That would be you.)

    The great news for me is that pretty much every sponsor I’ve ever had on MNB is the kind of company I take pleasure in endorsing.

    So check out my sponsors. Try their products and services. And for my sake, be transparent about the fact that you saw their ads on MNB.

    Published on: October 6, 2009

    by Michael Sansolo

    A CEO friend once summarized his biggest internal challenge simply. His company had become a massive game of telephone, where messages are passed person to person until the entire meaning is twisted or lost.

    In his case, the great challenge was figuring out how to race from the executive suite all the way to the front lines to hear what message ended up getting through. It was a task he could rarely perform.

    (To see the only successful story of anyone doing just that, watch the movie Johnny Dangerously. When a prison gang mangles a vital message, Johnny can correctly decode it because, as he said, “I know this grapevine.”)

    However, if you think it’s tough getting a message through from top to bottom, consider the opposite; a message working its way up. In short, it’s something that’s bound to fail even though the front line might have stunningly important information that goes nowhere.

    I got two blasts of front line vision last week from two very different sources. In both cases, the lesson is worth sharing.

    The first came from my daughter, Sarah, who’s currently working sales at an upscale women’s clothing chain. Although Sarah’s store attracts a well-off clientele in a fairly affluent area, she’s noticed a problem. The store urges its staff to market the company’s credit card to shoppers. Yet even in an affluent area, the financial/credit crunch makes that one awful idea.

    As Sarah has found, women still want to make some clothing purchases, especially at a store with a reputation for quality and timeless style. But right now the last thing anyone wants is another credit card in his or her purse or on a credit report. Clearly, the company needs a different strategy to build customer loyalty at the moment. Sarah’s managers are terrific, but the chain of communication to stop this policy is more than daunting. So the store level vision is dying right there - at store level.

    The second story comes from Domonique Debnam, a recent retailing graduate from Portland State University. Domonique believes there’s an institutional problem at work. “Retailing has a bottom up mentality. To be successful you have to start at the bottom and work your way up.” That’s neither shocking nor abhorrent, but Domonique articulates the drawback:

    “By the time you get into a position where you can effect change you've been in the colony for 20 plus years and have the normal or traditional way of doing things ingrained in your head. This is how innovation is stifled. I could offer a million ideas for improving process or stores, but by the time I get to where I can actually implement change, they maybe outdated and irrelevant.”

    It would be easy to tell both Sarah and Domonique to chill out or remind them of all they don’t know, except I think they both have a point. In a dynamic and diverse climate like we have today, the people best able to understand the needs and wants of the emerging shopper generation are the people whose voices are heard least. The fact that people like me use Facebook and Twitter doesn’t mean I’ve found the fountain of youth. It means that while I think I’ve caught up with Sarah, Domonique and their cohorts, they have moved on.

    And we’ll have trouble finding them unless we have the right guides.

    We’re always told that youth is wasted on the young. So are freshness and innovation. The front line might have a lot to tell us if only we learn how to listen.

    Michael Sansolo can be reached via email at .
    KC's View:

    Published on: October 6, 2009

    Crain’s Chicago Business reports on how discount grocer Aldi is “mounting an aggressive expansion in Chicago,” posing a threat to Supervalu-owned Jewel.

    “By yearend, Aldi is set to have more stores in the city than any other grocer,” Crain’s writes. “When it completes three locations now under construction, it will have 37 stores inside Chicago to Jewel's 35.

    “To be sure, Jewel remains the biggest grocer in town from a sales perspective: A typical Jewel store is estimated to bring in roughly $30 million in annual revenue, about six times more than an Aldi. But as the grocery sector gets more crowded and shoppers trim spending, Aldi represents a growing competitive threat to Jewel, long the dominant player in the Chicago market.”
    KC's View:
    One of the interesting things about the Crain’s story is that it notes that Jewel says that it has slashed prices up to 20 percent this year in order to remain competitive. This made me think about an email that I posted last week here on MNB, from a supplier to Supervalu-owned Albertsons in Southern California, who wrote, “The most recent edict to Albertsons-SoCal from the corporate headquarters at Supervalu is 75% pass through of all promotional allowances, no exceptions. Prices wall to wall jumped up while advertising ‘1000’s of prices reduced!’ from banners hanging across the store fronts.”

    So I guess the question that needs to be asked – and while I don't know what the answer is, I suspect somewhere out there does – is whether Jewel has really cut prices…or if it is just saying so.

    Published on: October 6, 2009

    • The Chicago Sun Times this morning reports that Chicago’s failure to win the 2016 Olympic games means that Alderman Howard Brookins plans to ramp up his campaign to bring a new Walmart store to the city’s South Side.

    “The Olympics were a side show to my cause and an excuse for many to say, 'We ought to put this off so that we can have peace with the unions,'" Brookins tells the paper. "Now that those union workers aren't gonna be employed building these fabulous buildings all over the city, at least this is some immediate help for those local tradesmen. . . . And it's a tremendous help to stop the leaking that continues to plague our city with people going to the suburbs looking for a bargain."

    The building of a new Walmart in the city has long been a controversy; there is only one within the city limits at the present time, largely owing to opposition engineered by Chicago’s powerful labor unions.

    • Walmart announced yesterday that it has signed a deal to begin marketing the Nutrisystem 14-day starter diet program in more than three thousand of its stores as well as on its website. It reportedly is the first time that the Nutrisystem program has been available at retail.

    The program will sell for $148. Once the program is activated at Walmart, home delivery of the foods on the program will begin.
    KC's View:

    Published on: October 6, 2009

    Conde Nast has decided to fold four of its magazines - Gourmet, Modern Bride, Elegant Bride and Cookie

    The decision was reached after an extensive review by McKinsey & Co., which required a 25 percent budget cut across the company, with only The New Yorker spared any cuts.

    However, while Gourmet no longer will be published as a print magazine, Conde Nast said that it will remain as a digital brand on the company’s website, as well as used for books and television programs.
    KC's View:
    Yet another example of how physical properties are being repositioned for the digital age.

    Another point on this, if I may. Gourmet has been around for a long time, and in some ways it may have become a relic of an earlier time. During the past year or so, however, the magazine’s educators have tried to adjust their focus to recession realities. However, the combination of precipitous advertising declines, economic realities and the lure of new media were more than the title could weather.

    Published on: October 6, 2009

    • In Colorado, the Daily Camera reports that Sprouts Farmers Market is opening a new 23,800 square foot store in Boulder – one of 11 stores being opened by the company this year. As the Camera reports, there is no dearth of competition: “Boulder -- which birthed natural groceries of Alfalfa's, Wild Oats and Sunflower Farmers Markets -- has four Whole Foods markets, a Natural Grocers By Vitamin Cottage, one Sunflower, the natural-foods-focused Lucky's Market and King Soopers and Safeway stores redesigned to highlight their natural and organic offerings.”

    But Doug Sanders, Sprouts’ president/COO, tells the newspaper that while the competition is tough, he is convinced that the company’s approach – healthy foods at value prices – will be enough of a differentiation to succeed in the marketplace.

    • The US Supreme Court said yesterday that it would not hear an appeal filed by Family Dollar of a $35 million jury award to employees who successfully sued the company for not paying them overtime wages. Family Dollar had maintained that the workers wee managers and did not qualify for overtime, even though their job duties included manual labor like unloading trucks and janitorial duties.

    • The National Retail federation (NRF) said yesterday that it expects 2009 end-of-year holiday sales to decline one percent to $437.6 billion, which it said would not be “as dramatic as last year’s 3.4 percent drop in holiday retail sales nor as severe as the 3.0 percent decline in annual retail industry sales expected for all of 2009.”

    • GS1 US has announced that 55 foodservice manufacturers, distributors and operators have launched the Foodservice GS1 US Standards Initiative, and have funded the “GS1 US Team for Foodservice” to guide execution. According to the announcement, “The Initiative recommends the adoption of a common timeline for voluntary individual company implementation of GS1 Global standards for company identification, item identification and product description; 45 of the Initiative’s founding member companies have already voluntarily committed to this common timeline … The Initiative is striving for 75 percent adoption of GS1 standards throughout the foodservice industry, measured in terms of revenue, by 2015, and is endorsed by the International Foodservice Manufacturers Association (IFMA), the International Foodservice Distributors Association (IFDA), the National Restaurant Association, and GS1 Canada Foodservice.”
    KC's View:

    Published on: October 6, 2009

    • Tesco PLC said yesterday that its first half net profit was the equivalent of $1.64 billion, up from $1.61 billion during the same period a year ago. First half revenue, excluding the value-added tax, was up 9.3 percent to $44.3 billion. In the UK, where Tesco has been meeting strong competition of late, same-store sales were up 3.1 percent.

    • Drugstore chain Walgreen said that its September sales were up 10.3 percent to $5.35 billion, on same-store sales that were up 5.3 percent. The increases were attributed to the chain’s program for in-store flu vaccinations, more than 2.4 million of which have been given this year (double 2008).
    KC's View:

    Published on: October 6, 2009

    • PepsiCo announced that Jaya Kumar has been named president of its Quaker Food & Snacks unit. Kumar has been serving as chief marketing officer at Frito-Lay North America.
    KC's View:

    Published on: October 6, 2009

    Apologies for the fact that yesterday’s MNB Wake Up Call went out very late…which was a direct result of the fact that the site’s servers went down for a number of hours. (Ironically, because of my travel schedule, I’d actually posted MNB at 2 am…which meant you were supposed to get it early. Ah well…)

    Thanks to the folks at Webstop, the problem was fixed. Their servers were fine, and we’ve now made an adjustment that hopefully will prevent this from happening again.

    (I say “we’ve” made an adjustment, but in fact they did all the work. This stuff is way over my pay grade. Thank goodness for people who actually understand what they’re doing.)

    And as always, I appreciate your patience.
    KC's View:

    Published on: October 6, 2009

    MNB reported yesterday on an extraordinary 4,800-word page one story in the New York Times that offered a scathing look at the nation’s ground beef production processes and the seeming inability to rid the nation’s ground beef supply of the E. coli strain that sickens tens of thousands of people each year.

    One MNB user responded:

    I read the New York Times article yesterday, although it was difficult to get through past the waves of nausea. I remember as a child, I used to sneak scraps of raw ground beef, which I thought was yummy with salt. I stopped that practice years ago, after I read a book called Diet For A New America, which chronicled, a bit melodramatically, the practices of the beef, pork and poultry industries from an environmental, safety, and moral standpoint. In fact, although I didn't have any trouble with being at the top of the food chain in general (and still don't) I didn't eat any meat for about two years after reading it - I was THAT grossed out and offended by the cruelty in the industry.

    Alas, I got over it, and went back to eating meat. A few years ago I read the follow-up to Diet For a New America, Food Revolution, and was immediately back on the "ick" train, but chose to not forego meat entirely, going instead down the path of purchasing meat from small local farmers.

    But that passed too. I went back to buying meat at the grocery store, even though every time I did, I thought about how disgusting it really all is. Ground beef is the ultimate in gross, combining poor cattle raising practices with all of the disgusting bits from the slaughterhouses, but any large processor beef, pork or poultry really is fairly revolting.

    Ultimately, I bear responsibility for what I purchase for my family to eat, but we live in a society that still trusts its government to have effective minimum standards for safety in place. It's a trust that is clearly misplaced, as you have shown over and over again on your site.

    I don't know what the solution is, but I don't think it's irradiation, at least not as a one stop shopping solution. Sure, it would kill all of the bacteria, but with what unintended consequences? Would slaughterhouses and processing centers get even more disgusting, tossing aside any pretense of sanitary procedures, if everyone knew that the meat was going to get zapped before it went to the consumer? And what else does the irradiation do to the meat? Has that been adequately examined by anyone outside of the industry or the government agencies that obviously are in their back pocket?

    All I know is that I'm still a little queasy.

    Another MNB user wrote:

    It is absolutely inexcusable for our government to overlook the safety of its citizens so that corporations can rest assured they'll receive their profits at the end of the year. I've traveled all over Central and South America - a part of the world mostly comprised of "third world countries" - and trust me on this, those countries (you know, the ones most Americans consider barbaric and underdeveloped) don't have the scale of food safety issues we have in the United States. The beef in Argentina is some of the best in the world with their grass fed, grass finished tradition of raising cattle on the lush pampas. Their products are mostly local and the farms are supported by the communities they feed. Michael Pollan is right - corporate agriculture is a health risk to all of us.

    From another MNB user:

    Without further delay Congress needs to get USDA out of the food inspection business and create a single agency for all food.


    I commented yesterday that I cannot understand why irradiation has not been more embraced as a solution to E. coli contamination, which led one MNB user Elizabeth Archerd to write:

    We should have a serious talk about food irradiation as a proposed solution to contamination problems. Irradiation has been a technology in search of a purpose ever since the "Friendly Atom" days, when the government tried to figure out uses for radioactive waste. They tried to sell it to grocers in the 80s as a way to extend shelf life. Didn't fly. Who wants to be known as the store that sells old food that was nuked to look forever young?

    Irradiating meat sounds like a great idea, but human beings are still running the show.

    Think about how this plays out. Slaughterhouses don't want to sell their meat to companies that will test the product for contamination, and they manage to hold on to this position while people are dying from a deadly bacteria contracted from their product. Can we honestly expect them to get more careful and honest about their products if they know that at the end of the grinding line the product will be exposed to bacteria-killing rays? Animal feces are still what they are, even after exposure to gamma rays. Do we really want to feed our children nuked filth?

    Irradiated food is subject to recontamination at any point. But humans being humans, you can bet that people will think that there is some magical aura around the products that makes it resistant to bacteria and just not be as careful as they need to be. The bacteria killed by the gamma rays are not just the ones that make us sick, but the ones that let us know that meat is starting to go bad by giving off an unpleasant odor. (Care to feed your children old, nuked filth?)

    There are plenty of ways to assure a cleaner meat supply that don't involve an expensive techno-fix that only dazzles the eye but does not address the underlying problems.

    All fair points.

    And another MNB user wrote:

    This is why my sisters and I have, for the last 18 years, purchased free-range, grass fed (no grain) cows (no antibiotics or artificial hormones given), butchered, wrapped and delivered by our rancher. We know who raised, butchered, wrapped and delivered the cow. Plus it has the taste of real beef.

    Gee, where I do get myself a rancher? That sounds like a pretty good deal…

    In all seriousness, the one thing that the food industry – and retailers in particular – must not do in this case is ignore this story, downplay it, or hope that it will simply go away. It won’t. Consumer confidence in the US food supply is slowly eroding, and it seems likely to me that something is going to happen that will accelerate the process.

    This is job one. It cannot and should not be ignored.

    Had a story yesterday about an NPR interview in which Sallie James, an agricultural trade policy analyst with the Cato Institute, said that the best way to get poor people to eat a more nutritious diet is to put Walmart in charge. "You allow Walmart to come into urban areas and provide cheaper fresh produce to people," James said. "The reality is they have a very good distribution network. They can get fresh produce into rural and exurban areas very well … I'm sure they'd love to provide produce to poor people, but often activists prevent that from happening."

    I described that this was an “interesting notion,” but even that was too much for one MNB user:

    Will your love of Wal-Mart never end? Allow any chain to service poor neighborhoods, and they will have the same chance at fresher produce, and a healthier diet. Doesn’t mean they will take advantage of the opportunity. Maybe we need to narrow what they can buy with food stamps (EBT card) allow only healthy foods to be purchased, do not allow sodas, candy, chips, this list could go on for a long time.

    It might be good for you to spend some time behind a register instead of a keyboard, maybe a little less time with executives, more with the rank and file. A lot of the choices they make are out ignorance or time constraints.

    I grew up in a large family, watched my mother stretch her food dollar extremely far. I marvel what is purchased on EBT today when they can get a whole lot more if they shopped smart, and going to Wal-Mart isn’t always the smartest way. Many other chains across the country work very hard to stay competitive with whoever is their competition.

    Another MNB user wrote:

    I also heard this interview on NPR Saturday and was surprised to hear an economist from the Cato Institute espouse Wal-Mart as the solution to such a complex problem.

    Has she not heard of ALDI or Winco, who actually beat Wal-Mart's pricing on many items? There are also many regional grocery chains across the country that offer the same or better prices as Wal-Mart on similar quality produce.

    While I do not agree with the majority of the Wal-Mart bashing that the grocery industry seems to enjoy, I find it very hard to believe that Wal-Mart is the solution for better diets for low-income people.

    Still another MNB user chimed in:

    The idea of putting Wal Marts in Urban communities would be great, until the Union comes along and forces the store to join the union and then the prices go up to offset the cost of having a union and then we are back to square one. Sorry to be so cynical.....I'm from Chicago, and the city did a huge disservice to the people of Chicago by not allowing a Wal Mart there. It would have created jobs, and given people access to fresh produce and healthier cheaper options.
    KC's View:

    Published on: October 6, 2009

    In a Monday Night Football grudge match, the Minnesota Vikings defeated the Green Bay Packers 30-23.
    KC's View:
    BTW…I got an email yesterday asking me how come I don't include college football scores in these occasional sports reports. (I get some version of this email every once in a while…though sometimes I’m asked how come I don't do baseball scores before the playoffs start, or hockey scores, or basketball scores, or golf results…)

    The reason is simple. I gotta draw the line somewhere. NFL football and MLB playoff scores fall on the right side of the line. The other stuff, not so much (unless a specific event catches my fancy).