retail news in context, analysis with attitude

Published on: November 13, 2009

The Richmond Times Dispatch reports that Ukrop’s “has expanded its line of prepared foods to include several oven-ready, family-sized options aimed at working families.

“Sold under the Ukrop's Bakes brand, the meals are pre-made and can be cooked in 30 minutes. The chain has also added meals to its Chef's Specials brand and a new single-serve pasta line. The line of food includes appetizers, pastas and desserts.”

All of these entries reportedly were developed based on consumer feedback.

Published on: November 13, 2009

The Wall Street Journal reports that in the UK, Tesco and Walmart-owned Asda are engaging in a price war that “could be the most aggressive discounting during the key holiday period for a decade.”

Both companies announced significant price cuts this week, with Asda saying that it will save shoppers the equivalent of more than $250 million (US) through lower prices and special offers, and Tesco saying that it will save customers $450 million (US).

And the paper says that other competitors such as Sainsbury and William Morrison Supermarkets are expected to follow suit.

However, the Journal writes, “Despite firing the first salvo, Asda chief finance officer Judith McKenna said the company was not interested in a price war and would concentrate on offering lower prices throughout its stores and ranges.”

Published on: November 13, 2009

Unified Grocers announced that it has closed a transaction with the John Hancock Life Insurance Company and borrowed an additional $25 million from the Boston-based financial institution. The funds will be used to reduce borrowings under the Company's line of credit.

According to the company, “The new debt is comprised of 10-year fixed rate senior secured notes at 6.82 percent. These new notes are part of a note purchase agreement covering the Company's existing $86 million in senior secured fixed rate notes with John Hancock, which mature in 2016.”

"We will use this money to pay down our line of credit and maintain our already-strong balance sheet," said Al Plamann, president/CEO of Unified Grocers. "At the same time, we feel it also is critically important to garner as much liquidity as possible, particularly in these difficult economic times. These additional funds will provide us with more flexibility to take advantage of opportunities and have resources available to help our member retailers grow.”

Published on: November 13, 2009

ShopRite supermarkets is launching a new iPhone application that will allow shoppers to download specials.

According to the announcement, “It functions as a portable circular and invites consumers to ‘start saving’ before they even arrive at the store by browsing hundreds of items instantly. Among its features, ShopRite Weekly Specials enables consumers to see what’s on sale in real time at their regular ShopRite store. Once they select an item, it literally tumbles into their shopping list, which is neatly organized by category with pictures, descriptions and real time prices. The App syncs and downloads store specials directly to an iPhone or iPod Touch and can even sync with customers’ shopping lists at ShopRite.com.”

The ShopRite application was developed by MyWebGrocer.

Published on: November 13, 2009

Reuters reports that a traditional Thanksgiving meal will cost four percent less in 2009 than in 2008. According to the story, “The American Farm Bureau Federation's grocery list of 12 items estimated the average cost of this year's Thanksgiving feast for 10 people will be $42.91, a decrease of $1.70 from last year's $44.61.”

Consumers can expect to see lower prices for turkey and rolls, while stuffing and pumpkin pie mix have gone up a bit in price.

Published on: November 13, 2009

Reuters quotes Starbucks CEO Howard Schultz as saying that McDonald’s espresso drink strategy “made us better,” and that his company benefitted from comparisons made between the two products.

At the same time, the Chicago Tribune reports that “McDonald's big new beverage blitz -- espresso-based coffee drinks, smoothies and frappes -- is on track in test markets to exceed its sales goals ... Year to date through October, McDonald's overall U.S. coffee sales are up 28 percent over the same time a year ago, and more than 90 percent of that gain stems from McCafe drinks ... Those drinks include all hot and iced espresso-based beverages, as well as hot chocolate.”

The paper notes that the next elements of McDonald’s “beverage offensive, smoothies and frappes, are being rolled out regionally or in test markets, and both drinks are expected to be widely available by midsummer 2010.”
Reuters also reports, by the way, “McDonald's Corp. plans to spend $2.4 billion on capital improvements in 2010 as it continues to revamp restaurants and expand in emerging markets, the world's largest restaurant company said on Thursday. Half of the spending will be on new restaurants and the other half will be spent on remodeling existing restaurants.”

Published on: November 13, 2009

Dow Jones reports that Tesco has signed a deal for a joint venture that will develop three major shopping malls in China, each of which will feature a Tesco hypermarket. According to the story, this is part of a broader China strategy that has Tesco opening 18 hypermarkets there between February 2009 and February 2010.

The story says that “50% of joint venture will be owned by syndicate of leading Asian investors including HSBC Nan Fung China Real Estate Fund, Singapore's Metro Holdings Ltd and Hong Kong's Nan Fung Group.”

Published on: November 13, 2009

• The Wall Street Journal reports that Japanese c-store operator Family Mart is in negotiations to acquire am/pm Japan, a privately held and small rival. the goal of the deal would be “to better compete in an environment of diminished consumer spending and intense competition,” according to the paper.

Published on: November 13, 2009

• Blockbuster said yesterday that its third quarter net loss was $116.8 million, compared to a loss of $17.8 million during the same period a year ago. Q3 sales were down 24 percent to $910.5 million, on same-store sales that were down 14.4 percent.

Published on: November 13, 2009

MNB reported yesterday that a shareholder activist group is asking the management of Winn-Dixie Stores to either buy back shares in the company so that cash can be returned to investors, or to sell the company outright.

My response:

If Winn-Dixie does not invest in its fleet, then it might as well sell the whole damn thing. Thought I’m not sure that Winn-Dixie, in the current environment, is going to get what these investors view as a “fair price.” What this illustrates to me is that there is a huge gap between the investor class and the retailer class. I can understand investors wanting a fair return, but I’m not sure that handicapping a retailer’s ability to compete is the best way to get it.

Which prompted MNB user Michael Stumpf to write:

Seeing your views on Winn-Dixie confirms why I have always found your blog so useful. If it is to survive, Winn-Dixie must invest in new and remodeled stores along with other business practices. The fact that it has the resources to do so is remarkable in this economic environment. Investors’ desire for quick profits over investment in long-term stability is at the root of this recession. I would hope that people would begin to understand this and act differently, but this is just the latest in a series of indications that it is not so.

Another MNB user wrote:

It occurs to me, that any investor, particularly the more elderly of them, are more worried about trying to milk the market so that they can retire “on time” with enough to live on.  Are all investors working over all the “dogs” in their portfolios this way?  Perhaps putting the lens on what WD looks like after the economy recovers is more important that the short-term stock price?

And another MNB user chimed in:

Who said greed is dead?  This is classic and yet another example of our addiction to immediate gratification that has driven corporate leaders everywhere to virtually abandon long-term planning.  Hell, even short-term planning doesn't get much play.  It's all about quarterly earnings and profit.  If you're down a quarter or two, your stock pays the price.  If, God forbid, you make a good, strategic, long-term choice that has short-term down side, you're out of a job.  To be clear, I'm not against being nimble and responsive to rapidly changing consumer needs and
preferences.  That's tactical.  What I'm talking about is strategic.  Yes, this is a bit of rant but, objectively, probably not that far off the mark.

MNB user Simon Mark Haddad wrote:

I couldn't agree with you more...Winn Dixie have done a great job with their remodeling efforts. They understand what it is going to take to compete. They have received positive response from consumers and even the industry is impressed with their efforts.

Their shareholders should look at why they invested in the first place — If they believed in the retailer, they should stand behind them and give them the opportunity to put their best foot forward. Easier said than done, in this economy, when so much rest of profitability.

And MNB user Dave Henry wrote:

Right now a sale of WD would not generate the "fair return" that these stockholders would want. The supermarket industry is too flat as a whole. And secondly, paying off stockholders at the expense of growing the company through a store remodel program is foolhardy at best. It is exactly this type of shortsightedness that got WD in trouble before. Time was when WD worried more about the monthly dividend ( and paid at the first of the month no less ! ) than it did about providing great stores.  Peter Lynch led a miracle trip through Chapter 11 and has brought back WD, when nobody gave WD a chance. If WD continues to improve its stores and operations, the customer will respond.  The result will be a better company, that eventually will be worth more, whether to stockholders or potential suitors. Limiting WD's ability to improve its stores would be like having the Patriots run the wildcat offense. You could, but why would you ever take the ball out of Tom Brady's hands?

MNB user Tim Heyman wrote:

There have been very few times in life, that a board recommendation should be to, “go pound salt”, to the investor group, this should be one of them.  Back home it would be more like go get $%#@’d.

Anyone who bought Winn-Dixie stock as a short-term play is a fool. And they ought to fire their broker.

Of course, there always are people who disagree:

Winn-Dixie continues to have one of the worst sales per square foot performances in the industry, if not the worst for a similar sized chain.  Those remodels are futile.  The only people who think they are successful is Winn Dixie management.  Its the old lipstick on a pig analogy.  Winn Dixie should take their $590 million and simply pay a one time dividend back to investors.  Then start borrowing billions, buy back stock,  and reinstate their dividends.  Those stores are never going to be able to complete and you can't operate at their low sales per square foot level forever.  Winn Dixie needs to remember stockholders don't care about old stores getting a paint job.  They want Winn Dixie to show them the money.

This person, I suspect, never sees a glass as half-full.



MNB reported yesterday that California-based Save Mart Supermarkets said this week that chairman/CEO Bob Piccinini “will reward 10 employees with cash prizes of $10,000 each during his annual six-week tour of all 252 of the company’s stores, distribution centers, warehouses, and offices. The 10 employees are being recognized through the company’s Customer Connection program for delivering excellent customer service and fostering a friendly shopping experience for their customers.

“There’s no better time than the holidays to thank all of our employees for the hard work they’ve done all year and to reward the service superstars that bring our customers back to our stores,” Piccinini says. “By visiting every single store and support facility in our chain, I have the opportunity to personally reconnect with our employees. And I always get a big charge out of delivering the prizes to our top winners.”

To say that MNB user Glen Terbeek had a strong reaction to this story would be an understatement:

Unless my math is wrong, Piccinini's holiday visits amount to over 6 a day, assuming he uses all 7 days of the six week period.  It would be hard to believe that he can meaningfully "reconnect" with his employees in that amount of time per visit, once a year.  Do the employees at all levels in the store or warehouse, really feel they can tell him what would make their store or warehouse better?  In fact, I would bet that his visit is somewhat a pain to the employees, since they have to get their location in "inspection ready" condition in anticipation of his visit.

The reality is that after a chain reaches 20 or so stores, the CEO starts becoming irrelevant to the needs  of the local stores fighting in their local marketplace.  But in most retailer organizations, the CEO, 252 stores away from the local marketplace in this case, is the only person who is responsible for the local store's market performance, and the shopping experience in the store.  Every other position up the organization only has a piece of it. 

The self inspection question to ask is "Who is responsible for the market performance of each store?"  My experience is that the answer is almost always something like "Well, we all are, but no one really is". Most companies don't even measure local market performance appropriately.

It is time to reorganize around market modules of about 20 stores, where the market module CEO, staff  and store personal have complete responsibility for the market performance of each store in the module.  They would be relevant, connected all the time; they wouldn't have to "reconnect" annually.  They would be supported by "a support center" for such irrelevant functions  as buying, distribution, finance, personal and systems.  The local modules would be large enough to have merchandising and marketing skills, and close enough to the markets and shoppers to react accordingly on a real time basis.  With market modules, a company can manage much more closely to potential; while traditional organization companies can manage to average at best.

Many large retailers started out as being very effective in their local markets, but became less and less so as they grew past the "disconnect" size, while creating functional silos in central organizations at the same time.  

Maybe Save Mart should be reorganized into 12-13 market modules.

Published on: November 13, 2009

In the first Thursday night NFL game of the season (also known as the game you only get to see if you subscribe to the pay NFL cable network), the San Francisco 49ers defeated the Chicago Bears 10-6.

Published on: November 13, 2009

There was a great story on the Wall Street Journal “Digits” blog yesterday about the Apple Store, keyed to the opening of its fourth unit in New York City. Some excerpts:

• Nearly 10,000 people submitted job applications, said Ron Johnson, senior vp of retail, “and about 220 will staff the store. A staircase, similar to the Fifth Avenue location, leads downstairs to the service area, which he said will be able to accommodate up to 100 customers at any time.”

• “Apple’s retail stores have been the most successful among similar stores by consumer-electronics companies and have been a key part of the company’s branding strategy. Services like the Genius Bar, where staff can help field product-related questions, encourage customers to keep coming back even after the initial purchase. Its new stores, both significant and standard, will be larger, to accommodate the width of three product-display tables and bigger Genius Bars.”

What this tells you is that even in a recession, Apple continues to grow and excel through a culture of service that differentiates it from virtually every other competitor in the industry.

No lowest common denominator thinking here. The result is that in a time when we might expect to see bread lines, there are a lot more iPhone lines.

Good lesson to learn.




Interesting research out of Australia suggesting that while both low-fat/high carb diets and high fat/low carb diets can be effective in helping people to lose weight, people who eat more carbs tend to be in a better mood - “less angry, depressed and confused after one year than those who ate fewer carbs.”

This strikes me as interesting on a couple of levels.

One, I’m nor surprised. Few things in life are as comforting...or as cheering...as a terrific bowl of pasta.

Two, this sort of illustrates to me the whole weight loss conundrum. We focus on diet extremes, not moderation. It is all highs and lows and tactics, not the development of long-term good habits that will serve us well without having to engage denial in one area and over-indulgence in another.

On the other hand, if this were not the ways things worked, then there would not be so many sales of books and foods in the diet category.




Wines of the week:

2006 Icario Rubi Delle Rietrose Toscana, which is wonderful melange of 70%Sangiovese, 10% Merlot, 20% Teroldego ... and at about $14, a terrific deal on a deep and satisfying wine.

2008 Groth Sauvignon Blanc, which is soft and refreshing...maybe a little light for this time of year, but nice nonetheless with seafood. About $13.




Once again, Michael Sansolo and I want to thank you for all the book orders. The funny thing is that we committed to each other that we would sign all the books sold to MNB users...and suddenly, that seems like a much more daunting prospect than we originally thought.

But we’re not complaining. Not even a little bit.




Finally, someone sent me an email this week saying that “bronchial infections seem to be the new black.” I know exactly what she’s talking about - I’ve had one for more than a week, and while I’m grateful it isn’t the flu, it’s really beginning to wear me down. I can’t help but feel that I’m off my game a bit...and if so, I appreciate your patience. Hopefully I will emerge from the weekend a better man.



That’s it for this week. Have a great weekend, and I’ll see you Monday.

Slainte!